126
BRIBERY WAS
TOLERATED AND
... REWARDED
THE SIEMENS SCANDAL, 2008
W
hat do a mobile phone
network in Bangladesh,
a national identity card
scheme in Argentina, a UN food-for-
oil programme in Iraq, and two new
rail systems in Venezuela have in
common? They are just a few of
the lucrative public works projects
awarded to German engineering
giant Siemens by corrupt state
officials who were happy to accept
“financial encouragement” when it
came to choosing contractors.Between March 2001, when
Siemens was first listed on the
New York Stock Exchange, and
September 2007, when US officials
intervened in the firm’s operations,
Siemens’ staff ran a foreign bribery
operation of unprecedented scale.Allegations of bribery
The US stock exchange watchdog,
the Federal Securities and
Exchange Commission (SEC),
brought a case against Siemens inIN CONTEXT
LOCATION
Washington D.C., USTHEME
Corporate corruptionBEFORE
1914 German company
Siemens and British rival
Vickers are exposed for bribing
Japanese officials for warship
contracts; Siemens employee
Karl Richter is sentenced to
two years in prison.1985–2006 British defence
group BAE Systems admits
misrepresenting its dealings
with Saudi officials in the
Al Yamamah arms-for-oil deal.AFTER
2009 Executives at US
engineering company Kellogg
Brown & Root are convicted
for participating in a decade-
long scheme to bribe
government officials in Nigeria
in return for $6 billion (£4.3
billion) of contracts to build
liquefied gas facilities.Siemens sets aside large
pools of cash for briberySiemens bribes government officials to bypass the public
selection process and simply award the contracts to themGovernments around the
world offer private
companies contracts to
build large-scale
infrastructure projectsCompetitors are shut out, and Siemens profits from
the day-to-day running of railway lines, energy
grids, power plants, and other state projects126-127_Siemens.indd 126 02/12/2016 16:17
127
Reinhard Siekaczek was largely
responsible for Siemens’ accounting at
the time of the scandal, but he helped
expose the company’s corruption and,
as a result, received a lighter sentence.See also: The Teapot Dome Scandal 108–09 ■ The Enron Scandal 122–23 ■ The Volkswagen Emissions Scandal 130–31WHITE COLLAR CRIMES
September 2008. It had discovered
that between 2001 and 2007, 4,283
bribes and kickbacks totalling
$1.4 billion (£928 million) were
made by the firm to government
officials in over 60 countries. A
further 1,185 payments with a total
value of $392 million (£260 million)
were made to other third parties.
The SEC was not the only
institution with allegations against
Siemens. In Greece, prosecutors
pursued the firm for complaints
arising from contracts for security
systems at the 2004 Athens
Olympics. In subsequent months,
fresh accusations were made about
Siemens’ activities in other parts
of the world, from Norway to
Slovakia and from China to Turkey.Culture of corruption
For Siemens’ management and staff,
offering bribes when competing for
foreign contracts was a standard
strategy. The US Department of
Justice revealed that the firm had
three “cash desks” in its offices.
Staff would bring in empty suitcases
and carry them away stuffed with
banknotes. Up to €1 million(£900,000) could be “withdrawn” at
a time to secure contracts for the
firm’s telecoms arm; few questions
were asked and little paperwork was
required. Between 2001 and 2004,
roughly $67 million (£50 million)
was taken out via the cash desks.
However, most of Siemens’
illicit business practices were
carried out less crudely: deniability
was all. Special off-the-books bank
accounts and “consultants” were
widely used to hide the nature of the
shady transactions. Accounting was
kept deliberately sketchy. Managers
would sign payment slips for bribes
using Post-it notes, which would
then be removed and disposed of at
the very moment the authorized
funds were transferred.
Siemens’ apparent tolerance of
these corrupt practices suggests its
staff must have felt, on some level,
they were doing nothing wrong.
This attitude was at odds with the
fact that the firm’s listing on the
New York Stock Exchange meant it
was subject to US anti-bribery laws.
And although offering bribes to
foreign officials was once legal inGermany, the practice had been
outlawed in 1999. In December
2008, Siemens pleaded guilty in a
US court; it was ordered to pay fines
of $1.6 billion (£1 billion) and to
rehabilitate itself by reforming its
internal culture. It has since set up
anti-corruption processes. ■The day is past when
multinational corporations
could regard illicit payments
to foreign officials as simply
another cost of doing business.
Cheryl J. ScarboroDefining white collar crime
The term “white collar crime”
was coined in 1939 by American
sociologist Edwin Sutherland.
His work attempted to shift
criminology’s focus away from
the blue-collar street crimes
committed by the working class- according to the prevailing
theory, crime was intrinsically
linked with poverty. Instead, he
chose to study the financially
motivated, non-violent crimes
committed by professional, often
wealthy, businessmen and other
pillars of society. His definition
of a white collar crime was one
“committed by a person of
respectability and high social
status in the course of his
occupation.” Sutherland claimed
that the offences white-collar
felons committed – including
fraud, forgery, bribery, and
money-laundering – were more
likely to be seen as matters for
civil rather than criminal law.
And compared with their
counterparts in the lower
classes, they were far more
likely to “get away” with them.126-127_Siemens.indd 127 12/12/2016 17:13