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The Siemens Scandal

by DoDo Thu Mar 29th, 2007 at 04:32:36 PM EST

On Wednesday, Johannes Feldmayer, an acting CEO of German electronics giant Siemens was arrested on corruption charges. Prosecutors later let it be known that they are already eyeing the chairman of the oversight board, famed former top CEO Heinrich von Pierer, and his predecessor in the oversight board, Karl-Hermann Baumann.

This is the latest peak of a scandal brewing for months, during which trails to dozens of CEOs were followed. According to the charges, the managers misappropiated up to €200 million (according to Siemens internal investigators, up to €420 million), and turned them into black funds, which they used to ease the wheels of tender-granting processes and such.

For example, Mr. Feldmayer is accused of financing and buying the compliance of an industrial council chairman (who formed his council in opposition to the unions) with €14 million. Another particularly obscene case were payments to a former manager, after he was caught with corruption in an Italian power plant deal in 2003, despite losses to Siemens from that scandal.

For me, the morale of the story is not that Siemens is a crooked company -- I suspect Siemens was only 'unlucky' to have been caught doing this.


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But we should believe thew market is so wonderfully effective...

...or, maybe, for multis, it is? If all of them fight with the same weapons...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Mar 29th, 2007 at 04:34:00 PM EST
Yes. It's the 11th Commandment.

"Thou shalt not get Caught"

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 29th, 2007 at 05:31:57 PM EST
[ Parent ]
There is something with Dell as well:

Dell finds evidence of misconduct in finance probe

by das monde on Fri Mar 30th, 2007 at 03:26:31 AM EST
Bribery to get business was right out in the open when I was in Europe.  US companies did it too until Lockheed (IIRC) got caught bribing in Japan and the Foreign Corrupt practices act was passed.  Now US companies set up off shore affiliates to work in those sorts of places.  We got lots of compliance training on this subject as the liability was to both the company and to the individual.

I've read that French companies could deduct bribes from their taxable income up until the late 90's.

My counterparts at various European companies were not too embarrassed to admit they had bag men in places like Nigeria.  The joke was Exxon's man could offer an official a nice pen.  Elf could offer a Mercedes.

by HiD on Fri Mar 30th, 2007 at 06:33:32 AM EST
These are really a lot like stories I have heard with the honest swedish company and various nasty foreign ones. It might be true, degrees of corruption (or what is acceptable and appropriate behaviour in making a deal) varies around the world.

But it might also be stories told to explain losses (nothing wrong with our product, everyone else cheats) or even to motivate bribery (we do not want to, but everyone else does it).

Anyone got some good links on corruption evaluations?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Mar 30th, 2007 at 07:55:13 AM EST
[ Parent ]
Honest Swedish companies like Boliden, right?

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Fri Mar 30th, 2007 at 08:03:09 AM EST
[ Parent ]
Anyone caught is always an exception...

I am more leaning towards the "stories we tell" approach.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Mar 30th, 2007 at 08:32:28 AM EST
[ Parent ]
uh. no.

Why do you think Marc Rich Co. agent in Nigeria was the first lady of the land at the time?

A major I know very well paid a certain Nigerian agent 5 cts/bbl on certain trades.  Wonder why?

Enel would only purchase oil for years through a very limited number of purposely created companies that consisted of little more than a couple of guys in suits and a phone.  They'd sell on to you Mr. Big Oil/Trader but only at a guaranteed margin of $6-8/ton (about 8-12% at the time).  Wonder why?

How many Enel managers are being caught taking bribes even now?

Trust me on this, the biz was dirty as hell and the European traders, including state oil cos, were right in the thick of it.

by HiD on Fri Mar 30th, 2007 at 06:10:03 PM EST
[ Parent ]
I think I was unclear. Corruption is real alright, and I do not doubt your examples.

What I refered to was stories like this joke:

The joke was Exxon's man could offer an official a nice pen.  Elf could offer a Mercedes.

And the implication that Exxon does its business fair, it is the others that are dirty. That reminded me of similar stories of how swedish companies are honest and thus fooled by their crocked foreign competitors.

So what I am disputing is if indeed Exxon did not offer more then a pen.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Mar 30th, 2007 at 10:28:22 PM EST
[ Parent ]
But it was generally impossible for a US major oilco trader to simply cut an official a check for a bribe.  Europeans could be that direct.  US Oilcos do play games via agents etc.  the 5ct agent I referred to worked for a US major.  Tended to be on larger projects rather than one of, "let me have a cargo of Bonny Lite, here's $10K to make it happen".

US companies are not virgins in the forest.  No argument there.

by HiD on Sat Mar 31st, 2007 at 05:50:05 PM EST
[ Parent ]
Swedish armtraders apparently also plays by way of agents.

A bribery scandal (by way of agents) was recently uncovered by a swedish documentary. JAS Gripen was sold and leased (two seperate deals) to the Czech republic and some pretty serious money changed hands to make it so.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Mar 31st, 2007 at 06:57:05 PM EST
[ Parent ]
The arms trade is ten times as dirty as the oil industry.

I was rather shocked that anyone was surpried we do it too. If we didn't, we wouldn't get any planes sold.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Apr 2nd, 2007 at 06:15:32 AM EST
[ Parent ]
"Was" dirty as hell?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Mar 31st, 2007 at 04:30:40 AM EST
[ Parent ]
I'm out of date.  I can hope it got better (and where is that Ferrari Dad?)
by HiD on Sat Mar 31st, 2007 at 05:55:36 PM EST
[ Parent ]
You can search on these web sites:

Transparency International

Publish What You Pay

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Mar 31st, 2007 at 12:30:49 PM EST
[ Parent ]
Thanks.

Found this:

Overseas bribery by companies from the world’s export giants is still common, despite the existence of international anti-bribery laws criminalising this practice, according to the Transparency International 2006 Bribe Payers Index (BPI), the most comprehensive survey of its kind to date.

The BPI looks at the propensity of companies from 30 leading exporting countries to bribe abroad. Companies from the wealthiest countries generally rank in the top half of the Index, but still routinely pay bribes, particularly in developing economies. Companies from emerging export powers India, China and Russia rank among the worst. In the case of China and other emerging export powers, efforts to strengthen domestic anti-corruption activities have failed to extend abroad.

With a nice chart. The chart is based on perception of bribiness. A top value of ten is no bribes coming from that countries companies and zero is bribes coming out of their ears.

Some countries (choosen by me):

1 Switzerland 7.81
2 Sweden 7.62
...
6 UK 7.39
7 Germany 7.34
...
10 US 7.22
11 Japan 7.10
...
13 Spain 6.63
...
15 France 6.50
...
20 Italy 5.94
...
22 Saudi Arabia 5.75
...
28 Russia 5.16
29 China 4.94
30 India 4.62

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Mar 31st, 2007 at 07:21:28 PM EST
[ Parent ]
A great business opportunity. Last time I checked ABB had a much higher p/e than Siemens, in spite of the companies being pretty equal otherwise.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Mar 30th, 2007 at 08:07:38 AM EST
Scandal widens in European car sector - Business - International Herald Tribune

Scandal widens in European car sector

By James Kanter and Carter Dougherty, International Herald Tribune PARIS

The chief executive of a leading French auto parts supplier stepped down Wednesday amid charges by prosecutors that he was aware of bribes allegedly paid to Germany's top automakers to win their business.

Directors at Faurecia, one of the biggest European makers of automotive interiors, met late Wednesday and announced the resignation of Pierre Lévi, saying that his departure was "in the best interests of the group." Prosecutors in Frankfurt had said last week that they were investigating Lévi in connection with up to €800,000, or $1 million, worth of bribes that they suspected were paid to managers at Volkswagen, Audi and BMW. Other investigations are under way into suppliers in Germany as well as Lear, which is based in the United States. Faurecia is majority-owned by PSA Peugeot Citroën, a leading French car manufacturer, and employs 60,000 people worldwide.

The fresh allegations come as competition is stiffening in Europe's blue- chip - but scandal-marred - automotive industry. Parts makers have consolidated and are increasingly seeking contracts with big car manufacturers outside their home markets. "We have seen a lot more business across European borders in a business that's long been characterized by German-to-German, French-to-French and Spanish-to-Spanish relationships," said Antonio Ferreira, a London-based manager for European component forecasts at CSM Worldwide, a consultancy. "The parts industry is growing smaller and smaller with fewer players, and the pressures are immense."

But instead of increasing transparency, that progress in cracking open national markets and fostering pan- European companies may have contributed to the seeming wave of corruption, other analysts said. Faced with the prospect of losing a bid for a large order to a competitor in an increasingly cutthroat market, paying a bribe may have seemed like the cheapest way to secure a hefty chunk of business, according to Ferdinand Dudenhöffer, the director of the Center for Automotive Studies in Gelsenkirchen, Germany. "The money one might pay to a customer is, in the end, a fraction of the cost of an overall shipment," Dudenhöffer said.

Caspar von Hauenschild, an executive board member of Transparency International Germany, a leading anti- corruption group, called the crackdown by German prosecutors overdue. The wave of bribery investigations represents "a kind of paradigm shift," said von Hauenschild, who is also a nonexecutive director of some German companies. "Even chief executives are now worried because investors simply don't like scandals," he said, warning that disaffected shareholders could sell shares in companies that become involved in corruption investigations. Von Hauenschild said that employees convicted of wrongdoing in Germany could face prison terms of up to five years under principles agreed to by member countries of the Organization for Economic Cooperation and Development, the Paris-based club of 30 wealthy countries.

The problem in the latest cases, according to von Hauenschild, partly lay in the way car companies had drawn up codes of conduct forbidding such practices - yet failed to impress the importance of those rules upon managers. "It was not enough," he said. "You have to let the people in the purchasing units know that there will zero tolerance for corruption and that if they don't adhere they will be fired."

(snip)

On Wednesday, prosecutors in Munich confirmed that they were also investigating possible bribery in transactions between Lear, a U.S. auto parts supplier based near Detroit, and BMW.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Sat Mar 31st, 2007 at 12:54:49 PM EST


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