Siemens faces $538M in taxes, fines for ‘black money’ scandal

By Colleen Taylor, Contributing Editor -- Electronic News, 10/5/2007

Bringing an end to a months-long federal probe into the "black money" scandal at Germany-based electrical engineering and electronics company Siemens AG, German authorities have ordered the company to pay fines and taxes of about $538 million (380 million Euros).

The company's trouble started in November 2006 as reports began to emerge that Siemens had for years used a network of "black accounts" for bribery around the world. In a raid conducted at Siemens' headquarters, Munich police reportedly uncovered suspicious payments made mostly through Swiss and Austrian accounts. In April, Siemens' then-CEO Klaus Kleinfeld abruptly stepped down from his post at the company as the investigation intensified.

Siemens announced Thursday that a district court in Munich has imposed a fine of $284.6 million (201 million Euros) on the company, marking the end of an investigation conducted by the Munich office of public prosecution. In addition, Siemens said that it must pay $253.5 million (179 million Euros) to German tax authorities.

But Siemens is by no means out of the woods with the ending of the German investigation. Since evidence of the bribes began to surface in late 2006, federal investigations of the company have been launched in the U.S., Japan, Greece, Switzerland, and Italy, in addition to the company's native Germany. Siemens also said Thursday that an independent investigation being conducted by the U.S.-based law firm Debevoise and Plimpton continues; in August, a German newspaper reported that the law firm's probe had discovered that Siemens' illicit payments exceeded $1.4 billion (1 billion Euros). Last month, the Wall Street Journal reported that the amount had since increased to $2.3 billion (1.6 billion Euros.)

The company has taken its punishment in Germany without putting up a fight. "Siemens accepts the fine imposed by the court, and takes responsibility for past misconduct," the company said in a statement, adding that it has waived its right to appeal.

Siemens has taken aggressive steps in recent months to clean up its sullied image. In May, Peter Löscher was appointed Siemens' new president and CEO. The chairman of Siemens' supervisory board, Gerhard Cromme, said at the time that he was confident that Löscher "has what it takes to steer Siemens through its current difficulties and into a better future." The company has said it is also further strengthening its compliance measures and internal control systems.