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The Siemens Argentina Individual Enforcement Actions Are A Step Forward, But Issues Remain

Last week (see here for the prior post) the DOJ and SEC brought FCPA enforcement actions against several former executives and agents of Siemens.  As noted in this initial post, the enforcement action comes nearly three years after the Siemens corporate enforcement action, a portion of which concerned improper conduct in Argentina and allegations that Siemens S.A. (Argentina), and those acting on its behalf, engaged in a bribery scheme in connection with an Argentine government contract to produce national identity cards.

The Siemens Argentina individual enforcement actions were brought after the DOJ faced scrutiny for not bringing any individual enforcement action in connection with a bribery scheme “unprecedented in scale and geographic reach” in which there existed at Siemens a “corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”

Thus, the Siemens Argentina individual enforcement actions with allegations (and that is all they are at this point) of individual improper conduct are a welcome development and the DOJ ought to be recognized for bringing what will likely be a difficult case to prosecute.  Among other things, extradition issues loom, and many of the defendants are likely to aggressively mount a defense.

While a welcome development, two facts remain unchanged by last week’s development.

First, Siemens itself was never charged with FCPA anti-bribery violations for the same conduct its former employees and agents are now facing FCPA anti-bribery charges.  The reason is that FCPA anti-bribery charges would have hurt Siemens too much.  In its sentencing memorandum (here), the DOJ in explaining its charging decisions specifically stated as follows.  “The Department’s analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts.”  As noted last week in a Wall Street Journal article by Vanessa Fuhrmans “Shrugging Off Bribery Case, Siemens Gains Favor in the U.S.” (here),  “three years after Siemens AG reached a record foreign-bribery settlement with U.S. authorities, the German industrial conglomerate is capitalizing on business from an unexpected place—the U.S. government.”  Among things, the article notes that “Siemens today isn’t just benefitting from its ongoing business with the government. It’s made capturing more business and influence in Washington a central part of its U.S. strategy.” 

In short, the notion that certain companies selling certain products to certain customers are essentially immune from FCPA anti-bribery scrutiny remains a troubling issue, notwithstanding last week’s development. 

[Incidentally, under the FCPA’s former so-called Eckhardt amendment, the lack of FCPA anti-bribery charges against Siemens would have precluded the FCPA anti-bribery charges the individuals now face.  See U.S. v. McLean, 738 F.2d 655 (5th Cir. 1984)  (“[B]oth the language of the Act and its legislative history reveal a clear intent to impose criminal sanctions against the employee who acts at the behest of and for the benefit of his employer only where his employer has been convicted of similar FCPA violations. […] We hold that in order to convict an employee under the FCPA for acts committed for the benefit of his employer, the government must first convict the employer.”]

Second, even with last week’s development, the fact remains that the DOJ and SEC have addressed – through individual enforcement actions – only a sliver of the conduct at issue in the 2008 enforcement action.  As alleged by the enforcement agencies, the corruption at Siemens involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe and the Americas.  As alleged (see here) “among the transactions on which Siemens paid bribes were those to design and build metro transit lines in Venezuela; metro trains and signaling devices in China; power plants in Israel; high voltage transmission lines in China; mobile telephone networks in Bangladesh; telecommunications projects in Nigeria; national identity cards in Argentina; medical devices in Vietnam, China, and Russia; traffic control systems in Russia; refineries in Mexico; and mobile communications networks in Vietnam.” 

Some individual or individuals presumably paid or authorized these numerous non-Argentina bribes.   If last week’s development is the only individual enforcement actions resulting from the 2008 Siemens enforcement action, continued scrutiny and asking of the why questions is warranted.

What other egregious corporate FCPA enforcement action might yield future individual enforcement actions?  Based on the DOJ’s allegations, Daimler would seem like a good bet.  See here for the prior post.

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