Investigation of 'Fraudulent Activity' at Siemens Widens

By Patrick Barnard

TMCnet Associate Editor

 

The investigation into alleged financial improprieties at Siemens’ (News - Alert) corporate headquarters in Germany widened yesterday, with investigators reportedly searching the offices of top managers, including CEO Klaus Kleinfeld.

Police raided the Munich offices of the technology company last Tuesday as part of an investigation into alleged fraudulent activity among company employees. According to published reports, police are investigating whether certain employees misused company funds – possibly to pay bribes to potential customers for their business. There are also suspicions of money laundering.

In a statement to the press last week, company spokesman Andreas Schwab acknowledged that “certain Siemens employees have engaged in fraud” and added that the company is “cooperating fully with the investigation.” Schwab did not provide details on the type of illegal activity - or its scope - nor did he say whether any company executives are involved.


Media reports have speculated that the illegal activities may have involved as much as €100m, however, Siemens has reported that the sum involved is about €20m. So far, a former Siemens board member and four other employees have been taken into custody. It is unclear whether any of these individuals is still being held by police.

Apparently Siemens has known about the irregularities for some time. A spokesman said in a published report that the firm had been informed about an investigation into possible money laundering at its business in Switzerland last year. According to the report, Swiss prosecutors were investigating whether company employees had transferred company funds into secret accounts and then used the funds to pay bribes to secure contracts. Apparently, that investigation led to the one currently being carried out at the company’s corporate headquarters in Germany.

Approximately 200 police officers, tax inspectors and prosecutors were reportedly involved in last week’s raids, which occurred at some 30 offices, as well as the private homes of some employees.

The news follows recent criticisms of Kleinfeld from the German media and politicians. Kleinfeld was due for a significant pay raise, while the company’s former mobile-phone division, which Siemens handed to Benq Corp. last year, filed for insolvency. Although Kleinfeld’s office was searched, he is not a target of the investigation, according to investigators.

Siemens AG, originally founded in 1847, is one of the world’s largest and oldest technology companies. In addition to its offices in Munich it also has international headquarters in Berlin. Siemens main business is in communications and information systems, however, through its various subsidiaries it also has a focus on automation and control; power generation, transmission and distribution; transportation and automotive technology; medical technology; and lighting technology. The company is also active in financing, real estate, home appliances; water purification technologies; computers; business services; and home and office communication devices.

Siemens and its subsidiaries employ a total of about 470,000 people in 190 countries. The company reported global sales of $96.6 billion in fiscal year 2005.

--------

Patrick Barnard is Associate Editor for TMCnet and a columnist covering the telecom industry. To see more of his articles, please visit Patrick Barnard’s columnist page.