US authorities have charged eight former executives and agents of the German corporation Siemens AG and its subsidiaries with a conspiracy to violate the Foreign Corrupt practices Act (FCPA). The charges allege that the individuals used over $100 million illicitly to secure a lucrative contract in Argentina for the production of national ID cards.
The details of the case concern the Argentine Government’s issuance of a tender for bids in 1994 to replace its existing system of national identity booklets with the ‘DNI project’ - digitalised national identity cards. The estimated value of the project was $1 billion. Argentina awarded the DNI project to a subsidiary company of Siemens AG in 1998. The US Department of Justice (DoJ) claims that this lucrative contract was granted as a result of a decade-long corruption scheme.
The DNI project was terminated in May 2001, the consequences of which causing the members of the conspiracy allegedly sought to avoid. The indictment alleges that the conspirators attempted to recover the anticipated proceeds of the DNI project by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim accused Argentina of wrongful termination of the contract and demanded approximately $500 million in lost profits and expenses.
The eight individuals are charged with conspiracy to violate the FCPA and a number of related offences. Residents of Germany, Switzerland and Argentina, the defendants have not been taken into custody but the DoJ plans to seek the assistance of its international partners to detain the individuals. The Securities and Exchange Commission also filed a related civil action, alleging that over $100 million in bribes were paid in connection with Siemens’ efforts to secure the DNI contract.
This development comes three years after Siemens’ record-breaking $1.6 billion global settlement of bribery allegations with the DoJ, SEC and German authorities and illustrates just how prolonged and multi-faceted corruption investigations can become once initiated.
The case also offers a stark reminder for managers and executives of the personal consequences of becoming embroiled in corporate corruption. The US authorities, which have at times received criticism for failing to convict individual employees in FCPA cases in which their employer settles, have demonstrated by bringing this indictment that there is appetite for prosecuting individuals involved in corruption. This case marks the first time a board member of a Fortune 50 company has been charged with FCPA violations.
Lanny Breuer of the DoJ observed that the indictment ‘reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.’