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Friday Roundup

Docket exploration in this Friday roundup.

SEC v. Jackson & Ruehlen

My first post concerning the SEC’s enforcement action against Mark Jackson and James Ruehlen asked – will the SEC be put to its burden of proof?   I noted that the case would be most interesting to follow as the SEC is rarely put to its burden of proof in Foreign Corrupt Practices Act enforcement actions and I highlighted, at the time, how the last time that happened (in 2002) the SEC lost.

As time would demonstrate, Jackson and Ruehlen indeed did put the SEC to its burden of proof and in December 2012 Judge Keith Ellison (S.D. of Tex.) granted Defendants’ motion to dismiss the SEC’s claims that sought monetary damages while denying the motion to dismiss as to claims seeking injunctive relief.  (See here for the prior post).  Even though Judge Ellison granted the motion as to SEC monetary damage claims, the dismissal was without prejudice meaning that the SEC was allowed to file an amended complaint.  As noted in this prior post, that is indeed what happened next, and as noted here a second round of briefing began anew.

In the Defendant’s renewed motion to dismiss (filed Feb. 22nd) they argued that the SEC could not rely on the fraudulent concealment or continuing violations doctrine to extend the limitations period to cover certain claims that accrued before May 12, 2006.  A week later the Supreme Court issued its unanimous decision in SEC v. Gabelli (see here for the prior post) and soon thereafter on March 11th the Defendants filed a notice of supplemental authority with the court arguing that Gabelli “bolstered” their position.

On March 22nd, the same day the SEC’s opposition brief was due, the parties jointly notified the court “that in lieu of opposing the [motion to dismiss] the SEC intends to file a Second Amended Complaint.”  The filing noted that the then proposed Second Amended Complaint “moots the relief sought in the [the motion to dismiss] because it clarifies that, among the violations alleged, the SEC seeks civil penalties … only to the extent such violations accrued on or before May 12, 2006.


Speaking of statute of limitations, a recent article highlights how the DOJ is “testing a novel argument” to extend statute of limitations in certain cases.  The theory.  We are at war … in Afghanistan … and regardless of whether the conduct at issue has anything to do with that war in Afghanistan, the 1948 Wartime Suspension of Limitations Act gives prosecutors unlimited time to go after alleged fraud during times of war.

No this article was not in the Onion, it was in the Wall Street Journal (see here).

Former Siemens Executive Sharef Settles 2011 SEC Enforcement Action

The SEC announced earlier this week (here) that Uriel Sharef, “a former officer and board member of Siemens” agreed to settle – as had long been expected – the SEC’s action against him.  As noted in this previous post, Sharef, along with others was charged (both by the DOJ and SEC) in December 2011 in connection with an Argentine bribery scheme that was also the focus, in part, of the 2008 Siemens corporate enforcement action.

As noted in the SEC’s release, without admitting or denying the SEC’s allegations, Sharef consented to entry of a final judgment prohibiting future FCPA violations and he agreed to pay a $275,000 civil penalty – a penalty the SEC called “the second highest penalty assessed against an individual in an FCPA case.”

[In connection with the Innospec FCPA enforcement action, in August 2010, Ousama Naaman resolved an SEC enforcement action by agreeing to disgorge $810,076, pay prejudgment interest of $67,020 and pay a civil penalty of $438,038.  See here for the prior post].

The burning question of course is whether the SEC would have prevailed against Sharef if he put the SEC to its burden of proof.  As highlighted in this previous post, Sharef’s co-defendant, Herbert Steffen, did just that and in February Judge Shira Scheindlin dismissed the SEC’s complaint against Steffen finding that personal jurisdiction over Steffen exceeded the limits of due process.

The SEC’s allegations against Sharef mention the phone call Sharef placed in the U.S. to Steffen.  As to this call, Judge Scheindlin stated as follows in the Steffen decision.

“Neither Sharef’s call to Steffen from the United States nor the fact that a portion of the bribery payments were deposited in a New York bank provide sufficient evidence of conduct directed towards the United States to establish minimum contacts.  First, Steffen did not place the calls to Sharef.  Further, Steffen did not direct that the funds be routed through a New York bank.  […]  His conduct was focused solely on ensuring the continuation of the Siemens contract in Argentina.”

The SEC complaint did however state the following additional as to Sharef.

“Sharef met in New York, NY [in January 2003] with payment intermediaries and agreed to pay $27 million in bribes to Argentine officials in connection with the [contract at issue].

Obstruction Charges Filed Against French Citizen in Connection With FCPA Investigation

The DOJ announced (here) earlier this week that “Frederic Cilins a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”

The Criminal Complaint charges Cilins with one count of tampering with a witness, victim, or informant; one count of obstruction of a criminal investigation; and one count of destruction, alteration, and falsification of records in a federal investigation.

Under the heading “Overview of the Defendant’s Crimes” the complaint states, in pertinent part, as follows.

“Cilins … has made repeated efforts to obstruct an ongoing federal grand jury investigation … concerning potential money laundering violations and potential violations of the Foreign Corrupt Practices Act, including such violations by a domestic concern as defined by the FCPA, relating to bribes to officials of a former government of the country of Guinea for the purpose of obtaining valuable mining concessions in Guinea.  During monitored and recorded phone calls and face-to-face meetings with a cooperating witness “CW” [identified as the former wife of a now deceased high-ranking official in the Government of Guinea who is cooperating with the government “in the hopes of obtaining immunity for her own potential criminal conduct”] assisting in this investigation, Cilins, among other things, agreed to pay large sums of money to the cooperating witness to induce the cooperating witness to: (1) provide to Cilins, for destruction, documents Cilins knew had been requested from the cooperating witness by special agents of the FBI and which were to be produced before a federal grand jury; and (2) sign an affidavit containing numerous false statements regarding matters within the scope of the grand jury investigation.  Cilins repeatedly told the cooperating witness that the documents needed to be destroyed ‘urgently’ and that Cilins needed to be present to personally witness the documents being burned.”

Various reports (see here for instance) have linked Cilins to Guernsey-based BSG Resources Ltd and the Criminal Complaint would seem to reference this company as a “particular business entity not based in the United States engaged in the mining industry” (the “Entity”).  The Criminal Complaint sketches a bribery scheme and states, in pertinent part, as follows.

“CW was visited by several individuals including Cilins who identified themselves as representatives of the Entity.  According to the CW, these individuals told the CW, on behalf of the Entity, that they wished to invest in mines in Guinea and asked the CW for help with the Guinean Official, who was then CW’s spouse.  Cilins offered the CW $12 million, to be distributed to the CW and ministers or officials within the Government of Guinea who might be needed to secure the mining rights if all went well after their introduction to the Guinean Official.”

The Criminal Complaint further states that “some of the money paid to the CW by the Entity and its affiliates or agents was wired to a bank account in Florida controlled by the CW.”

It would appear from the Criminal Complaint that BSG Resources is not the sole focus of the U.S. investigation.   Indeed, BSG Resources does not fit the description of a “domestic concern” as referenced in the Criminal Complaint which further states that “subjects of the grand jury investigation include one or more “domestic concerns” within the meaning of the FCPA …”.

Contrary to this assertion, obstruction charges were not first used in the FCPA enforcement against Hong Carson.  Prior to Carson (in which the charge was ultimately dropped) obstruction charges have been used in several FCPA enforcement actions since the FCPA’s first-mega case in 1982 (see here for the prior post).  Although not always successful prosecuted, the following FCPA defendants were nevertheless also charged with various obstruction charges:  Gerald Green, David Kay and Douglas Murphy, Leo Winston Smith and John O’Shea

TJGEM, LLC Complaint

In another example of the noticeable trend of increasing “offensive” use of the FCPA, in late March, Missouri-based TJGEM, LLC filed this civil complaint in U.S. District Court for the District of Columbia alleging a variety of claims, including RICO, against various Ghana officials and New Jersey-based Conti Construction Co. Inc. in connection with a sewer project.  AllAfrica reports here as follows.

 “TJGEM is claiming that [a Ghanian official] inflated the contract sum for the construction of the sewer system, which has now been awarded to Conti Construction, also an American company, by $10 million …  According to [the complaint] because TJGEM’s representatives, who were negotiating with [the official] for the contract, were totally non-receptive and unresponsive to the [official’s] corrupt practices and solicitations, and refused to neither entertain  nor accede to same, but instead, rejected said corrupt practices, the contract  was taken away from them. [TJGEM] argues that the selection of a company whose price for the reconstruction of the sewer  project was some $10,000,000 in excess of the price fixed by TJGEM, leads to a reasonable inference that the [official] inflated the price of the sewer project, in order to receive said $10,000,000 as a bribe and kickback in the award of the  sewer project contract to his own use and benefit, and to the use and benefit of other Ghanaian public officials with whom he is acting in concert in the said criminal enterprise.”


A good weekend to all.

Strange Things Happen In Threes – Another Challenge In A SEC FCPA Enforcement Action Filed

It’s been said that strange things happen in threes.

Until very recently, the last time the SEC was challenged in a Foreign Corrupt Practices Act enforcement action was 2002 in the Eric Mattson and James Harris enforcement action.  As noted in this previous post, the SEC lost.

After a 10 year period enforcing the FCPA against cooperating corporate and individual defendants, this past summer Mark Jackson and James Ruehlen’s challenged the SEC in an FCPA enforcement action.  (See here for the briefing, oral arguments are set for Halloween).

This post last week noted that former Maygar Telekom executives Elek Straub, Andras Balogh and Tamas Morvai plan on challenging the SEC’s enforcement action against them.  Briefing is to be completed in mid-December and oral arguments are scheduled for mid-January 2013.

Strange things happen in threes.

Last week, Chris Matthews (Wall Street Journal – Corruption Currents) reported here that former Siemens executive Herbert Steffen has filed a motion to dismiss the SEC’s charges against him.

As noted in this previous post, Steffen is among a group of former Siemens executives charged by the SEC (and DOJ) in connection with the Argentina conduct at issue in the widespread Siemens enforcement action from 2008.

In his motion to dismiss (here) Steffen moves to dismiss the SEC complaint for lack personal jurisdiction and for the SEC’s failure to file the complaint within the applicable five-year statute of limitations.

The motion states as follows.

“Mr. Steffen, 74 years of age, is a German citizen residing in Germany. He is trained as an engineer, and spent his entire career at Siemens Aktiengesellschaft (“Siemens”) and its subsidiaries with postings in Germany, Brazil, and Argentina. He was never employed in the United States, and never travelled to the United States on business for Siemens during the entire period alleged in the complaint. The complaint alleges he had managerial positions in Siemens’ Argentina business from 1983 through 1989 and again in 1991.   There are no allegations of any improprieties during the period he had such responsibilities. He retired from Siemens nearly ten years ago and has not been employed since.  The complaint alleges that between 2000 and 2003, when Mr. Steffen was Group President of Siemens Transportation Systems in Germany, he was recruited to assist in efforts to recover a contract that the Argentine government planned to terminate.  It further alleges that in that capacity he engaged in conduct that the SEC contends violated or aided and abetted violations of Sections 13(b)(2), 13(b)(5) and 30A of the Securities Exchange Act of 1934.  The last alleged act attributed to Mr. Steffen in the complaint is alleged to have occurred sometime in “the first half of 2003.”  The complaint does not allege that Mr. Steffen ever entered the United States. Nor does it allege that he initiated any contact with anyone in the United States. Although it alleges that he participated in “one or more telephone conversations with defendant Sharef” (another Siemens employee), it expressly alleges that Mr. Sharef “called him from the United States.”  Because the complaint fails to plead facts sufficient to establish personal jurisdiction over Mr. Steffen, and because the SEC’s claims are barred because they were not filed within the applicable five-year statute of limitations, we respectfully move to dismiss all the claims against Mr. Steffen pursuant to Fed R. Civ. P. 12.”

The statute of limitations portion of Steffen’s states, among other things, as follows.

“At the September 28, 2012 scheduling conference before this Court, the SEC expressed the view that the applicable statute of limitations was tolled indefinitely because Mr. Steffen is a foreign defendant who has not been in the United States and does not own property in the United States. The SEC’s rationale for this novel argument was language in a sixty-year-old statute that neither expressly mentions tolling the statute of limitations nor has been held by any court to support the interpretation offered by the SEC.  The interpretation advanced by the SEC is particularly nonsensical, given the relative ease with which service of process can be effected on foreign defendants residing abroad. Moreover, the proposed interpretation—which as a practical matter would extend indefinitely the statute of limitation as to those individuals with the least connection to the United States— disregards, with no indication from Congress, the strong judicial policy favoring statute of limitations. [… Because the SEC cannot overcome its lack of diligence in pursuing its claims within the five-year statute of limitations, its claims against Mr. Steffen should be dismissed.”

Steffen is represented by Skadden lawyers Erich Schwartz (here – former Assistant Director of the SEC Enforcement Division) and Amanda Grier (here).

As noted in Chris Matthew’s Corruption Currents post, “the SEC said in a court letter filed last Friday it had reached an agreement with Uriel Sharef, a former member of Siemens’ managing board, to settle the foreign bribery charges pending against him.”

On the same day the SEC enforcement action was brought in December 2011, the SEC announced settlement of the charges against Bernd Regendatz.  As to the other defendants charged by the SEC, the docket notes a default by Ulrich Bock and Stephan Singer and that Andrews Truppel was recently served.  The docket contains no information as to Carlos Sergi.

As noted in the December 2011 post, the DOJ also charged several former Siemens executives as well.  The docket does not contain any entries since December 2011.

In Depth On The Siemens Argentina Enforcement Action

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.

Former Siemens Executives and Agents Charged

In December 2008, Siemens resolved the largest ever (in terms of fines and penalties) FCPA enforcement action.  See here and here.   A portion of the improper conduct focused on 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.

Since the 2008 enforcement action, U.S. enforcement authorities have been under pressure to charge culpable individuals.  See here for a prior post and here for the transcript of the November 2010 Senate FCPA hearing during which former Senator Specter again called for individual accountability, an occurrence which prompted him to ask me several questions after the hearing about the “most egregious examples of individual conduct associated with the Siemens prosecution.”  See here for my responses.

Today, the DOJ announced that “eight former executives and agents of Siemens AG and its subsidiaries have been charged for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards.”

The defendants charged in the indictment (here) are:  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 allegedly served as intermediaries and agents of Siemens in the bribe scheme).  None of the individuals are U.S. citizens and during a press conference today Assistant Attorney General Lanny Breuer indicated that none of the defendants are in U.S. custody.

The indictment, filed in the Southern District of New York, charges the defendants and their co-conspirators with conspiracy to violate the FCPA and the wire fraud statute, money laundering conspiracy and wire fraud.

In the DOJ release, Assistant Attorney General Lanny Breuer stated as follows.  “Today’s indictment alleges a shocking level of deception and corruption.  The indictment charges Siemens executives, along with agents and conduits for the company, with committing to pay more than $100 million in bribes to high-level Argentine officials to win a $1 billion contract.  Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials.  This indictment reflects our committment to holding individuals, as well as companies, accountable for violations of the FCPA.”  During the press conference, Breuer stated that today’s action is the “first time a former Board member of a Fortune 50 company” has ever been charged with FCPA violations.  Breuer also stated that  “Siemens was a remarkably cooperative and helpful party throughout our investigation.”

In a parallel civil enforcement action also announced today (here), the SEC charged seven former Siemens executives with violating the FCPA for their involvement in the same bribery scheme.  The following individuals are charged in the civil action:  Sharef, Bock, Signer, Steffen, Truppel, Sergi and Bernd Regendantz (a former chief financial officer of Siemens Business Services).  The civil complaint (here) alleges FCPA anti-bribery violations, aiding and abetting Siemens’ FCPA anti-bribery violations, as well as other charges.  Robert Khuzami (Director of the SEC’s Division of Enforcement) stated as follows.  “Business should flow to the company with the best product and the best price, not the best bribe.  Corruption erodes public trust and the transparency of our commercial markets, and undermines corporate governance.”  During today’s press conference, Khuzami called the action the “largest [SEC] action ever against individuals” in the FCPA’s history.

Additional analysis of the DOJ and SEC enforcement actions will follow.

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