In Congressional hearings over the past two years, DOJ
officials have faced repeated questioning about the lack of FCPA prosecutions
against individuals. While the DOJ and the SEC have negotiated FCPA settlements
involving huge payments by the likes of Siemens AG, BASF, JGC and other
international giants, those cases have yielded few prosecutions against the
individuals alleged in the court papers to have been involved.
Now however the DOJ, along with the SEC, has a partial
answer to the questions: Eight former senior executives and agents of Siemens
were charged with criminal violations of the FCPA by the Department of Justice.
U.S. v. Sharef, 11 Crim 1056 (S.D.N.Y.). Seven of those executives were
also charged by the SEC in a parallel civil action. SEC v. Sharef, 11
CIV 9073 (S.D.N.Y. filed Dec. 13, 2011). One former executive settled with the
The actions center on conduct first revealed in the
record setting FCPA settlement in 2008 involving Siemens A.G. The allegations
in the criminal indictment and the civil complaint arise out of commitments by
Siemen's executives and agents to pay over $100 million in bribes to Argentine
officials to win a $1 billion contract. Named as defendants in the indictment
are Uriel Sharef, a former member of the central executive committee of Siemens
AG; Herbert Steffen, a former CEO of Siemens Argentina; Andres Truppel, a
former CFO of Siemens Argentina; Ulrich Bock, Stephan Singer and Eberhard
Reichert, former senior executives of Siemens Business Services or SBS; and Carlos
Sergi and Miguel Czysch, intermediaries and agents of the company.
The conduct traces to 1994 when the government of
Argentina issued a tender for bids for the DNI project which was to create a
new system of national identity booklets with state of the art national id
cards. During the bidding process the defendants and others committed Siemens
to paying about $100 million in bribes to officials of the Argentine
government, members of the opposition party and candidates for office who were
likely to come to power during the project. Approximately $31.3 million was
paid after March 12, 2001 when Siemens became a U.S. issuer. The defendants
used various means to conceal the payments including 17 off-shore shell
companies. The project had an estimated value of $1 billion over its life time.
In 1998 the project was awarded to a special purpose subsidiary of Siemens.
In 1999 the government suspended the project. When a new
government came to power in Argentina, the defendants are alleged to have
committed Siemens to paying additional bribes to the new officials. Existing
obligations to other officials were also paid.
Nevertheless, in May 2001 the project was terminated. In
an effort to recover the lost profits on the project, the defendants caused
Siemens to instituted an arbitration against the government of Argentina in
Washington, D.C. During that proceeding the fact that the contract was secured
through the payment of bribes was suppressed. At the same time Siemens
continued to fulfill its obligations to various government officials by making
the promised bribe payments in part conceal its activities according to the
charging papers. Indeed, payments were even made through a related arbitration
instituted in Switzerland by agents of the defendants. Siemens prevailed in the
Washington arbitration, securing an award of about $217.
In 2009, following a change in management and the
initiation of proceedings by the Munich prosecutors office, the company began
cooperating with the DOJ and the SEC as well as German prosecutors. At that
time the scheme first was revealed. The company decided to forego the right to
the arbitration award.
The indictment alleges violations of the FCPA, conspiracy
to commit wire fraud, conspiracy to commit money laundering and substantive
wire fraud. The SEC's complaint alleges violations of Exchange Act Sections
30A, 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5). Both actions are pending.
The SEC settled with defendant Bernd Regendantz, the
former CFO of SBS from February 2002 to 2004. He is alleged to have authorized
two bribe payments totaling about $10 million. Mr. Regendantz consented to the
entry of a permanent injunction prohibiting future violations of Exchange Act
Sections 30A and 13(b)(5) and from aiding and abetting violations of Exchange
Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B). He agreed to pay a civil penalty
of $40,000 which was deemed satisfied by the payment of a €30,000
administrative fine ordered by the Public Prosecutor General in Munich,
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