Siemens seeks damages from 11 ex-execs

July 29, 2008 6:03:38 PM PDT
Siemens AG said Tuesday it plans to sue two former CEOs and nine other ex-executives for alleged supervisory failings in a corruption scandal that has cost the company millions in fines and damaged its reputation.

Siemens' supervisory board decided to seek damages from former chief executive Heinrich von Pierer and his successor, Klaus Kleinfeld, now the chief executive of U.S.-based Alcoa Inc., and others, the industrial conglomerate said in a statement.

It did not specify how much money it would demand.

Siemens said it based its claim for damages on "breaches of their organizational and supervisory duties" relating to illegal business practices and payments between 2003 and 2006, practices now placing a substantial financial burden on the company.

The company said the 11 former board members "will be given an opportunity to state their positions on the accusations before legal action for damages is taken."

Siemens has acknowledged dubious payments of up to 1.3 billion euros ($2 billion) in the corruption case that came to light last year. An investigation commissioned by Siemens has found evidence of violations across the company and in several countries.

Siemens, which makes products ranging from wind turbines to trams, agreed in October to pay a fine of 201 million euros ($316 million) to end some legal proceedings in Germany related to the investigation.

The company has put the total costs incurred by the scandal at 1.9 billion euros (nearly $3 billion) ? a figure that also includes expenses such as back tax payments and advisory fees.

The supervisory board acted one day after a Munich court convicted a former Siemens manager of its ICN fixed-line telephone network division of breach of trust in the first trial related to the scandal.

Prosecutors said the ex-manager, Reinhard Siekaczek, set up a complex network of shell corporations to siphon off company money over several years. They said the money was used as bribes to help secure contracts abroad by paying off would-be suppliers, government officials and potential customers.

Judge Peter Noll said it had not been possible to determine whether company executives knew about the bribes, but indicated that testimony had pointed in that direction.

Along with von Pierer and Kleinfeld, Siemens said it would seek damages against Johannes Feldmayer; Thomas Ganswindt; Edward Krubasik; Rudi Lamprecht; Heinz-Joachim Neubuerger; Juergen Radomski; Uriel Sharef; Klaus Wucherer; and Guenter Wilhelm.

Prosecutors in May opened administrative proceedings against von Pierer on suspicion of possible violation of oversight duty, which could lead to fines but not imprisonment. They stopped short of launching a criminal investigation.

Von Pierer has steadfastly denied any wrongdoing. His lawyer, Winfried Seibert, said the former manager learned of Tuesday's decision "with dismay and regret."

"He will of course defend himself" against the accusations and the threatened damages claim, Seibert added in a statement.

The Siemens CEO until 2005, von Pierer then became supervisory board chairman ? a post from which he stepped down last year.

Kleinfeld also stepped down as CEO last year, and was replaced by current company boss Peter Loescher.

Kleinfield has never been formally accused of any wrongdoing. After the corruption allegations emerged, he hired an outside anti-corruption expert and a law firm to examine and revise the company's anti-corruption safeguards.

In a statement from Pittsburgh-based Alcoa, Kleinfeld was quoted as saying, "I have great faith in the German judicial system, and that is why I am not concerned about this development."

Alcoa said in the statement that it and the board "have sought and received extensive information regarding the Siemens matter" since the company started talking to Kleinfeld about taking its CEO job.

"Alcoa continues to monitor the situation, and believes no further comment or action is warranted or necessary at this time. The board believes it is well informed of all pertinent information in this matter," the company statement said.

Siemens shares rose 1.8 percent to 73.19 euros ($114) in Frankfurt.