BERLIN – Engineering multinational Siemens, which has touted its system for self-policing as “best-in-class” after it paid one of the largest corporate bribery fines in history, received more than 3,000 new internal complaints of wrongdoing since the case was settled in 2008, including reports of corruption, bribery, fraud, anti-trust violations, embezzlement and conflict of interest.
While the number of complaints substantiated has been rising, the share of employees sanctioned for wrongdoing has gone down, to 63 percent in 2012 from 86 percent in the immediate aftermath of Siemens’ landmark guilty plea and settlement with US and German authorities. Recent public statements by Siemens officials and internal company data obtained by 100Reporters raise a number of questions about the Munich-based company’s commitment to rooting out corruption from within:
- Disparities exist between what the company has reported publicly about its anti-corruption efforts and what it reports at industry conferences. These include the specific types of alleged wrongdoing reported by company whistleblowers and data indicating that while the number of credible complaints has gone up in recent years, disciplinary actions have declined.
- Company documents suggest Siemens still does not consistently track reports of bribery, even though this was at the heart of the massive 2006 scandal.
- Whistleblower reporting websites that Siemens’ created after the scandal did not function for more than six months, and were only repaired after reporters contacted the company.
- A wide range of alleged misconduct continues to be reported, and retaliation against whistleblowers persists. Yet Siemens repeatedly has refused to discuss how cases of misconduct and retaliation have been handled, and which cases have been referred to outside authorities.
- Siemens’ officials have repeatedly opposed national whistleblower protection laws before the German parliament.
Officials at Siemens defended the company’s record, but declined to address questions in detail. They said that privacy laws prevented them from discussing specific cases, and that the company reported wrongdoing to law enforcement authorities when required by law to do so.
The emerging questions underscore the secrecy that surrounds Justice Department agreements with corporate offenders. Following its guilty plea in 2008, Siemens hired a former finance minister of Germany, Theo Waigel, to monitor its compliance with the terms of its agreement with the US Justice Department. But the content of those monitoring reports, for Siemens as for other companies that run afoul of the law, remain out of public view.
The reliance on self-policing, common in corporate anti-bribery regulations, concerns advocates for whistleblowers, given the company’s record. “Siemens should not be able to decide to keep the information internally if the case concerns the public interest or breaches of laws,” said Guido Strack, chair of Whistleblower Network, based in Cologne, Germany.
The bribery scandal that engulfed Siemens was massive in scale. According to investigators in the US and elsewhere, Siemens channeled some 4,283 bribes totaling $1.4 billion to government officials and other parties worldwide to win lucrative contracts from 2001 to 2007. The bribes, sometimes delivered in suitcases filled with cash, were “standard operating procedures for corporate executives who viewed bribery as a business strategy,” according to US prosecutors.
Bribes and other illicit payments, investigators said, flowed with the help of secret bank accounts, slush funds, fake invoices, sham business deals, middlemen, fictitious companies, doctored accounting records and backdated contracts. Siemens managers reportedly signed their names on “Post-it” notes they could later peel off to hide their complicity.
At the peak of the global probe, Siemens was suspected of bribery or other corrupt acts in at least 25 countries. The “astonishing” scheme was “unprecedented in scale and geographic reach,” according to US investigators. The trail led to Argentina, Bangladesh, China, Egypt, France, Greece, Indonesia, Italy, Jordan, Kuwait, Liechtenstein, Mexico, Nigeria, Norway, Russia, Saudi Arabia, Serbia, Switzerland, Turkey, Venezuela and Vietnam.
In cooperation with prosecutors, Siemens went on to set up a wide-ranging compliance system – including confidential and anonymous whistleblower hotlines and websites – ostensibly to cleanse the company of corruption, bribery and other crimes from the inside. Before lawmakers, prosecutors and the public, Siemens executives repeatedly have praised their own efforts to root out criminals among its some 350,000 employees working in more than 200 countries.
“During a crisis you have to make your company stronger and change the culture. We used the opportunity to make fundamental changes,” said Peter Löscher, then Siemens’ CEO, in 2010. “Siemens has a best-in-class compliance system,” said then-Vice President Frank Schmidt the following year.
But some insiders remain concerned. Norman Lohse, a compliance officer with Siemens’ Wind Power Division in Hamburg, said “the culture has changed,” but could regress due to “frustrated” employees, growing market pressures and an ongoing company reorganization. Some employees, he said, continue to display “certain criminal energy,” and managers have been involved with wrongdoing. Retaliation against whistleblowers, though on the decline, persists, he said.
Bea Edwards, executive director of the Government Accountability Project (GAP), a whistleblower advocacy organization based in Washington, DC, criticized the company for creating a “secret accountability system.” “If Siemens wants to earn any kind of credibility, it has to be more transparent,” she said.
Opposing Whistleblower Protections
Credits: Infographics by Dan Hill for 100Reporters.
Photos from top: Siemens headquarters in Beijing in February 2014, as Chinese regulators investigated allegations that the group’s healthcare unit and its dealers bribed hospitals to buy expensive disposable products used in some of its medical devices. Photo by Imaginechina via AP Images.
Siemens shareholders arrive for the company’s annual general meeting in Munich, southern Germany in January 2008. Photo by Oliver Lang for AFP/Getty Images.
Peter Löscher, Chairman of German engineering conglomerate Siemens, after the 2008 settlement. Photo by Sean Gallup for Getty Images.
Heinrich von Pierer (L), then chief executive of Siemens Germany, and Theo Waigel (R), then Germany’s finance minister, toast at a beer fair in Erlangen in 1998 following a ceremony to lay the foundation stone for a $110 million Siemens medical technic plant. Photo by Reuters.