August 14, 2013 / 1:35 AM / 4 years ago

Brazilian governor says state will sue Siemens for price fixing

SAO PAULO, Aug 13 (Reuters) - Brazil’s São Paulo state will sue German engineering giant Siemens to recoup public funds its governor said it lost to a cartel that fixed prices for public transit construction, equipment and upkeep.

“We are going to open a case against Siemens for damages to public coffers and the state of São Paulo and to demand total reimbursement,” Governor Geraldo Alckmin told reporters on Tuesday.

The lawsuit will be based on information in a complaint against Siemens filed with Brazil’s anti-trust agency by Brazil’s National Subway Operators Association, he said.

São Paulo, Brazil’s most populous and economically developed state, has been spending billions of dollars a year to expand overcrowded roads, transit links and other public infrastructure.

But rising subway and bus fares combined with poor service for the 20 million people of greater Sao Paulo city, the state’s capital, sparked nationwide protests in June and July against political corruption and inadequate public services.

More demonstrations are planned for Wednesday in São Paulo in response to the cartel accusations.

Paulo Stark, chief executive of Siemens’ Brazilian unit, said in a statement that the company is cooperating with anti-trust officials as they investigate charges that Siemens and other companies formed a cartel that raised the price of contracts to build and operate train and subway lines between 1990 and 2007.

Siemens declined to comment on Alckmin’s plan to sue.

In addition to Siemens, France’s Alstom SA and many other international engineering and railway equipment companies have bid for transit contracts in São Paulo in recent years.

Alstom rigorously complied with local laws in its dealings in Brazil, company spokesman Philippe Kasse told Reuters by email.

Alckmin, a leading figure in Brazil’s opposition Social Democracy Party (PSDB), said Sao Paulo state plans to hold other companies responsible for the loss of public funds if they are found to have participated in the suspected cartel.

Siemens was the only company the governor mentioned by name in his remarks Tuesday.

Alckmin and other PSDB officials, who have been in control of São Paulo state for almost two decades, have denied they were involved in any illegal activities such as bribery and kickbacks related to the transportation-cartel case.

The charges come as Brazilians are showing less tolerance for corruption. The demonstrations that crippled cities across Brazil in June and July have diminished but not died out.

In Rio de Janeiro this week, protesters took over the city council chambers to demand an independent inquiry into possible fixing of bus concession contracts.

Attempts to placate the demonstrators have prompted some local governments to rescind recent transport-fare increases. This, though, may make it harder for the government to attract companies to build, own and operate urban transport projects.

Brazil had to postpone multibillion-dollar tenders to build a subway line in the center of São Paulo and a high-speed rail line between São Paulo and Rio de Janeiro this month following investor concerns that the projects would fail to turn a profit.

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