Ex-manager on trial in Siemens scandal

May 26, 2008 6:01:10 PM PDT
A former Siemens AG manager on trial over alleged corruption and bribery testified Monday that "commissions" were paid to secure orders. Reinhard Siekaczek, a former manager at the ICN fixed-line telephone network division, is the first to go on trial over the company's corruption scandal that came to light last year.

Siekaczek, 57, is charged with 58 counts of breach of trust. Prosecutors allege that he set up a complex network of shell corporations that he used to siphon off company money over several years. The money allegedly was used as bribes to help secure contracts abroad by paying off would-be suppliers, government officials, potential customers.

Testifying as the trial opened, Siekaczek acknowledged having set up slush funds.

"The whole sectoral management was naturally informed that this function was carried out by me," he told the Munich state court.

"Naturally it was known to me and everyone that we pay commissions to secure orders," he said, adding that they had been handled "very discreetly" with only a very small circle of people in the know.

Siekaczek testified that his superiors had told him to create a new payment system after paying bribes abroad became a criminal offense in Germany in the late 1990s. He said judicial authorities had been on the trail of a previously established system of accounts in Austria.

He said at a meeting with four managers in 2002 he was given the job of organizing the payments. "It was naturally clear to all that this does not correspond to the law," he said, adding that their attitude was: "We're not doing it for ourselves, but for this firm."

Siekaczek said he used a system of phony consultant contracts in order to generate money for commissions. "I saw no other possibility," he said.

The defendant said he did not receive bonus payments for his actions. "I myself derived no benefit," he said.

Breach of trust carries a maximum possible sentence of five years in prison. The trial is scheduled to last through July.

Siemens has acknowledged dubious payments of up to $2 billion in the wider corruption case uncovered last year.

The company, which makes everything from wind turbines to trams, agreed in October to pay a $317 million fine to end some legal proceedings in Germany related to the scandal.

Siemens' own investigation has found evidence of violations across the company and in several countries.

In a summary of a Siemens-commissioned report released April 29, Debevoise & Plimpton LLP said it examined business transactions that took place between 1999 and 2006 and found that "domestic as well as foreign compliance regulations have been violated."

Several different countries, including the U.S., Switzerland, Italy and Greece, have launched investigations into suspected bribes to win contracts.

Shares of Siemens were up .06 percent to $112.56 in Frankfurt.