30 minute sentence, scrutiny alert, monitors, and silly. It’s all here in the Friday roundup.
30 Minute Sentence
As highlighted here, Larry Puckett, one of several individuals associated with Alstom who was criminally charged in connection with an Indonesian bribery scheme, was recently sentenced. Puckett pleaded guilty, cooperated with the DOJ for many years, and testified for the government at the 2019 Hoskins trial.
Scrutiny alerts, wow that case is still going on, and for the reading stack.
It’s all here in the Friday roundup.
Scrutiny Alerts
ZTE
According to this report “ZTE, the Chinese telecom giant that pleaded guilty three years ago to violating U.S. sanctions against Iran and North Korea, is the subject of a new and separate bribery investigation by the Justice Department […] The new investigation … centers on possible bribes ZTE paid to foreign officials to gain advantages in its worldwide operations. […] [N]ews reports, documents and at least one lawsuit filed in recent years have accused ZTE of corruption in more than a dozen countries, including Algeria, Liberia, Kenya and Zimbabwe.” (See here for a 2018 post regarding ZTE).
Alleged bribery at the U.N., former Siemens exec pleads guilty to long-standing charges, scrutiny alerts and updates, quotable, and for the reading stack.
It’s all here in the Friday roundup.
Alleged Bribery at the United Nations
The United Nations does much preaching about bribery and corruption, yet perhaps it should look inward as once again one of its own is alleged to have engaged in bribery and corruption.
This recent criminal complaint charges John Ashe and others with a variety of criminal offenses. Ashe is described as having various positions at the U.N. including serving as the Permanent Representative of Antigua to the U.N. and recently serving as the President of the U.N. General Assembly.
According to the complaint, various other defendants (most of whom are alleged to be naturalized U.S. citizens, as well as a Chinese national who allegedly has a New York-based non-governmental organization) made bribe payments to Ashe in connection with a U.N. sponsored conference center in Macau, China and to influence business interactions with Antiguan government officials.
The alleged bribery is charged under 18 USC 666 (theft or bribery concerning programs receiving federal funds) on account of the U.N. receiving U.S. federal government funds.
However, Ashe is likely a “foreign official” under the FCPA given that the definition of “foreign official” includes individuals associated with “public international organizations” and the U.N. has been designated as such an organization.
Moreover, as highlighted above, the alleged payors of the bribes to Ashe are predominately naturalized U.S. citizens subject to the FCPA’s anti-bribery provisions. The Chinese national defendant is alleged to have engaged in conduct in the U.S. likely sufficient to satisfy the dd-3 prong of the FCPA.
The recent enforcement action is certainly not the first to involve bribery of a U.N. official.
As highlighted here, the Richard Bistrong enforcement action involved bribe payments to, among others, U.N. officials.
For additional coverage of the Ashe charges, see here.
Former Siemens Exec Pleads Guilty
Recently, the DOJ announced that Andres Truppel of Argentina, the former chief financial officer of Siemens S.A. – Argentina (Siemens Argentina), pleaded guilty to conspiring to violate the anti-bribery, internal controls and books and records provisions of the FCPA; and to commit wire fraud.
On social media, some commentators have tried to link the guilty plea to the recent Yates Memo. Such an attempt is off-target as Truppel and other former Siemens executives and agents were criminally charged in December 2011.
As highlighted in this prior post from nearly four years ago, the Siemens Argentina individual enforcement action was brought after the DOJ faced much 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.” (Those are direct quotes from DOJ/SEC).
This scrutiny occurred, among other places, during the Senate’s November 2010 FCPA hearing in which hearing Chair Senator Arlen Specter gave me this homework assignment regarding the Siemens enforcement action.
As highlighted in the prior post, despite the Siemens Argentina individual enforcement action, the fact remains that only a sliver of the conduct at issue in the 2008 enforcement action against Siemens resulted in individual prosecutions. 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.”
For additional coverage of the Truppel plea, see here and here.
Scrutiny Alerts and Updates
There has never been an FCPA enforcement action against a Canadian company, but recently Kinross Gold Corp (a company with shares listed on the NYSE) stated:
“In August 2013, Kinross received information regarding allegations of improper payments made to government officials and certain internal control deficiencies at its West Africa mining operations. Kinross takes such allegations very seriously and action was immediately taken in accordance with Kinross’ Whistleblower Policy. External legal counsel was immediately retained to conduct an objective internal investigation into the allegations.
In March and December 2014, and July 2015, Kinross received subpoenas from the United States Securities and Exchange Commission (the “SEC”) seeking information and documents on substantially the same subjects as had previously been raised. In December 2014, Kinross received similar requests for information from the United States Department of Justice (the “DOJ”).
Kinross is fully cooperating with the SEC and DOJ and continues to diligently pursue its own internal investigation, which, over the course of the past 25 months, has not identified issues that Kinross believes would have a material adverse effect on the Company’s financial position or business operations. Our internal investigation is ongoing, and additional issues or facts could become known as the investigation continues.
It is important to note that the SEC subpoenas expressly state that: “This investigation is confidential and nonpublic and should not be construed as an indication by the Commission or its staff that any violation has occurred, nor as a reflection upon any person, entity or security.”
Kinross is committed to operating in accordance with the highest ethical standards and conducting business in an honest and transparent manner that is in compliance with the law. Kinross has a longstanding culture of ethical conduct and accountability consistent with its Code of Business Conduct and Ethics and related anti-corruption compliance program.”
Quotable
Informed by my prior experience as an FCPA lawyer in private practice, I have long pinned one of causes for the inexcusable long duration of FCPA inquiries on the high attrition rates at the DOJ and SEC’s FCPA Unit.
Since leaving the DOJ, Paul Pelletier (former Acting Chief and Principal Deputy Chief of the DOJ’s Fraud Section and currently a partner at Mintz Levin) has offered an informed voice on the long duration of DOJ FCPA inquiries. (See here for instance).
Commenting on the Yates Memo in this recent FCPA Blog guest post, Pelletier writes:
“To avoid delay in the efficient and timely prosecution of business entities, implementation of the formal requirements of the Yates Memo will require the deft and even hand of prosecutors, both experienced in investigating and prosecuting complex corporate white collar crime and trained in the methods of real time prosecutions. This unique experience and specific training are required and essential.
From 2002 through 2010, the average Criminal Division tenure of a Fraud Section prosecutor exceeded 5 years and according to the OECD’s most recent Foreign Bribery Report, during that same time frame, the average duration of a foreign bribery investigation measured from the last act of the offense to resolution was approximately 3 years. Commentators have noted an increasingly high and troubling turnover rate in the Fraud Section since 2010, radically altering the average tenure of Section prosecutors. Moreover, since 2010 the average investigatory duration of foreign bribery matters has doubled to more than sixyears.
Whatever explanation may be offered for these jaw dropping statistics, the practical effect is that most FCPA investigations will be passed from prosecutor to prosecutor, almost certainly leading to unnecessarily protracted investigations—perhaps an exclamation point which highlights the critical consequences to FCPA investigations flowing from implementation of the Yates Memo, absent a root cause cure.
Given the formal requirements of the Yates Memo, no matter how good the prosecutors’ intentions or how noble their cause, without the DOJ’s commitment to sustained and focused training combined with a similar effort to retain prosecutors with the experience essential to the success of the endeavor, corporations (including employees and shareholders) caught up in the throes of an FCPA investigation, if they choose to cooperate, are likely to be forced to suffer the untold and unwarranted costs and disruptions of seemingly interminable investigations. That should not be the consequence of DOJ’s renewed focus.”
For the Reading Stack
This recent Wall Street Journal Risk & Compliance Journal article states:
“The Justice Department’s Foreign Corrupt Practices Act unit is focusing its enforcement efforts on quality rather than quantity. Spokesman Peter Carr said after years of handling smaller cases coming from corporate self-reporting, the unit is now putting more at stake and going after blockbuster cases. Initiatives to boost foreign corruption enforcement personnel and resources are being used to go after that high-profile wrongdoing, Mr. Carr said. Many of those programs began years ago. His comments came in response to news that the Department’s anti-bribery efforts were eclipsed by the Securities and Exchange Commission in the third quarter. “The department several years ago handled more cases based on self-reporting by companies, and as a result of that we saw more resolutions, but smaller cases,” Mr. Carr said in an email. “We are currently focusing on bigger, higher impact cases, including those against culpable individuals, both in the U.S. and abroad, and those take longer to investigate and absorb significant resources, but there are a lot of cases out there. In fact, the department is increasing its FCPA resources, and the three new FBI squads focusing on this issue are now staffed and operational.” […] “Our investigations of FCPA cases are as robust as ever, and the resources we dedicate to FCPA cases continue to grow. These are sophisticated cases that can take years to investigate,” Mr. Carr said. “The number of public announcements about filed cases or resolutions will vary over time, but our commitment to FCPA cases is strong.”
*****
A good weekend to all.
Siemens delists, former Siemens execs fail to show up, quotable, to FCPA Inc. and for the reading stack. It’s all here in the Friday roundup.
Siemens to Delist ADRs
The record-setting 2008 FCPA enforcement action against Siemens A.G. was primarily based on the fact that the company had its shares listed on a U.S. exchange and was thus subject to the FCPA’s books and records and internal controls provisions. (Note: Siemens AG itself was not charged with FCPA anti-bribery violations).
I doubt – six years after the fact – that there is a cause and effect relationship here, but it is interesting nevertheless to note that last week Siemens announced that “it is planning to delist its American Depositary Receipts (ADR) from the New York Stock Exchange (NYSE).” The company further announced that “Siemens intends to terminate its reporting obligations (deregistration) to the American Securities and Exchange Commission (SEC).” As stated in the release:
“The goal of the delisting and deregistration is to address the change in the behavior of its investors. As a consequence processes of financial reporting are simplified and efficiency is improved. The trading of Siemens shares is nowadays conducted predominantly in Germany and via electronic trading platforms (‘over-the-counter’). Trading volume of Siemens shares in the USA is low, amounting to significantly less than 5% of its global trading volume in the year 2013.”
A delisting of course does not remove Siemens from the reach of the FCPA. There still is the 78dd-3 prong of the FCPA, but the jurisdictional reach of it is the most restrictive found in the FCPA.
For a moment, let’s just pretend that Siemens delisting was related, in some way, to the FCPA. If so, is this a good thing or a negative impact of the DOJ and SEC’s expansive jurisdictional theories of FCPA liability against foreign actors?
For instance, as noted in this 2010 post, approximately one month after Daimler resolved its FCPA enforcement action it decided – after 17 years on being on the NYSE to delist from the exchange. (See here for more).
Former Siemens Execs
One way for the SEC to win its FCPA cases is when the defendants do not show up.
As highlighted here, in December 2011 the SEC filed a civil lawsuit against former Siemens executives Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Carlos Sergi, and Bernd Regendantz. The complaint was based on conduct concerning the Argentine prong of the 2008 Siemens enforcement action.
On the same day the enforcement action was announced, Regendatz agreed to resolve the enforcement action. As noted in the SEC release, Regendatz “paid a €30,000 administrative fine ordered by the Munich prosecutor (equivalent to $40,000 in U.S. dollars).”
As highlighted in this prior post, when put to its burden by Steffen, Judge Shira Scheindlin dismissed the SEC’s complaint in February 2013 for lack of personal jurisdiction (an initial threshold issue not unique to the FCPA).
As noted in this prior post, in April 2013 Uriel Sharef agreed to resolve the enforcement action by paying a $275,000 civil penalty. (See here).
The SEC voluntarily dismissed its claims against Carlos Sergi in October 2013.
Earlier this week, on February 3rd, Truppel consented to a final judgment in which he agreed to pay a $80,000 civil penalty.
Also earlier this week, on February 4th, Judge Scheindlin entered a default judgment as to Bock and Signer. As part of the order, Bock was ordered to pay $937,957 (a $524,000 civil penalty, $316,452 in disgorgement, plus prejudgment interest of $97,505) and Signer was ordered to pay a $524,000 civil penalty. The Bock and Signer settlement amounts rank first and third in terms of individual SEC FCPA settlements amounts with Ousama Naaman (approximately $877,000) ranking second.
The burning question of course is whether the SEC would have prevailed against Truppel, Bock and Signer if put to its burden of proof. Like in Steffen, there would no doubt have been an initial threshold issue of personal jurisdiction before turning to FCPA specific jurisdictional issues.
The relevant jurisdictional allegations against Truppel were as follows.
“Truppel participated in meetings in Miami, Florida, and New York, NY, in which bribes to Argentine officials were negotiated and promised. He caused Siemens to pay, and promise to pay, millions of dollars in bribes in an effort to retain the DNI Contract. Some ofthe bribes were paid via bank accounts in the United States.”
The relevant jurisdiction allegations against Bock were as follows.
“Bock participated in a meeting in Miami, Florida, at which bribes to Argentine officials were negotiated and promised. Bock also provided false testimony in two arbitration proceedings, one of which was filed in Washington, D.C., in an effort to conceal Siemens’ corrupt payments and recover its expected profits from the DNI Contract.”
The relevant jurisdictional allegations against Signer were as follows.
“Signer authorized the payment of bribes to government officials in Argentina. Some of the bribes were paid to bank accounts in the United States.”
Quotable
As noted here OECD Secretary General Angel Gurria warned that the bribery of foreign public officials by businesses was contributing to an “erosion of public trust.” True, but “enforcing” bribery and corruption laws through resolution vehicles not subjected to judicial scrutiny and otherwise inconsistent with rule of law principles (see here for my recent article) also contribute to an “erosion of public trust.”
Gurria also reportedly stated: “corporations need to stop bribing public officials, and that is going to help recover public trust and legitimacy, that is going to help markets work.”
In all due respect, this is just such a naive way to view the problem of bribery and corruption.
I like what Alexandra Wrage (President of Trace International) said here:
“Whether they’re stating it expressly or acting on it quietly, governments are using corporations as their primary tool to reduce international bribery. They alarm companies with vast fines and terrify individuals with substantial prison sentences with the hope of ending the payment of bribes because they cannot, in most cases, do much of anything about those demanding them. This is not inappropriate. Companies are regulated, subject to laws and answerable to shareholders. The worst offenders demanding bribes, on the other hand, do so with impunity, hiding behind sovereign immunity and, often, their own, complicit local law enforcement. Abacha. Suharto. Marcos. Duvalier. It’s a longstanding tradition, still thriving in many countries today. U.S. and some European law enforcement agencies have been extraordinarily successful, with fines in the United States now counted in the billions of dollars and other jurisdictions promising to catch up soon. While these efforts have done more than anything else to reduce bribery, they have yet to convince us that companies are both the sole source and solution of all international corruption — and that’s insupportable. […] The simple reality is that there are just some things that companies can’t do about corruption.”
See here and here for further reasons why Gurria’s statement is off-base.
To FCPA Inc.
Weil Gotshal announced that Adam Safwat, most recently the Deputy Chief in the DOJ’s Fraud Section where he worked on – among other things – FCPA enforcement actions – has joined the firm. According to the release, “with several years of senior level experience in the DOJ, as well as experience as a former federal prosecutor, [Safwat] brings a deep understanding of criminal and regulatory enforcement to the Firm, including with regard to corporate securities fraud and Foreign Corrupt Practices Act investigations.”
Reading Stack
A handy-dandy “Master List of Third Party Corruption Red Flags” courtesy of the FCPAmericas Blog.
For your viewing enjoyment, the recent program at Fordham Law School “China and the Foreign Corrupt Practices Act: Challenges for the 21st Century.”
For your viewing enjoyment, Senator Elizabeth Warren talking about an issue discussed in last week’s Friday roundup regarding JPMorgan.
I’ve written before about “offensive use” of the FCPA, but I am still trying to figure out the purpose of this press release.
*****
A good weekend to all.
Yesterday’s post (here) covered the DOJ indictment and SEC civil complaint against former Siemens’ executives and agents. This post provides a more in-depth analysis of the allegations. Every enforcement action needs a name, so let’s call this large case the Siemens Argentina Enforcement Action, recognizing that Siemens itself resolved its exposure for the conduct described below in 2008 and is not a part of the current matter.
DOJ Indictment
As noted in the previous post, the DOJ indictment (here) charges the following individuals. Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Eberhard Reichert, Carlos Sergi and Miguel Czysch.
The below defendants are described as “officers, directors, employees and agents” of an “issuer” (Siemens AG).
According to the indictment, Sharef (a dual citizen of Israel and Germany) was employed by Siemens from 1978 to December 31, 2007. The indictment alleges that from 2000 until his departure from Siemens, Sharef was a member of Siemens AG’s Managing Board and Corporate Executive Committee (“CEC”), with oversight responsibilities for Siemens AG’s power operations group, including Siemens Power Transmission and Distribution (“Siemens PTD”), and Siemens AG’s operations in the Americas region, including Siemens Argentina.
According to the indictment, Steffen (a German citizen) was a long-time Siemens employee who left the company in 2003. The indictment alleges that Steffen, at various times, was: group president of Siemens AG’s transportation systems operating division; group president of Siemens PTD; CEO of Siemens Argentina; and chairman of the Supervisory Board of Siemens Argentina.
According to the indictment, Truppel (a dual citizen of Germany and Argentina) was employed by Siemens until 2002 when he then became a consultant to Siemens until 2004. The indictment alleges that until his “shift to consultant status” Truppel was CFO of Siemens Argentina.
According to the indictment, Bock (a German citizen) was a long-time employee of Siemens until 2001 when he then became a paid consultant to Siemens until 2007. While a Siemens employee, Bock was commercial head of Siemens Business Services (“SBS” – a wholly-owned subsidiary of Siemens AG and a unit in Siemens information and communications operating group).
According to the indictment, Reichert (a German citizen) was a long-time Siemens employee until 2001. He was the technical head of SBS’s Major Projects subdivision.
According to the indictment, Signer (a German citizen) was a long-time Siemens employee until 2011. The indictment alleges that from 2000 to 2007, Signer worked for SBS as a commercial director in various capacities.
The below defendants are described as “agents” of Siemens AG who served as “intermediaries between Siemens and officials of the Government of Argentina” – the so-called “Intermediary Defendants.”
According to the indictment, Sergi (a citizen of Argentina) “was a prominent businessman in Latin America with extensive high-level government contacts in Argentina.” The indictment states that Sergi was for a 15 year period ending in 2003 a member of the Supervisory Board of Siemens Argentina along with Sharef.
According to the indictment, Czysch (a German citizen and resident of Switzerland) was a business associate of Sergi.
For both set of defendants, the indictment invokes 78dd-1 of the FCPA. The jurisdictional hook under 78dd-1 for non-U.S. “issuers” is “use of the mails or any means or instrumentality of interstate commerce” in furtherance of a bribery scheme. As described below, the indictment alleges certain conduct in the U.S. as well as wire transfers of money through U.S. bank accounts in furtherance of the bribery scheme.
The indictment also refers to six unindicted co-conspirators (two individuals described an attorneys in Argentina and former senior officials in the Argentine Ministry of Justice; a former CEO of Siemens Argentina; a former deputy general counsel in the Legal Services office at Siemens AG headquarters; a business partner of Sergi; and a business partner of Czysch).
Under the heading “Overview of the Conspiracy” the indictment alleges as follows. “In or about August 1994, the Government of Argentina issued a tender for bids to replace an existing system of manually created national identity booklets with state-of-the-art national identity cards” – the so-called DNI (Documento Nacional de Identidad) project. According to the indictment, the “total estimated value of the DNI project was approximately $1 billion.” In 1998, the President of Argentina issued a decree awarding the DNI project to Siemens IT Services S.A. (“SITS”), a special-purpose subsidiary created by SBS for the purpose of bidding on the DNI project. According to the indictment, from 1996 to 2009, the defendants and others “engaged in a conspiracy on behalf of Siemens to obtain the lucrative proceeds of the DNI project, and to foster future business, by means of bribery, fraud, and other forms of corruption.”
The indictment specifically alleges as follows. “Members of the conspiracy won the DNI project for Siemens by bribing Argentine government officials. They paid more bribes in the hope of reviving the project when, in or about 2001, the DNI project was stalled. Ultimately […] the DNI project was terminated altogether. Even after this point, members of the conspiracy continued to pursue the profits that Siemens had expected to gain from the project. They did so through additional bribes and corrupt conduct, including the pursuit of a fraudulent arbitration in Washington, D.C. against the Argentine government, demanding nearly $500 million while actively hiding the corruption from the tribunal.”
According to the indictment, “some of conspirators were employed by Siemens as executives, lawyers, and managers working on DNI project matters; others served as agents and conduits for the payment of bribes to Argentine government officials who were in a position to influence the direction of the DNI project.” The indictment alleges as follows. “Integral to the conspiracy, and to the concealment of the illegal objects of the conspiracy, was the conspirators’ use of at least 17 conduit entities (collectively, the ‘Conduit Entities’) controlled or otherwise affiliated with the Intermediary Defendants and with various Argentine government officials and candidates for office who were the recipients or intended recipients of bribe payments (the ‘Argentine Officials’).
The conduct alleged in the indictment starts with “initial bribe commitments and payments.” The indictment alleges that various co-conspirators “committed Siemens to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party, and candidates for office who were likely to come to power during the performance of the project.” According to the indictment, many of these payments were made pursuant to “black contracts, that is unwritten contracts” with third-parties who later sought reimbursement from Siemens.
Argentine officials described in the indictment are “Argentine Official A” (a senior official in the Office of the President and thereafter a candidate for office and member of the Argentine Congress), “Argentine Official B” (a senior official in the Ministry of Interior and thereafter a member of the Argentine Congress); and “Argentine Official C” (a senior official in the Ministry of Migration and the Office of Internal Security and thereafter a member of the Argentine Congress). The indictment alleges that certain defendants “caused SBS to transfer two wires in the aggregate amount of approximately $7.4 million to a bank account in Manhattan, New York” in furtherance of the bribe scheme.
The indictment next alleges that in 1999 “with work on the DNI project underway, the Government of Argentina suspended the project, as the country faced a mounting economic crisis and a presidential election” and that a “new administration, which came to power […] maintained the suspended status of the DNI project.” The indictment alleges that Sharef and Steffen “led a campaign on Siemens’s part to restart the DNI project” and that “renegotiation of the contract governing the DNI project was a part of the campaign.” The indictment charges that various defendants “lobbied Argentine government officials” and that Sharef met with a “Argentine Official D” (a senior official in the office of the Argentine President). According to the indictment, “the meeting engendered optimism at Siemens that the President of Argentina would soon issue a decree authorizing the resumption of the DNI project” and that “continuing the payment of bribes was part of the conspirators’ effort to revive the DNI project.”
According to the indictment, the conspirators committed to pay additional bribes to Argentine Officials A, B, C, D, as well as “Argentine Official E” (a senior official in the Ministry of the Interior and thereafter a member of Congress), “Argentine Official F” (a senior official in the Ministry of the Interior and thereafter a candidate for office in the Argentine Congress), and “Argentine Official G” (a senior official in the Ministry of Interior). According to the indictment, conspirators “agreed to funnel payments on all existing and new bribe obligations through the Intermediary Defendants” and “also agreed to conceal the bribe payments under a ‘white contract’ – that is, a contract that appeared legitimate on its face, but which did not reflect an actual transaction of business.”
The indictment next alleges that in 2001 “the anticipated decree authorizing the resumption of the DNI project still was not issued.” According to the indictment, “the Argentine government was instead conducting an assessment of the merits of continuing the DNI project through a body” called the General Accounting Agency of the Nation (“SIGEN”) and that “in a further effort to prevent termination of the DNI project, members of the conspiracy determined to influence SIGEN’s assessment in Siemens’s favor by bribing a SIGEN board member (“Argentine Official H”).
According to the indictment, “despite Siemens’s efforts and bribe payments intended for various foreign officials, the Government of Argentina officially terminated the DNI project” in 2001. Nevertheless, the indictment alleges that certain defendants and conspirators assembled a Crisis Management Team (“CMT”) continued a bribe scheme to “(i) ensure that Siemens recognized the economic benefits of the contract for the DNI project, notwithstanding its termination and the corrupt manner by which it had been procured, (ii) prevent public disclosure of the bribery associated with the DNI project, and (iii) ensure Siemens’s ability to secure future government contracts in Argentina and elsewhere in the region.” According to the indictment “the conspirators sought to achieve these related goals by paying down outstanding bribe obligations to Argentine Officials through a complex series of transactions, paying down bribe obligations through a sham arbitration in Switzerland, and seeking to recoup the anticipated financial benefits of the DNI project through a fraudulent arbitration in Washington D.C.”
Specifically, the indictment charges that certain defendants met with Sergi and Czysch in Miami, Florida to “re-negotiate the amount of outstanding bribe commitments to the Argentine Officials.” The indictment further alleges certain “wire transfer instructions for payment through a bank account in Manhattan, New York” and payments through a New York-based account. The indictment further alleges that one of the Conduit Entities had Miami, Florida addresses. The indictment further alleges that certain defendants also met in Manhattan, New York “to discuss the outstanding bribe obligations.”
Thereafter, the indictment alleges that Sergi (the prominent businessman in Latin America with extensive high-level government contracts in Argentina who served as an agent of Siemens AG) filed a formal claim against SBS in a Swiss arbitral tribunal in 2005 to recover under a sham contract used to make certain bribe payments. The indictment states that “although the members of the conspiracy knew that none of the services described in the contract were performed and were not expected to be performed, and that the contract was a sham used to disguise illegal bribe obligations, none of the conspirators acknowledged as much before the Swiss tribunal.” According to the indictment, SBS settled the claim for approximately $8.8 million, but that the “settlement was actually a mechanism to disguise a partial payment of bribe obligations to the Argentine Officials.” According to the indictment, certain of the settlement money passed through bank accounts in Manhattan, New York.
As to the Washington D.C. arbitration, the indictment alleges that certain of the defendants and co-conspirators “orchestrated the filing of a fraudulent arbitration claim in Washington D.C. in 2002 to cause the Argentine government to pay Siemens AG damages in an amount equivalent to incurred expenses and the total profits the company would have earned from the DNI project had it not been terminated.” According to the indictment, “exposure of the bribery associated with the DNI project would have likely rendered the arbitration claim futile because the contract would have been procured through illegal corruption.” The indictment alleges that certain defendants and co-conspirators “successfully kept evidence of bribery out of the arbitration in Washington D.C.” by filing witness statements containing “material misrepresentations and omissions relating to the DNI’s project origins, among other matters.” According to the indictment, despite later claims by Argentina that the DNI project bidding was corrupted – claims Siemens denied, the arbitral tribunal sided with Siemens AG and on February 2007 it awarded Siemens AG approximately $218 million in loss of investment, plus interest. However, the factual portion of the indictment ends with the following statement – in August 2009 “Siemens AG personnel who were not members of the conspiracy caused the company to waive its right to the award.”
Based on the above conduct, the indictment charges the defendants with conspiracy to violate the FCPA’s anti-bribery, books and records and internal control provisions; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.
SEC Complaint
The SEC’s complaint (here) is based on the same core conduct alleged above. Reichert and Czysch are not named as defendants in the SEC action, but the SEC complaint includes as a defendant Bernd Regendantz (the CFO of SBS who allegedly authorized certain bribe payments). Each of the SEC defendants are charged with violating the FCPA’s anti-bribery provisions; aiding and abetting Siemens’ FCPA violations – both anti-bribery violations and books and records and internal controls; and violating other securities laws by falsifying documents, including invoices and sham consulting contracts in furtherance of the bribery scheme.
According to the SEC, “over the course of the bribery scheme, Siemens paid an estimated total of over $100 million in bribes, approximately $31.3 million of which were made after […] Siemens became subject to the U.S. securities laws.”
In addition, Regendantz is charged with violating Rule 13b2-2 by signing false internal certifications pursuant to SOX. As to Regendatz, the SEC complaint alleges that he “had no prior dealings with the DNI contract” when he became CFO of SBS in 2002 and that he had resisted other defendants pressure to authorize additional bribe payments. According to the complaint, “Regendantz sought guidance from Siemens’ Head of Compliance, Chief Financial Officer, Chief Executive Officer, and two members of the Managing Board.” The complaint alleges that “in each instance, Regendantz explained that the payment demands lacked any legitimate commercial basis and that he was reluctant to authorize them.” The complaint then states as follows. “In each instance, Regendantz explained that the payment demands lacked any legitimate commercial basis and that he was reluctant to authorize them. In each instance, Regendantz’s superiors gave every indication that they were familiar with the DNI Contract and with the nature of the payment demands. And in each instance, his superiors told Regendantz that it was his responsibility to find a solution to the problem. Regendantz understood these responses from his superiors to be an instruction that he authorize the bribe payments.”
The SEC’s release noted that Regendantz settled the SEC charges without admitting or denying the allegations and consented to entry of a final judgment that enjoins him from future violations. The release states that Regendantz previously paid a $40,000 administrative fine ordered by the Munich prosecutor.
