May 26, 2008 / 9:13 AM / 12 years ago

Siemens unit bosses failed to stop bribes: defendant

MUNICH, Germany (Reuters) - A former Siemens (SIEGn.DE) manager who built a system of slush funds and fake contracts for the engineering giant told a court he later tried to stop the systematic bribery but top managers failed to act.

The logo of Siemens company is pictured in front of a factory in Berlin in this March 28, 2007 file photo. REUTERS/Tobias Schwarz

Defending himself against 58 charges of breach of trust, Reinhardt Siekaczek said on Monday he had appealed to Thomas Ganswindt, at the time head of Siemens’ telecoms networks unit where Siekaczek worked, in 2004, but Ganswindt had done nothing.

“It carried on after that. It didn’t stop,” Siekaczek said, adding that he had been sent to Ganswindt by the unit’s finance chief Michael Kutschenreuter, who “didn’t want to hear”.

Siekaczek has already admitted playing a part in what may be the world’s largest corporate bribery scandal, which began a year and a half ago with a probe into 20 million euros’ ($32 million) worth of suspect payments at Siemens’ telecoms unit.

Siemens has since identified 1.3 billion euros supposedly paid for consultancy services but suspected of being bribes, and has attracted investigations by the U.S. Department of Justice and Securities and Exchange Commission that are still ongoing.

On the first day of the criminal trial, 57-year-old Siekaczek said he had been asked by superiors to construct the slush-fund network to disguise payments to foreign telecoms companies, after such bribes became illegal in Germany in 1998.

Such payments may have helped Siemens’ telecoms equipment division, which had annual sales of 13 billion euros and 50,000 employees in its heyday, win contracts against rivals such as Cisco (CSCO.O), Nokia NOK1V.HE and Ericsson (ERICb.ST).

Siekaczek, a former sales manager who worked at Siemens for almost four decades, is not accused of paying the bribes or enriching himself. He faces a jail term of up to five years for each breach of trust charge of which he is convicted.


Siekaczek told the Munich Higher Regional Court it had not been difficult to set up financial channels to siphon off the funds. “It was no great art, no great system. You didn’t have to be particularly intelligent,” he said.

The grey-haired, bespectacled retiree described how managers at the telecoms unit would sign post-it notes that were stuck to potentially incriminating documents rather than signing the documents themselves.

“In this way, the signatories could elegantly remove signs of their involvement if it came to an investigation,” he said.

“Of course, I and others knew that we made payments to win contracts and get information,” Siekaczek said. “We behaved very discreetly in such matters. We knew there were very few people who could access the money or approve the payments.”

The affair has already cost the jobs of Siemens’ ex-Chief Executive Klaus Kleinfeld and ex-CEO and chairman Heinrich von Pierer, who are not accused of wrongdoing, and has led to an upheaval of corporate culture and structures.

The multiple investigations that have widened to include Siemens’ transportation and power units, among others, may also result in Europe’s biggest engineering group’s being banned from bidding for certain U.S. contracts.

Siemens has already been fined 201 million euros in a previous case after prosecutors traced bribes paid in Nigeria, Russia and Libya to the fallen corporate icon.


Siekaczek said his superiors had been aware that the system would have to be wound down after Germany outlawed paying bribes to win foreign contracts and banned the previously legal practice of deducting such payments from tax in 1998.

But the process could only be a gradual one since some payments had already been promised on the completion of multi-year contracts, he said. “It was a difficult time for those concerned.”

Siekaczek compared the momentum of such practices to that of an express train. “It was like an ICE train driving into a station at 250 kilometers (160 miles) per hour. It’s not so easy to stop,” he said, adding: “That’s not an excuse or a get-out.”

Senior prosecutor Anton Winkler said the trial should send a warning to other corporations.

“We hope it will bring a new awareness in corporate culture that bribery will not be tolerated, either in Germany or abroad,” he said before the start of the trial.

Munich prosecutors have amassed 5 terabytes of information — equivalent to about 5 million sheets of A4 paper — and are investigating almost 300 people.

Ex-Siemens chairman and CEO von Pierer will be called as a witness later in the trial.

Additional reporting by Nicola Leske, editing by Elizabeth Fullerton and David Cowell

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