U.S. Charges Eight Former Siemens Execs

Three years after Germany's Siemens AG settled the biggest FCPA case in history, eight of its former executives and agents have been indicted for a criminal conspiracy to violate the FCPA, launder money, and commit wire fraud.

The defendants also face civil charges brought by the SEC for bribing government officials in Argentina.

A ninth man, Bernd Regendantz, has already settled the SEC's charges by agreeing to pay a civil penalty of $40,000. The penalty was 'deemed satisfied by Regendantz' payment of a €30,000 administrative fine ordered by the Public Prosecutor General in Munich, Germany.' He was not charged in the U.S. criminal indictment. That may indicate he's already cooperating with the DOJ's prosecutors.

The defendants named in the DOJ's indictment were:

•     Uriel Sharef, a former member of the central executive committee of Siemens AG

•     Herbert Steffen, a former chief executive officer of Siemens Argentina

•     Andres Truppel, a former chief financial officer of Siemens Argentina

•     Ulrich Bock, Stephan Signer, and Eberhard Reichert, former senior executives of Siemens Business Services, and

•     Carlos Sergi and Miguel Czysch, who served as intermediaries and agents of Siemens in the alleged bribe scheme.

The defendants allegedly bribed a series of Argentine government officials beginning in 1994 for ten years to win a billion dollar contract to produce national identity cards. After the contract was terminated, they paid bribes to reinstate it. They also paid further bribes to suppress evidence when the termination of the contract was being arbitrated.

The defendants live in Germany, Switzerland, or Argentina. They have not yet been arrested or extradited. 

'Over the course of the bribery scheme,' the SEC said, 'over $100 million in bribes were paid, approximately $31.3 million of which were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws. As a result of the bribe payments it made, Siemens received an arbitration award in 2007 against the government of Argentina of over $217 million plus interest for the [contract]. In August 2009, after settling bribery charges with the U.S. and Germany, Siemens waived the arbitration award.'

Siemens AG's settlement in December 2008 with the DOJ and SEC for $800 million is still the biggest FCPA case of all time. It paid a criminal fine of $450 million in the DOJ settlement and $350 million in disgorgement of profits under its agreement with the SEC. Siemens' Argentina subsidiary was named in the 2008 enforcement action. In Germany, Siemens also paid €596 million in 2007 and 2008 to settle actions brought by the Munich Public Prosecutor.

The DOJ's Lanny Breuer said today: 'This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.'

The DOJ had faced criticism in the media and in Congress for not prosecuting individuals from 'issuers' that resolve FCPA cases.

The indictment charged the defendants with conspiracy to violate the anti-bribery, books and records, and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.

The most senior defendant, the SEC said, was Uriel Sharef, a former Siemens Managing Board member. It said all of the defendants allegedly 'falsified documents, including invoices and sham consulting contracts, participated in meetings in the United States to negotiate the terms of bribe payments, and made use of U.S. bank accounts to pay bribes.'

The DOJ's Breuer said, 'This is the first time we’ve charged a board member of a Fortune global 50 company with FCPA violations.'

Robert Khuzami, head of the SEC’s enforcement division, said it is the largest civil enforcement action ever brought by the SEC against defendants accused of bribing foreign officials.

The DOJ praised Siemens' 'laudable actions . . . in disclosing potential FCPA violations.' It said,

Siemens AG disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation; cooperated extensively and authentically with the department in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.

Siemens AG's American Depositary Receipts trade on the NYSE under the symbol SI.

____________________

The criminal case is U.S. v. Sharef, 11-01056, U.S. District Court, Southern District of New York (Manhattan).

View the DOJ's December 13, 2011 release here.

View the SEC's Litigation Release No. 22190 and Accounting and Auditing Enforcement No. 3342 (both dated December 13, 2011) in Securities and Exchange Commission v. Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel and Bernd Regendantz, Civil Action No. 11 civ 9073 (Judge Scheidlin/Pitman) (S.D.N.Y.) here.

Download the SEC's civil complaint here.

Avon Discloses SEC Investigation

Avon Products confirmed Thursday that the SEC has issued a formal order of investigation into possible violations of the Foreign Corrupt Practices Act.

Avon's disclosure appeared in its quarterly report filed with the SEC.

The company, which first disclosed an internal investigation in October 2008, said it has turned over evidence to the SEC and DOJ from 'compliance reviews.'

The investigation, the company said, focused on expenses and accounting for 'travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and acquisitions, and payments to third-party agents and others.'

The Wall Street Journal said in May the internal investigation uncovered millions of dollars of questionable payments to government officials in China, Brazil, Mexico, Argentina, India, and Japan.

The company's legal fees and costs for outside counsel conducting the investigation were $59 million in 2009, $95 million in 2010, and $22.5 for the first quarter of this year.

Last year, Avon reportedly suspended four employees pending its internal bribery investigation -- three in China and one in New York.

China imposed restrictions on direct selling in the late 1990s that forced Avon to market its products through shops and boutiques. But in 2006, the company convinced China's regulators to allow its traditional door-to-door sales model.

Avon appeared on our 2011 watch list.

Avon Products, Inc. trades on the NYSE under the symbol AVP.

___________________

Avon's FCPA disclosure in its Form 10-Q (pdf) filed October 27, 2011 said:

*     *     *

As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the Foreign Corrupt Practices Act (“FCPA”) and related U.S. and foreign laws in China and additional countries. The internal investigation, which is being conducted under the oversight of our Audit Committee, began in June 2008. As we reported in October 2008, we voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies of our internal investigation. We are continuing to cooperate with both agencies and inquiries by them, including but not limited to, signing tolling agreements, translating and producing documents and assisting with interviews.

As previously reported in July 2009, in connection with the internal investigation, we commenced compliance reviews regarding the FCPA and related U.S. and foreign laws in additional countries in order to evaluate our compliance efforts. We are conducting these compliance reviews in a number of other countries selected to represent each of the Company's international geographic segments. The internal investigation and compliance reviews are focused on reviewing certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and acquisitions, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and their employees. In connection with the ongoing internal investigation and compliance reviews, certain personnel actions have been taken and additional personnel actions may be taken in the future.

For additional information, see Note 5 to our consolidated financial statements contained in our Form 10-Q for the quarter ended March 31, 2011 and “Risk Factors” contained in our Form 10-K for the year ended December 31, 2010. The internal investigation and compliance reviews of these matters are ongoing, and we continue to cooperate with both agencies with respect to these matters. In connection with the internal investigation and compliance reviews, we continue to enhance our ethics and compliance program, including our policies and procedures, FCPA compliance-related training, FCPA third party due diligence program and other compliance-related resources.

On October 26, 2011, the Company received a subpoena from the United States Securities and Exchange Commission (“SEC”) requesting documents and information in connection with a Regulation FD investigation of the Company's contacts and communications with certain financial analysts and other representatives of the financial community during 2010 and 2011. The Company was also advised that a formal order of investigation was issued by the SEC relating to the FCPA matters described above and the Regulation FD matters that are referenced in the subpoena. The Company intends to cooperate fully with the SEC's investigation.

At this point we are unable to predict the duration, scope, developments in, results of, or consequences of the internal investigation and compliance reviews and the SEC's investigation.

*     *     *

Ball Corporation Resolves SEC Charges

On March 24, Colorado-based Ball Corporation paid a $300,000 penalty to settle civil FCPA books and records and internal control charges brought by the the SEC.

Ball, a manufacturer of metal packaging for beverages, foods and household products, paid $106,000 in bribes through its Argentine subsidiary Formametal, S.A. in 2006 and 2007. At least ten bribes went to employees of the Argentine government to allow Ball to import prohibited used machinery and the exportation of raw materials at reduced tariffs, according to the SEC.

The SEC complaint said accounting personnel at Ball learned "soon after Ball acquired Formametal in March 2006 that Formametal employees may have made questionable payments and caused other compliance problems before the acquisition."

But Ball "failed to take sufficient action to ensure that such activities did not recur at Formametal after Ball took control of the Argentine company. Within months of Ball’s acquisition of Formametal, two Formametal executives—the then-Formametal President and then-Formametal Vice President of Institutional Affairs (hereinafter the “President” and “Vice President of Institutional Affairs,” respectively)—authorized improper payments to Argentine officials. The true nature of the payments was mischaracterized as ordinary business expenses on Formametal’s books and records and went undetected for over a year."

Ball Corporation trades on the NYSE under the symbol BLL.

Download the SEC's cease and desist order for In the Matter of Ball Corporation, Litigation Release No. 64123, Accounting and Auditing Release No. 3255, and Administrative Proceeding File No. 3-14305 (all dated March 24, 2011) here.

Driller Resolves FCPA Charges

Oil and gas driller Helmerich & Payne Inc. (H&P) will pay a $1 million criminal penalty to the Justice Department to settle Foreign Corrupt Practices Act violations related to improper payments to government officials in Argentina and Venezuela. It will also disgorge to the Securities and Exchange Commission $320,604 plus prejudgment interest of $55,077.22.

H&P, a Delaware corporation headquartered in Tulsa, Oklahoma, paid bribes to customs officials of about $185,673 from 2003 through 2008. The payments by subsidiaries in Argentina and Venezuela were made directly or through third-party customs brokers to clear imports of drilling equipment. H&P avoided costs of about $320,604 by the improper payments.

The Justice Department gave H&P and its subsidiaries a two-year deferred or non-prosecution agreement. In addition to imposing the criminal penalty, it requires the company to implement internal controls and cooperate with prosecutors. The DOJ recognized "H&P’s voluntary disclosure and thorough self-investigation of the underlying conduct, the cooperation provided by the company to the Department, and the extensive remedial efforts undertaken by the company."

The SEC said none of the bribes were accurately reflected in H&P’s books and records, and its system of internal accounting controls was not adequate to prevent and detect the illegal payments. As a result, H&P violated Exchange Act Section 13(b)(2)(A) and Section 13(b)(2)(B).

The SEC's cease and desist order said that in early 2008, as part of an effort to improve compliance, H&P "designed and implemented a stand-alone set of FCPA policies and procedures." It also began worldwide FCPA training for key employees.

At one such training session in May 2008, an employee voluntarily disclosed that potentially improper payments had been made by H&P Argentina, through a customs broker, to Argentine customs officials. This information was relayed to H&P’s corporate headquarters in Oklahoma, and came to the attention of H&P’s general counsel in July 2008. In response, H&P hired outside FCPA counsel and independent forensic accountants to conduct an internal investigation of its subsidiaries’ customs payment practices in a number of Latin American countries.

Eventually the internal investigation uncovered fifty improper payments to customs officials in Argentina and Venezuela. The payments were disguised in invoices as “additional assessments,” “extra costs,” and “extraordinary expenses,” “urgent processing,” “urgent dispatch,” or “customs processing.” H&P self-reported its compliance problems in October 2008.

Helmerich & Payne Inc. trades on the New York Stock Exchange under the symbol HP.

Download the Justice Department's July 30, 2009 release here.

Download the SEC's Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order under Release No. 60400 and Accounting and Auditing Enforcement Release No. 3026 (both dated July 30, 2009) in Administrative Proceeding File No. 3-13565 In the Matter of Helmerich & Payne, Inc. here.
.

Help Wanted For Siemens Report

One of ProPublica's outstanding investigative reporters, T. Christian Miller, wrote the story below (which ProPublica co-published with MSN Money). We reprint it under ProPublica's generous license ("You can republish our articles for free, if you credit us, link to us, and don't edit our material or sell it separately.")

If you have trouble accessing the DOJ and SEC charging documents linked in the story (we did), you can also find them at the bottom of our earlier post here.
_________

Help Us Name Names in Siemens Corruption Scandal

by T. Christian Miller, ProPublica - December 22, 2008 1:05 pm EST

Get ready for the Siemens World Corruption Tour, 2001-2008. Siemens pleaded guilty last week to corruption across the globe, receiving a record-setting fine -- $1.6 billion (which sounds like a lot, but really, it's just 0.3 percent of their revenue during those years.)

In announcing the fine, the Justice Department and the Securities and Exchange Commission released formal complaints detailing how Siemens bribed government officials all around the world. (We published a story in Sunday's New York Times profiling the Siemens accountant at the center of the scandal.)

However -- and this is a big "however" if you're into accountability -- they released none of the names of the corrupt bureaucrats that took the cash or the Siemens officials who paid it.

This was done, Justice folks said, to protect the integrity of ongoing investigations and to comply with privacy laws in various countries.

At the hearing prosecutors seemed a bit wistful that they couldn't reveal the names, which were provided to Judge Richard Leon in a sealed file. Lori Weinstein, the dogged prosecutor who pursued the case, said the department could not provide exact names. But, she said, the documents were sprinkled with clues to provide "sufficient clarity" for the court to figure out who was who.

Some identifications are vague -- there are plenty of "government officials." But others are more specific. (Hello, "Wife of the former Nigerian Vice President, a dual U.S.-Nigerian citizen.") ProPublica figures that with the help of readers, we might be able to ID at least some of these folks. Below, you'll find descriptions of the bribees. Send us a name and a link sourcing the information.

To get things started, take the case of the Argentine identity card contract. The SEC's complaint said that Siemens paid bribes to a certain "president of Argentina" who left office in 1999. Not too hard to figure out that one -- Carlos Menem ran the country from 1989 to 1999. Looks like the buck really did stop there.

This is by no means an exhaustive list. As of last count, 16 countries had investigations ongoing into Siemens. Our list below includes only those bribery schemes detailed in the formal complaints by the Justice Department and the Securities and Exchange Commission.

E-mail us if you find clues to figure out the other grafters.

Argentina
Source: SEC Complaint, p. 21
National Identity Card contract (1998-2004)
Contract Amount: $1 billion
Bribe Amount: $40 million
Recipients:

• President of Argentina until 1999 (Carlos Menem)
• Minister of the Interior
• Head of Immigration Control
• Cabinet ministers

Bangladesh
Source: SEC Complaint, p. 19
Mobile Phone contract (2004-2006)
Contract Amount: $40.9 million
Bribe Amount: $5.3 million
Recipients:

• Son of then-Prime Minister
• Minister of Posts & Telecommunications
• Director of Procurement for the Bangladesh Telegraph & Telephone Board
• In addition, Siemens Ltd. Bangladesh hired relatives of two BTTB and Ministry of Posts and Telecom officials.

Venezuela
Source: SEC Complaint, p. 14
Metro contracts (2001-2007)
Valencia and Maracaibo metro systems
Contract Amounts: $642 million
Bribe Amount: $16.7 million
Recipients:

• A high-ranking member of the central Venezuela government
• Two prominent Venezuelan attorneys acting on behalf of government officials
• A former Venezuelan defense minister and diplomat

Israel
Source: SEC Complaint, p. 17
Power plants (2002-2005)
Contract Amount: $786 million
Bribe Amount: $20 million
Recipients:

• Former director of the Israel Electric Company
• Payments routed through brother-in-law of former CEO of Siemens Israel Ltd.

Nigeria
Source: SEC Complaint, p. 20
Telecommunications projects (2000-2001)
Contract Amount: $130 million
Bribe Amount: At least $4.5 million
Recipients:

• Wife of the former Nigerian Vice President, a dual U.S.-Nigerian citizen who lived in the U.S.
• "likely" the former President of Nigeria
• "likely" the former Vice President of Nigeria

Vietnam
Source: SEC Complaint, p. 22
Hospital equipment sales (2005-2006)
Contract Amount: $6 million
Bribe Amount: $383,000
Recipients:

• Government officials

Source: SEC Complaint, p. 27
Mobile network (2002)
Contract Amount: $35 million
Bribe Amount: $140,000
Note: Siemens did not win the project but agreed to pay 8 percent to 14 percent of project value to Vietnamese government officials
Recipients:

• "likely" Vietnamese Ministry of Defense officials
• Vietel, state-owned mobile phone network

China
Source: SEC Complaint, p.16
Metro trains and signaling devices contracts (2002-2007)
Contract Amount: $1 billion
Bribe Amount: $22 million
Recipients:

• Government officials

Source: SEC Complaint, p. 18
High voltage lines (2002-2003)
Contract Amount: $838 million
Bribe Amount: $25 million
Recipients:

• Government officials

Source: SEC Complaint, p. 23
Medical equipment sales (2003-2007)
Contract Amount: $295 million
Bribe Amount: $14.4 million
Recipients:

• Deputy Director, Songyuan City Central Hospital, convicted in China and sentenced to 14 years in prison

Source: SEC Complaint, p.24
Hospital equipment sales (1998-2004)
Contract Amount: Unknown
Bribe Amount: $650,000
Recipients:

• Chinese hospital officials

Russia
Source: SEC Complaint, p. 25
Traffic control system (2004-2006)
Contract Amount: $27 million
Bribe Amount: $741,419
Recipients:

• Government officials

Source: SEC Complaint, p. 27
Hospital equipment (2000-2007)
Contract Amount: Unknown
Bribe Amount: $55 million
Recipients:

• Russian state-owned hospital officials

Mexico
Source: SEC Complaint, p. 26
Refinery modernization (2004)
Contract Amount: Unknown
Bribe Amount: $2.6 million
Recipients:

• Senior official of Pemex, state-owned oil company

Iraq
Source: SEC Complaint, p. 28
Oil for Food program (2000-2003)
Contract Amount: $124 million
Bribe Amount: $1.7 million
Recipients:

• Iraqi Ministry of Electricity officials
• Iraqi Ministry of Oil official

So who are these folks? Send us a name and a link sourcing the information.
_________

Will readers of the FCPA Blog contribute to this story? Let's see.

* * *
A Siemens / Jefferson Link? Meanwhile, a story in the Dec. 24 edition of Harper's Magazine by Ken Silverstein refers to the earlier joint ProPublica/New York Times story about Siemens, and then says: "Now ProPublica has asked for help identifying some of the alleged recipients of the bribes who are described but not named in the SEC complaint. One of those people appears to be Jennifer Atiku-Abubakar, who is tied to the scandal involving the former Louisiana congressman William Jefferson and is also a donor to the Republican Party. But I want to emphasize that I have no way of knowing whether the charges made in the complaint about her are accurate. . . . According to this Washington Post story, she is the wife of Atiku Abubakar, the very controversial former vice president of Nigeria from 1999 to 2007."
.