EMERGING

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<strong>EMERGING</strong> MARKETS: A Review of Business and Legal Issues called “slush funds/black money” (German Schwarze Kasse). Suspicions shared by prosecutor's offices of several countries include transfers of the illegal funds of Siemens to Egypt, Saudi Arabia, Kuwait, Indonesia, China, Hungary, Israel, Norway, France, Vietnam, Greece, Nigeria, Italy, Serbia, Caribbean countries, Russia, Poland, Libya and other countries. Neue Bank Lichtenstein, LGT Bank Group, Dresdner Bank Schweiz, Deutsche Bank Frankfurt, Societe General Hellad, Raiffeisen Bank and other banks have all cooperated with the police and prosecutors during the investigation. Chart 1. Links between persons and companies involved in creating “black money” in Siemens AG (based on investigation documents) Source: Own study based on The Wall Street Journal, 28-30.Dec.2007, Der Spiegel, 14.04.2008 and other sources; continuous lines refer to assets held in particular companies, dotted lines refer to the transfer of assets to entities connected with Siemens AG transactions. Sample transactions only. The investigation started when numerous financial transactions made by Siemens employees through off-shore companies were incidentally discovered in Liechtenstein in 2003. Banking supervision officials suspected that the revealed transactions could have been used to finance international terrorism. The suspected bank accounts were monitored until 2005. In the meantime, the issue was investigated by Swiss, Austrian and Bavarian prosecutor’s offices. In autumn 2004 Siemens head office was informed of suspected Page 12 Volume 1, April 2009
<strong>EMERGING</strong> MARKETS: A Review of Business and Legal Issues corruption, yet the prosecutors’ request for explanation was rejected. In March 2006, investigators searched the premises of the Swiss company of Siemens in relation to suspected corruption in Greece, and froze more than EUR 200 mln originating from suspicious transactions on the company’s accounts. The company’s reaction was to close down the Swiss branch, although there were no economic reasons to justify such an action. 1 The principal persons involved in the revealed transactions and suspected of corruption in Greece had left Siemens only a few months before the scandal broke out, and some of them – even several moths after the crimes was revealed. 2 The case concerning suspected corruption in Siemens AG, which ended with a court settlement (tatsächliche Verständigung), revealed the details of 77 corruption cases in Nigeria (33 bribes of EUR 9.74 mln), Russia (38 cases of EUR 1.87 mln) and Libya (6 cases), amounting to the total of EUR 12 mln. The court possesses the names of persons and companies to whom the accused Reinhard Siekaczek gave bribes or controlled giving bribes, as was testified by one of the now former Siemens employees, arrested in November 2006. The files included a list of bribes amounting to from EUR 2 thousand to EUR 2.2 mln, paid by transfer or in cash to numerous public administration officials and to telecommunications companies from the countries mentioned above. As established by the court, the bribes earned the corporation "illegal economic profits" of EUR 200 mln, whereas, as the accused testified, they made it possible for 15 thousand Siemens employees to earn revenues of ca EUR 4 bn. 3 For the sake of comparison, in the Watergate scandal it was found that Lockheed Aircraft Corporation paid a bribe of USD 12.5 mln to public persons in Japan for the contract worth a total of USD 430 mln. 4 R. Siekaczek, as a supervision director in the corporation head office until 2004, supervised the sale of telecommunications equipment abroad, reported to the telecommunication department (COM) management, and the latter reported directly to the 1 D.Crawford, M.Esterl, 2007, Inside Bribery Probe of Siemens, The Wall Street Journal, 2 P.Mavridis resigned in April 2006, and the CEO of the Greek subsidiary - not until December 2007. 3 D.Crawford, M.Esterl: How Siemens paid out bribes across 3 countries. The Wall Street Journal, 16.11.2007, p. 1; 4 R.T.George, Business Ethics, after Klimczak (2006: ) The Time: Lockheed's Defiance: A Right to Bribe? 1975 http://www.time.com/time/magazine/article/0,9171,917751-2,00.html Page 13 Volume 1, April 2009
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