BIOGRAPHY – SIEMENS: THE COMPANY THAT PAID THE LARGEST FINE EVER FOR FCPA VIOLATIONS
The bribery process began with the simple act of setting up off-shore accounts. Who doesn’t have an off-shore account? Once the managers had the off-shore accounts, they gained the additional benefit of removing themselves from the actual bribes. They also employed foreign agents who were given the descriptive and more palatable term of BCAs (business consulting arrangements). The executives involved never referred to any of the money paid to foreign agents as “bribes,” rather they were called “useful expenditures.” With the right terms and the appropriate distance, the Siemens executives could convince themselves that they had never paid a bribe and that they were merely involved in winning business for the company.
The simple questions would have been, “Why do we need off-shore accounts for paying expenses?” “Why are we developing new terms for what we do?” It is also clear from the extensive documentation in the case, as compiled by government agencies from several countries, that those at Siemens who were involved in the accounts and working with BCAs were acutely aware of reality. At one point, Siemens executives involved with “useful expenditures” met together in a restaurant, fully cognizant that they had crossed well over the line into bribery territory. In fact, Siemens’ ubiquitous presence in government contracts around the world indicated it had conquered the territory. As those executives sat at the restaurant that night, they concluded that they could at least get a good game of cards going in prison because there would be so many of them. Yet it would be two more years before the executives and their complex network was even partially uncovered as the subpoenas and regulators arrived. There were so many points along the way when they themselves could have stopped their tools, labels, and accounts, but they all continued to grow because there were no longer any clear lines. One executive said in response to a reporter’s question about culpability, “I was not the man responsible for the bribery. I organized the cash.”
BUSINESS PLANNING TIP (Siemens): Siemens did follow the “four eyes” principle – all payments required two signatures. However, it had made so many exceptions that this form of internal controls was lost.
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8-1 What is Business Crime? The Crimes Within a Corporation (See PowerPoint Slides 8-1, 8-2, and 8-3)
8-1a Financial Fraud: Employees Manipulating Earnings Numbers
· Andrew Fastow: Manipulating the numbers to save jobs
8-1b Marketing Missteps: Sales Zeal and Crimes
· Marketing products by making statements that are not permitted or are not true: pharmaceuticals
8-1c Friendly Fire: Employee Theft
· See Exhibit 8.1 – “A Roster of Wrongdoing”