US authorities fined the German engineering group Siemens a record $800m (£523m) yesterday to settle a long-running bribery and corruption scandal.
Siemens also agreed to pay a fine of €395m (£354m) to settle a case in Munich, its home town, over the failure of its former board to fulfil its supervisory duties. It was fined €201m there a year ago over bribery by its former telecoms division.
Yesterday's fines, in the biggest corporate scandal in post-war Germany, bring the total cost to Siemens so far to €2.5bn, including €850m in lawyers' and accountants' fees, officials in Munich said. These include Debevoise & Plimpton, Deloittes and PricewaterhouseCoopers.
The US settlement, after a year of negotiations and plea bargaining, sees Siemens pay the US department of justice about $450m (€350m) to settle charges of bribery and trying to falsify corporate books.
The securities and exchange commission (SEC), the market regulator, will receive another $350m (€270m) on similar charges under the Foreign Corrupt Practices Act. The DoJ said it was the biggest such case it had ever seen in "scope and magnitude".
Siemens had once feared it would have to pay a penalty of up to $5bn. But, after co-operating with the US authorities and initiating an amnesty for whistleblowers over bribes paid to win lucrative overseas telecoms and power contracts, it set aside €1bn of provisions last month.
The US case, at the district court for the District of Columbia, was settled after judge Richard Leon accepted guilty pleas from Siemens' lawyers over a slush fund totalling more than €1.3bn and used to win overseas contracts from 2001 to 2007. The scandal has cost Siemens, a symbol of German engineering excellence and corporate probity, not only its reputation and that of former senior executives but more than €1.6bn in costs. The company is being investigated in scores of countries around the world, two ex-board members are under criminal investigation and a senior manager was recently given a suspended two-year sentence.
But the settlement is a personal coup for the Austrian chief executive, Peter Löscher. The first non-German chief, who was brought in to clean out the Augean stables, appointed a US lawyer, Peter Solmssen, as the company's first compliance director, with a seat on the main board. Solmssen said the rulings ended a painful chapter in the group's 162-year history.
The spotlight now turns to former executives such as ex-chairman and chief executive Heinrich von Pierer, who is under heavy suspicion by the US authorities of failing to stop the bribery when he and his board were informed. He has consistently denied any knowledge of corruption.
Without naming names, the DoJ and SEC findings both point the finger at the former board for failing in its fiduciary duties, insiders said. Siemens, which is already demanding compensation from 11 former executives, said these cases were unaffected by the corporate settlement.
Yesterday as part of the US settlement, Löscher said Siemens had made Theo Waigel, former German finance minister, its first "compliance monitor".
The appointment, demanded by the US, normally goes to an American, usually a former US prosecutor or federal judge. Waigel, an architect of German monetary union after the fall of the Berlin Wall, will report to the US authorities on Siemens' implementation of new compliance measures. Löscher said: "We regret what happened in the past but we have learned from it and taken appropriate measures. Siemens is now a stronger company."
Gerhard Cromme, who replaced Von Pierer as chairman in 2007, said: "The corruption cases in Germany and the US are now over. Today marks the end of an unprecedented two-year effort to resolve extremely serious matters."
The group said its "extraordinary co-operation" in the US case meant that the US defence logistics agency, the leading body awarding federal contracts, had reaffirmed it as a "responsible" contractor. But its shares closed down 0.5% in Frankfurt at €47.17.