United States: Regulators Listen To Senate Critics: Eight Ex-Siemens Execs Charged For FCPA Violations

Last Updated: December 27 2011
Article by Paul T. Friedman and Ruti Smithline

The Siemens case is undoubtedly the biggest case in FCPA enforcement history: the "pattern of bribery" involved was "unprecedented in scale and geographic reach."1 The $1.6 billion combined settlement with U.S. and German authorities remains the record-breaking anti-corruption penalty of all time. But what was missing from the Siemens case was the "cornerstone" of the Department of Justice's "enforcement strategy"2—not a single individual had been held accountable for the conduct at Siemens. That is, until yesterday.

THE CHARGES

Almost exactly three years to the day since Siemens AG and three of its subsidiaries, including Siemens Argentina, settled the massive FCPA case, the DOJ announced yesterday charges against eight Siemens former executives and agents. The indictment alleges that the eight individuals were involved in a conspiracy to funnel $100 million to Argentine officials to land a $1 billion contract to make national identification cards. The defendants were charged with conspiracy to violate the FCPA, conspiracy to commit wire fraud, substantive wire fraud, and conspiracy to commit money laundering. In a parallel action, the Securities and Exchange Commission charged seven individuals.

According to U.S. Attorney for the Southern District of New York, Preet Bharara:

As alleged, the defendants in this case bribed Argentine government officials in two successive administrations and paid off countless others in a successful effort to secure a billion dollar contract. When the project was terminated, they even sought to recover the profits they would have reaped from a contract that was awarded to them illegitimately in the first place.3

The indictment alleges that during the bidding and implementation phases of the project, the defendants caused Siemens to pay nearly $100 million in bribes to sitting Argentine government officials and members of the opposition party who were likely to come to power during the execution phase of the contract. According to the indictment, the defendants concealed the illicit payments in various ways, including transporting millions of dollars in cash across international borders and using at least 17 offshore shell companies.

The indictment also alleges that when the project was terminated, members of the conspiracy sought to recover the anticipated proceeds from the project by filing a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. DOJ alleges that defendants "allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the [] project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption."4 As an aside, the company's systemic corruption was not uncovered during the proceedings in Washington, and the tribunal found for Siemens. The company was awarded nearly $220 million in damages. But once the global corruption scheme unraveled, Siemens' new management declined to claim the award money.

The eight individuals charged by DOJ are all foreign nationals from Germany, Switzerland, and Argentina. None of the defendants have yet been arrested or extradited. Assistant Attorney General Lanny Breuer pointed out that the charges against Uriel Sharef, the most senior executive charged and a former Siemens managing board member, are the first under the FCPA against a board member of a Fortune Global 50 company.

The SEC also announced yesterday that one defendant, Bernd Regendantz, has already settled the SEC charges. Without admitting or denying the allegations, Regendantz consented to the entry of final judgment and a civil penalty of $40,000, "deemed satisfied by Regendantz' payment of a €30,000 administrative fine ordered by the Public Prosecutor General in Munich, Germany."5 The settlement with Regendantz and the fact he was not indicted by DOJ suggests that he is cooperating with the government's prosecution.

FOCUS ON INDIVIDUALS CONTINUES

Although the Siemens case was admittedly a big win for DOJ and SEC, the regulators had faced criticism for failing to bring charges against any individuals. For example, during last year's Senate hearings into FCPA enforcement, former Senator Arlen Specter questioned why no one had gone to jail for the biggest case of overseas bribery. During the hearing, Senator Specter stated: "Criminal fines are added to the costs of doing business," but "going to jail is what works to deter crimes."6

Yesterday's charges against the eight individuals show that the regulators were listening to Senator Specter. Prosecuting and holding individuals accountable continues to be a central focus of the regulators' enforcement strategy.7 As Mr. Breuer noted, "[c]ompanies, of course, operate through the actions of individuals and when we have evidence we believe shows those individuals violated the law, we will prosecute them."

Footnotes

1 DOJ Release No. 08-1105, Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines (Dec. 15, 2008), available at http://www.justice.gov/opa/pr/2008/December/08-crm-1105.html .

2 See DOJ, Lanny A. Breuer, Prepared Address to the 22nd National Forum on the Foreign Corrupt Practices Act (Nov. 17, 2009), available at http://www.justice.gov/criminal/pr/speeches-testimony/documents/11-17-09aagbreuer-remarks-fcpa.pdf .

3 DOJ Release No. 11-1626, Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme (Dec. 13, 2011), available at http://www.justice.gov/opa/pr/2011/December/11-atj-1626.html.

4 Id.

5 SEC Release No. 22190, SEC Charges Seven Former Siemens Executives with Bribing Leaders in Argentina (Dec. 13, 2011), available at http://www.sec.gov/litigation/litreleases/2011/lr22190.htm .

6 See "Is DOJ Doing Too Much, or Not Enough, to Combat Bribery?" (Nov. 30, 2010), available at http://blogs.wsj.com/law/2010/11/30/is-doj-doing-too-much-or-not-enough-to-combat-foreign-bribery .

7 Please refer to our Client Alerts: Telecom Exec Sentenced to Record Breaking FCPA Prison Term: 15 Years (October 28, 2011), Another Successful FCPA Prosecution Against Individuals—More Terra Telecom Execs Appear Headed for Prison for Haiti Bribes (August 29, 2011), and 2010: Another Record-Breaking Year for FCPA Enforcement, Confirming "New Era" (January 12, 2011).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions