Tuesday, December 23, 2008

Corruption (Siegmens AG, Theresa Jeanne Baker)

Siemens AG, Europe's largest engineering company, won an order valued at about 1.5 billion euros ($2.1 billion) from the Iraqi government to supply components for gas power plants.
The company will supply the Ministry of Electricity with 16 gas turbines capable of producing a combined 3,150 megawatts at five locations, Siemens said in a statement today. That makes the contract among the biggest it's won in the Middle East, the Munich-based company said.

The above is from Brian McGee and Mike Gavin's "Siemens Wins EU1.5 Billion Iraqi Power Plant Order (Update2)" (Bloomberg News) and we'll note other 'opportunities' in Iraq in a minute but first a lengthy US government press release issued last week. This is the Justice Dept's "Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines, Coordinated Enforcement Actions by DOJ, SEC and German Authorities Result in Penalties of $1.6 Billion" which was issued December 15th:

WASHINGTON – Siemens Aktiengesellschaft (Siemens AG), a German corporation, and three of its subsidiaries today pleaded guilty to violations of and charges related to the Foreign Corrupt Practices Act (FCPA), the Department of Justice and U.S. Securities and Exchange Commission announced.

At a hearing before U.S. District Judge Richard J. Leon in the District of Columbia, Siemens AG pleaded guilty to a two-count information charging criminal violations of the FCPA’s internal controls and books and records provisions. Siemens S.A.- Argentina (Siemens Argentina) pleaded guilty to a one-count information charging conspiracy to violate the books and records provisions of the FCPA. Siemens Bangladesh Limited (Siemens Bangladesh) and Siemens S.A. - Venezuela (Siemens Venezuela), each pleaded guilty to separate one-count informations charging conspiracy to violate the anti-bribery and books and records provisions of the FCPA. As part of the plea agreements, Siemens AG agreed to pay a $448.5 million fine; and Siemens Argentina, Bangladesh, and Venezuela each agreed to pay a $500,000 fine, for a combined total criminal fine of $450 million.

According to court documents, beginning in the mid-1990s, Siemens AG engaged in systematic efforts to falsify its corporate books and records and knowingly failed to implement and circumvent existing internal controls. As a result of Siemens AG’s knowing failures in and circumvention of internal controls, from the time of its listing on the New York Stock Exchange on March 12, 2001, through approximately 2007, Siemens AG made payments totaling approximately $1.36 billion through various mechanisms. Of this amount, approximately $554.5 million was paid for unknown purposes, including approximately $341 million in direct payments to business consultants for unknown purposes. The remaining $805.5 million of this amount was intended in whole or in part as corrupt payments to foreign officials through the payment mechanisms, which included cash desks and slush funds.

From 2000 to 2002, four Siemens AG subsidiaries – Siemens S.A.S. of France (Siemens France), Siemens Sanayi ve Ticaret A.S. of Turkey (Siemens Turkey), Osram Middle East FZE (Osram Middle East) and Gas Turbine Technologies S.p.A. (GTT) – each wholly owned by Siemens AG or one of its subsidiaries, were awarded 42 contracts with a combined value of more than $80 million with the Ministries of Electricity and Oil of the government of the Republic of Iraq under the United Nations Oil for Food Program. To obtain these contracts, Siemens France, Siemens Turkey, Osram Middle East and GTT paid a total of at least $1,736,076 in kickbacks to the Iraqi government, and they collectively earned more $38 million in profits on those 42 contracts. Siemens France, Siemens Turkey, Osram Middle East and GTT inflated the price of the contracts by approximately 10 percent before submitting them to the United Nations for approval and improperly characterized payments to purported business consultants, part of which were paid as kickbacks to the Iraqi government as “commissions” to the business consultants. For the relevant years, the books and records of Siemens France, Siemens Turkey, Osram Middle East and GTT, including those containing false characterizations of the kickbacks paid to the Iraqi government, were part of the books and records of Siemens AG.

As the charging and plea documents reflect, beginning around September 1998 and continuing until 2007, Siemens Argentina made and caused to be made significant payments to various Argentine officials, both directly and indirectly, in exchange for favorable business treatment in connection with a $1 billion national identity card project. From the date that Siemens AG became listed on the New York Stock Exchange on March 12, 2001, through approximately January 2007, Siemens Argentina made approximately $31,263,000 in corrupt payments to various Argentine officials through purported consultants and other conduit entities, and improperly characterized those corrupt payments in its books and records as legitimate payments for “consulting fees” or “legal fees.” Siemens Argentina’s books and records, including those containing the false characterizations of the corrupt payments, were part of the books and records of Siemens AG.

According to court documents, beginning around November 2001 and continuing until approximately May 2007, Siemens Venezuela admitted it made and caused to be made corrupt payments of at least $18,782,965 to various Venezuelan officials, indirectly through purported business consultants, in exchange for favorable business treatment in connection with two major metropolitan mass transit projects called Metro Valencia and Metro Maracaibo. Some of those payments were made using U.S. bank accounts controlled by the purported business consultants.

In the charging and plea documents, Siemens Bangladesh admitted that from May 2001 to August 2006, it caused corrupt payments of at least $5,319,839 to be made through purported business consultants to various Bangladeshi officials in exchange for favorable treatment during the bidding process on a mobile telephone project. At least one payment to each of these purported consultants was paid from a U.S. bank account.

“Today’s filings make clear that for much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens. It should be equally clear that Siemens has undertaken significant remedial measures, instituted real reforms and cooperated from the inception of this investigation,” said Acting Assistant Attorney General Matthew Friedrich. “The Department and our international colleagues will continue our efforts to level the business playing field, making it free from corruption and fair to those who seek to participate in it.”

“The coordinated efforts of U.S. and German law enforcement authorities in this case set the standard for multi-national cooperation in the fight against corrupt business practices,” said U.S. Attorney for the District of Columbia Jeffrey A. Taylor. “To its credit, Siemens has taken extraordinary steps to reveal its long-standing, systemic criminal conduct and it has fundamentally restructured its operations to make them transparent and honest going forward.”

“This pattern of bribery by Siemens was unprecedented in scale and geographic reach. The corruption involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas,” said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. “Our success in bringing the company to justice is a testament to the close, coordinated working relationship among the SEC, the U.S. Department of Justice, and other U.S. and international law enforcement, particularly the Office of the Prosecutor General in

“Today’s announcement of the guilty pleas entered by Siemens AG and several of its regional companies reflects the FBI’s dedication to enforce the provisions of the Foreign Corrupt Practices Act,” said Joseph Persichini Jr., Assistant Director in Charge of the FBI’s Washington Field Office. “Simply stated, it is a federal crime for U.S. citizens and companies traded on U.S. markets to pay bribes in return for business. The FBI will continue to assist its law enforcement partners to ensure that the corporate and business communities are not tarnished with violations of the kind we are presenting here today.”

“Complicated schemes involving high finance, bribery and corruption, particularly in the international arena, are often solved most efficiently through a multiple-agency approach to crime fighting,” said Eileen Mayer, Chief of Internal Revenue Service (IRS) Criminal Investigation Division. “As the IRS expands its international presence and impact, we are proud to lend our financial investigative expertise to this formidable multi-agency approach that has culminated with today’s guilty pleas.”

The resolution of the U.S. criminal investigation of Siemens AG and its subsidiaries reflects, in large part, the actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the Department after the Munich Public Prosecutor’s Office initiated searches of multiple Siemens AG offices and homes of Siemens AG employees. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation with the Department efficiently and continuously; cooperated extensively and authentically with the Department in its ongoing investigation; took appropriate disciplinary action against individual wrongdoers, including senior management with involvement in or knowledge of the violations; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.

Under the terms of the plea agreement, Siemens AG agreed to retain an independent compliance monitor for a four-year period to oversee the continued implementation and maintenance of a robust compliance program and to make reports to the company and the Department of Justice. Siemens AG also agreed to continue fully cooperating with the Department in ongoing investigations of corrupt payments by company employees and agents.

Today, Siemens AG also reached a settlement of a related civil complaint filed by the Securities and Exchange Commission (SEC), charging Siemens AG with violating the FCPA’s anti-bribery, books and records, and internal controls provisions in connection with many of its international operations including those discussed in the criminal charges. Siemens AG agreed to pay $350 million in disgorgement of profits relating to those violations.

Also today, Siemens AG agreed to a disposition resolving an ongoing investigation by the Munich Public Prosecutor’s Office of Siemens AG’s operating groups other than the Telecommunications group. The charges were based on corporate failure to supervise its officers and employees, and in connection with those charges Siemens AG agreed to pay €395 million or approximately $569 million, including a €250,000 corporate fine and €394.75 million in disgorgement of profits. In October 2007, in connection with charges related to corrupt payments to foreign officials by Siemens AG’s Telecommunications operating group, the Munich Public Prosecutor’s Office announced a settlement with Siemens AG under which Siemens AG agreed to pay €201 million, or approximately $287 million, including a €1 million fine and €200 million in disgorgement of profits.

In connection with the cases brought by the Department, the SEC and the Munich Public Prosecutor’s Office, Siemens AG will pay a combined total of more than $1.6 billion in fines, penalties and disgorgement of profits, including $800 million to U.S. authorities, making the combined U.S. penalties the largest monetary sanction ever imposed in an FCPA case since the act was passed by Congress in 1977.

The Department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing these cases. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which entered into force on Feb. 15, 1999.

The criminal case is being prosecuted by Deputy Chief Mark F. Mendelsohn and Trial Attorney Lori A. Weinstein of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorney John D. Griffith from the U.S. Attorney’s Office for the District of Columbia. The criminal case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. Investigative assistance also was provided by the Internal Revenue Service – Criminal Investigation.

The Department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of this investigation. The Department also acknowledges the exceptional help provided, in the form of mutual legal assistance, by the authorities of Germany, including in particular by the Munich Public Prosecutor’s Office.

Siemens AG Information

Sentencing Memorandum

Argentina Information

Bangladesh Information

Venezuela Information

Siemens AG Letter

Siemens AG Statement of Offense and Compliance and Monitor Attachments

Siemens Argentina Letter

Siemens Argentina Statement of Offense

Siemens Bangladesh Letter

Siemens Bangladesh Statement of Offense

Siemens Venezuela Letter

Siemens Venezuela Statement of Offense

Transcript of Press Conference

How lucky Iraq is to be in bed with Siemens! Earlier this morning, AP's Sinan Salaheddin reported, "Also Tuesday, the Ministry set Dec. 31 as the date to open its second licensing round for developing oil and gas fields. Its statement added that Oil Minster Hussain al-Shahristani will kick off the bidding round at a conference in Baghdad. The statement didn't divulge the number of fields." Reuters points out, "Oil officials had planned to announce Iraq's second round since 2003 of bidding for major oil contracts at a conference in Baghdad on Dec. 29. But the ministry said in a newspaper advertisement the conference had been moved back to Dec. 31." Luke Baker (Reuters) notes how corporations are eager to 'help' Iraq with "more than $9 billion" already earmarked in foreign investment "for the oil-hub of Basra and the region around it".

Related news includes this from the Justice Deptartment, "A U.S. Army Reserve Major Pleads Guilty for Role in Bribery Schemes Involving Department of Defense Contracts in Iraq:"

WASHINGTON -- A major in the U.S. Army Reserve, Theresa Jeanne Baker, pleaded guilty today for her role in two bribery schemes involving U.S. Department of Defense (DOD) contracts at Camp Victory, Iraq, the Department of Justice announced today.

Baker pleaded guilty in U.S. District Court in Oklahoma City to conspiracy and bribery charges. The plea is subject to court approval, and Baker’s sentence will be determined by the court.

As part of the same investigation, Elie Samir Chidiac, a former employee of a defense contractor, Raman International Inc., which does business as Raman Corporation (Raman), was indicted in January 2008 on conspiracy to commit bribery in connection with the same activity. Chidiac is currently a fugitive. On June 3, 2008, Cypress, Texas-based Raman pleaded guilty to an indictment charging conspiracy to commit bribery and agreed to pay a $500,000 criminal fine and restitution in the amount of $327,192 to the DOD for its role in one of these schemes. Raman's plea agreement is subject to court approval.

According to the charging document, in the first conspiracy, Baker received money and other items from Raman and Chidiac, including a new Harley Davidson motorcycle, in return for conveying sensitive information and fraudulently awarding contracts to Raman. Upon performance of these contracts, Chidiac received payment from the DOD on Raman’s behalf and kicked back a portion of that profit to Baker. In the second conspiracy, Baker canceled contracts that were awarded to third party contractors and fraudulently re-awarded them to Chidiac. Baker then authorized Chidiac to receive cash payments for those contracts, totaling more than $700,000, despite the fact that Chidiac had neither delivered any goods nor performed any services. In return, Chidiac gave a portion of the money back to Baker. Baker then sent cash, concealed in packages, through the U.S. mail.

"The Department of Justice will vigorously prosecute those who defraud our military of necessary goods and services," said Deborah A. Garza, Acting Assistant Attorney General in charge of the Department’s Antitrust Division. "We commend the detection efforts of the federal agents assigned to this investigation."

The U.S. Army procures goods and services in support of Operation Iraqi Freedom, including critical infrastructure, technological components and construction services. Camp Victory is the primary component of the Victory Base Complex, which occupies the area surrounding the Baghdad International Airport.

Baker was charged with two counts of bribery, with a maximum penalty of 15 years in prison for each count and the greater of a $250,000 fine or three times the monetary equivalent of the thing of value. She also was charged with two counts of conspiracy, with a maximum penalty of five years in prison for each count and a $250,000 fine. The maximum fines may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either amount is greater than the statutory maximum fine.

Today's charges represent the Department's commitment to protecting U.S. taxpayers from procurement fraud through its creation of the National Procurement Fraud Task Force. The National Procurement Fraud Initiative, announced in October 2006, is designed to promote the early detection, prosecution, and prevention of procurement fraud associated with the increase in contracting activity for national security and other government programs.

This case is part of an ongoing investigation being conducted by the Antitrust Division's National Criminal Enforcement Section (NCES) along with Special Agents from the Defense Criminal Investigative Service (DCIS) and the U.S. Army Criminal Investigation Division (Army CID). Agents from the U.S. Immigrations and Customs Enforcement and the U.S. Postal Inspection Service are providing additional assistance to the investigation.

Anyone with information concerning bid rigging, bribery or other criminal conduct in the procurement of goods and services in Iraq is urged to contact NCES at 202-307-6694, DCIS at 800-424-9098 or hotline@dodig.mil or Army CID at www.cid.army.mil.

While the tag sale continues in Iraq, the country is protected from its creditors for at least one more year. Neil MacFarquhar (New York Times) reports the United Nation's Security Council voted ("unanimously") to extend the protection of Iraq's assets that they had been offering for . . . Oh, the same length of time as the UN mandate for the occupation of Iraq. Remember that? Too hard, too difficult, the White House had to have the treaty. MacFarquhar also reports that UN resolutions passed against Iraq during the Saddam Hussein era will be reviewed by Iraq "with the United Nations Secretariat, which would then report to the Council for action."

Changing topics, Sunday on NPR's Weekend Edition, Terry Gildea reported on the workers at the Brooke Army Medical Center in San Antonio Texas:

In one corner, a therapist examines the wound on a soldier's head. The skin is burned completely down to his skull. In another area, a patient rides a stationary bike slowly, trying to rebuild muscles in what's left of his badly burned legs. Inside this room, burn patients push through their pain in the relentless pursuit of one goal -- getting their lives back to normal.
The wars in Iraq and Afghanistan have left lasting scars on the young men and women recovering at military hospitals across the country. Many of them injured by roadside bombs were burned beyond recognition. The medical staff who dress their wounds and help ease their agonizing pain also fight a daily emotional battle.

And Jillian notes Bruce R. Posten's "Berks County surgeon treats soldiers wounded in Iraq, Afghanistan" (Reading Eagle):

For two weeks, Dr. Ali Amin, 46, of Wyomissing, an Iranian native and vascular surgeon, served on the front lines of a war - not on a Middle East battlefield but in an operating room in a hospital in Germany.
Amin was in the fight to save lives of soldiers wounded in Afghanistan and Iraq, piecing together life-sustaining arteries and veins grossly wounded in war.
He returned last Sunday from volunteering at the Landstuhl Regional Medical Center at Ramstein Air Force Base in Germany.
Amin said he went there for two reasons: To help those making a great sacrifice for their country but also to learn the latest techniques in military medical care because historically many surgical innovations were developed in wartime.

And in violence reported so far today, Reuters notes a Tarmiya roadside bombing that claimed 5 lives (three more wounded), 1 corpse discovered in Mussayab and 1 in Kifl and 1 Kirkuk.

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