(Updates with use of off-shore companies in 11th paragraph.)
Dec. 13 (Bloomberg) -- Eight former executives at Siemens AG, Europe’s largest engineering company, were charged by the U.S. with conspiring to bribe Argentine government officials to land a $1 billion contract to make national identity cards.
The U.S. said the former executives ran a decade-long scheme to pay more than $100 million in bribes to officials including cabinet ministers and presidents to win the contract, and to cover their tracks so the fraud wouldn’t be exposed.
The case showed “corruption on an absolutely stunning scale,” Assistant Attorney General Lanny Breuer said in a call with reporters today. “This is the first time we have so many defendants charged with this fraud.”
The defendants in the criminal case are Uriel Sharef, 67, a former member of the managing board of Munich-based Siemens; Herbert Steffen, 74, Andres Truppel, 57, Ulrich Bock, 68, Eberhard Reichert, 74, Stephan Signer, 51, Carlos Sergi, 78, and Miguel Czysch, 79.
The counts against the former officials include conspiracy to violate the Foreign Corrupt Practices Act and the wire-fraud statute, money laundering conspiracy and wire fraud, according to an indictment unsealed today in Manhattan federal court.
A ninth executive, Bernd Regendantz, was named in a related complaint filed today by the U.S. Securities and Exchange Commission and not charged with a crime. Czysch and Reichert, who were charged criminally, aren’t named as defendants in the SEC complaint, which was also filed in Manhattan federal court.
None of them are in U.S. custody. In a call with reporters today, Breuer declined to say whether they will be extradited to the U.S.
“The company is not indicted,” said Alexander Becker, a Siemens spokesman. “We can’t comment on proceedings against individuals.”
The SEC claims that executives of Siemens and its Argentine subsidiary bribed officials in Argentina from 1996 to 2007.
Robert Khuzami, director of the SEC’s Division of Enforcement, called it the largest action his agency has brought against people accused of bribing foreign officials.
Prosecutors claimed the defendants channeled payments through conduit companies in off-shore locations including the Bahamas, British Virgin Islands, the Cayman Islands, Panama, Switzerland and Uruguay. They disguised the bribes through deceptive accounting and the use of phony consulting agreements and fraudulent invoices, the government claimed.
Sergi, an Argentine businessman with access to high-ranking officials, served as a conduit between Siemens and members of the country’s government, according to the indictment. The complaint refers to at least eight Argentine officials, who aren’t named.
In one incident, Bock, a former Siemens executive who also worked as a consultant for the company, withdrew $10 million from Siemens general-purpose accounts in Germany, then transported the cash across the border into Switzerland, where he deposited the money into Swiss bank accounts to be transferred to Argentine office-holders.
The group also filed fraudulent arbitration proceedings in Switzerland and the U.S., to provide a false justification for the money paid out in bribes.
According to the indictment, Argentina solicited bids for creating the citizen IDs in 1994. Siemens won the contract in 1998.
Fortune Global 50
“This is the first time we’ve charged a board member of a Fortune Global 50 company” with FCPA violations, Breuer said. “This was really one scheme that really began back in ‘97, ‘98, when the defendants and others at Siemens determined they’d get this contract any way they could,” he said
Breuer said that more than $25 million in bribe money was laundered through the U.S. banking system.
Steffen’s attorney, Steffen Ufer, said that his client denies wrongdoing and that he settled an investigation of the same issues with prosecutors in Munich.
Sharef’s lawyer, Heiko Lesch, and Hans Dieter Gross, who represents Bock, declined to comment.
Jan Olaf Leisner, who represents Truppel, and Eberhard Zeeb, Signer’s lawyer, didn’t immediately reply to e-mails seeking comment.
“He acted honorably at all points in the investigation and in the best interest of Siemens, where he continues to work, and he will not be named criminally,” Regendantz’s lawyer, Nicholas De Feis, said in a phone interview.
National ID Cards
The defendants are accused of bribing Argentine officials including two presidents and cabinet ministers in two administrations to win a contract to make national ID cards -- “Documentos Nacionales de Identidad” in Spanish -- for every citizen of the country of more than 40 million people.
“After paying bribes to obtain it, Siemens was awarded the DNI contract in 1998,” the SEC said in its complaint. “Later, after a change in Argentine political administrations resulted in the DNI contract being suspended, then canceled, Siemens paid additional bribes in a failed effort to bring the contract back into force.”
Siemens pleaded guilty three years ago to violating U.S. anti-corruption laws and agreed to pay $1.6 billion to settle bribery probes in the U.S. and Germany.
The criminal case is U.S. v. Sharef, 11-01056, U.S. District Court, Southern District of New York (Manhattan). The civil case is U.S. Securities and Exchange Commission v. Sharef, 11-CV-9073, U.S. District Court, Southern District of New York (Manhattan).
----With assistance from Thom Weidlich in New York, Richard Weiss in Frankfurt, Karin Matussek in Berlin and Joshua Gallu in Washington. Editors: Andrew Dunn, Fred Strasser
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