Siemens boss admits setting up slush funds

A former senior manager at Siemens on Monday admitted building up an elaborate system of slush funds and shell firms at the request of his superiors to help Europe’s biggest technology group win overseas contracts through bribes.

Reinhard Siekaczek told a Munich court that he had informed his entire divisional board about the system and assumed that the whole group executive board knew about it from at least 2004.

On the opening day of Germany’s biggest post-war corporate corruption trial, Siekaczek described how managers signed off “commissions” on yellow Post-It notes, which could be easily removed in case of raids or investigations.

His damning testimony included allegations that his efforts to stop the widespread bribery at Siemens’s fixed-line telecommunications equipment division (Com), where he was a sales manager, had fallen foul of his superiors who “didn’t want to hear”.

Siekaczek, aged 57, is the first of up to 300 accused among Siemens’s current and former staff to stand trial in a corruption scandal that the group itself admits involves at least â,¬1,3-billion in siphoned-off money.

Six of its divisions are involved in a bribery system spanning the globe that has so far cost it â,¬1,8-billion to clear up, including a â,¬201-million fine from another Munich court. It could result in a multibillion-dollar penalty from the United States securities and exchange commission as well as the loss of lucrative contracts.

The scandal, which came to light in November 2006, has cost the jobs of Heinrich von Pierer, the former chairperson, and Klaus Kleinfeld, who succeeded him as chief executive. Neither has been charged and both deny any involvement.

Von Pierer has been called as a witness on June 20 and several other former executives, including former finance chief Hans-Joachim Neubürger, are also due to testify—as is current chief financial officer Joe Kaeser.

Siekaczek, grey-haired and bespectacled and seen fidgeting nervously with a voluminous case-file, is standing trial on 58 counts of breach of trust and faces up to five years’ imprisonment.
He told the court that, as a trusted employee of more than 30 years, he had built the system up after a 1998 federal law proscribed bribes to win overseas contracts and that it had replaced a previous system of cash payments via accounts in Salzburg, Austria.

Altogether â,¬53-million is said to have been paid out—much less, according to Siekaczek, than in earlier periods.

The former sales manager insisted he had received neither promotion nor bonuses for his work in setting up the slush funds and had simply acted for the benefit of the firm. The funds had been easy to set up, using phoney consultants’ contracts, false bills and shell firms. “It was actually no great art, no great system. It was relatively easy,” he said.

He added: “I said then this was the only means we could use once overseas bribery was outlawed. We behaved very discreetly in such matters. We knew there were very few people who could access the money or approve the payments.” But he insisted: “The entire divisional executive knew that I was doing it.”

Siekaczek claimed to have tried to reduce the level of bribes but said this was like trying to stop a high-speed train.

The trial, which resumes on Tuesday and is expected to last into July, comes as the Siemens board examines whether to sue former directors and senior managers for compensation over the costly scandal.—Â

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