THE BRIBERY SCANDAL AT

SIEMENS
SUBMITTED TO :
DR MOHAMED SAAD

BY AHMED EMAM
MONA MAHER
YASMIN TAHA
Background

Siemens was initially started as Telegraphen -

Bauanstalt von Siemens & Halske in 1847 by Werner
von Siemens (Werner) and a mechanical engineer,
Johann Georg Halske.
Background

 In 1853, the company won its first international contract to build a telegraph net
work that stretched around 10,000 kilomerers and provide maintenance services
for it, in Russia.
 In 1855, Werner set up subsidiaries in Russia and Britain to serve the growing
opportunities for the company outside Germany and entrusted their responsibility
to his brothers.
 By 1914, Siemens & Halske was one of the largest companies of Germany with a
workforce if 82,000 employees. However, World War had a devastating impact on
the company’s business. It lost most of its foreign businesses.
 In 1966, Siemens & Halske, Siemens-Schuckertwerke Ag and Siemens-Reiniger-
Werke AG merged to form Siemens AG.
Background

 In 1969, the entire company’s business was reorganized into 6 operating groups.
 In 1990, the largest European company in the computer industry, Siemens-
Nixdorf Information system AG (SNI), was created.
 In 2001, Siemens obtained a listing on the New York Stock Exchange.
 During the fiscal year 2018, the revenues of the company stood at €83.044 billion.
Siemens Ethical history

 Since at least 1991, Siemens had developed corporate anti-corruption norms,

fancy codes of conduct and strict business guidelines
 It was even selected to become a corporate member of Transparency
International’s German chapter in 1998
 On July 5th 2000, Siemens issued a new corporate ‘No employee may directly or
indirectly offer or grant unjustified advantages to others in connection with
business dealings, neither in monetary form nor as some other advantage.
 In July 2004, Siemens’s CEO delivered a speech entitled “Tone from the top”.
The aim was to show that fighting corruption was finally a priority and contrary to
the company’s principles of integrity. In reality, as a German prosecutor was to
comment later, the Siemens compliance programme existed only on paper
Issue

 In 2006 a colossal corruption scandal for Siemens,

 This scandal described the pattern of bribery in the
company as “unprecedented in scale and geographic reach.
The corruption involved more than $ 553 million bribes to
government officials in Asia, Africa, Europe, the Middle
East and the Americas.”
 What
Happened
bribe to win contracts abroad

 On November 15, 2006, around 30 office and private

homes related to Siemens and its employees were raided
by some 200 police officers, tax inspectors and
prosecutors in Munich, and other cities of Germany, to
probe suspicions of bribery.
$ 553 million bribes

 $ 5 million bribes to win a mobile phone contract in Bangladesh

 $12.7 million in payment to senior officials in Nigeria for government contract
 $40 million a different Siemens Subsidiary paid to win 1 billion contract to prduce
national identify cards in Argentina
 $20 million provided to senior government officials to build power plants in Israel
 $16 million for urban rail lines in Venezuela
 $14 million for medical equipment in china
 $1.7 million to Saddam Hussein and his cronies in Iraq for a United Nations oil-
for-food program
 Bribes in n several other countries like Italy, Switzerland, Greece and the US
The method of bribery

 The method of bribery was hiring an outside consultant who would facilitate
bribery was a Siemens business strategy

 The magnitude of the bribery system was widespread. As Reinhard Siekaczek, a

Siemens employee put it:

 We all knew that what we were doing was illegal. Paying a bribe was customary
in practically all business units at Siemens AG,and bribery was a business
strategy.”
Time for justice

 The company was pleaded guilty in federal court in

Washington to charges that it violated a 1977 law banning
the use of corrupt practices in foreign business dealings.
 Shares of Siemens fell 0.22 euros, to 47.23 euros
 lost most of the market shares in global business in 2006 ,
2007
 Anti-corruption watchdog Transparency International asks
Siemens to leave the organization.
Time for justice

 Following the US and German prosecutions, Siemens paid more than $1.6 billion
in fines, penalties and disgorgement of profits, including $800 million to US
authorities. This was the largest monetary sanction ever imposed in a case
 the most important loss for Siemens is its good name and it will take a long time
to regain the trust of customers and business partners.
Executive board members

 Heinrich von Pierer, who ran the company from 1992 to 2005 pay €5 million as
settlement
 and his successor, Klaus Kleinfeld pay €2 million as settlement
Executive board members

 Kutschenreuter is the most senior Siemens

executive found guilty of corruption so far. He
was placed on probation for two years and fined
160,000 euro after admitting that he had covered
up slush funds and bribes paid by his employees.
Executive board members

 Hans-Werner Hartmann, who was in charge of

accounting at the company's communications arm,
was placed on probation for 18 months and fined
40,000 euro.
Corrective Actions

 International Governing Body as solution :As part of the settlement, Siemens

agreed to appoint Theo Waigel, the former German finance minister, as an
independent monitor for up to four years. Europe’s largest conglomerate also agreed
to co-operate with the US government’s continuing investigation in the case.
 After the bribery scandals were unearthed at Siemens, the company started many
initiatives to strengthen its corporate governance and compliance controls. Siemens
has laid down business conduct guidelines for its employees in dealing with
government officials in a document on “Anti-public corruption compliance.”
 As a result all parties involved know what is allowed and expected and what is not
thereby taking the unknowns out of the equation and equalizing the playing field for
all concerned.
Thank you