SIEMENS AG, Europe's biggest engineering company, faces renewed accusations that managers bribed customers to win contracts after the first criminal trial of a former employee opened in Munich yesterday.
Reinhard Siekaczek, 57, a manager at Siemens's ICN fixed-line communications unit in Munich until 2004, is charged with 58 counts of breach of trust. Prosecutors alleged he had diverted corporate funds into accounts that could be used to bribe clients. Former chief executive officer and chairman Heinrich von Pierer and other board members may testify in the case.
Funds used to pay off Siemens customers were uncovered 18 months ago, prompting raids on the company's offices and managers' homes, Bloomberg News reported.
Siemens, which is cooperating with the investigation, has found 1.3 billion euros (US$2 billion) of "unclear payments." Prosecutors are investigating 270 suspects, and Siemens expects further penalties after a 201-million-euro fine in October.
"There is some reputational damage in the broader public perception," said Colin Gibson, an analyst at HSBC Holdings Plc in London who has an "overweight" rating on the stock. "The biggest concern that investors would have is if there is anything that would compromise current top management and there's no sign up to now of that being the case."
'Reward' for help
Siekaczek's lawyer, Wolfgang Kreuzer, declined to comment last week. He said on April 4 that his client is cooperating with prosecutors and expects the court to "reward" the help.
The trial is scheduled for 15 days over nine weeks, according to court records. Siemens spokesman Wolfram Trost declined to comment.
The court in October fined Siemens 1 million euros, the maximum fine, for bribes paid in 77 cases between 2001 and 2004 to government officials in Libya, Nigeria and Russia. It also seized 200 million euros, the "economic benefits" Siemens obtained through the kickbacks, according to the October 4 ruling.
Prosecutors in at least a dozen countries are investigating the scandal. The US Securities and Exchange Commission and the Justice Department may cause Siemens the greatest financial damage, analysts say.
German prosecutors sent the agencies material from their investigation last month, Jan Versteegen, a spokesman for the German Federal Justice Authority, said last Wednesday.
"Most important is what happens in the US," Ernst Auburger, an analyst at BHF Bank AG in Frankfurt, said last Wednesday. "The market is expecting 1 billion to 2 billion euros" in fines and "if it's more than that, it would burden the shares."
Siemens shares rose 0.2 percent to 70.60 euros in Frankfurt. The stock has declined 4.9 percent since the bribery scandal was uncovered on November 15, 2006. Germany's benchmark DAX Index has advanced 8.2 percent since then.
Siemens's products include light bulbs, medical scanners and wind turbines. Its second-quarter profit dropped 68 percent after a review of orders led to charges at power and transport units.
Prosecutors earlier this month opened an administrative probe against von Pierer, the company's chief executive from 1992 to 2005, when he became chairman. Von Pierer, 67, stepped down a year ago as the scandal unfolded.
The court has summoned von Pierer as well as former board members Thomas Ganswindt and Heinz-Joachim Neubuerger as witnesses in Siekaczek's case. All of them have denied wrongdoing.
The court has also summoned Siemens chief financial officer Joe Kaeser, who was at the company's former ICM wireless unit when the bribes were paid, according to Bloomberg News.