On Tuesday, December 13, 2011, the Department of Justice and the SEC brought charges against a group of former employees and agents of Siemens AG for FCPA violations based on an alleged decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards. In the words of Assistant Attorney General Lanny Breuer, "[t]his indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA." The authorities have been undoubtedly active in the FCPA area this year against individuals, securing a sentence of record length against a telecommunications executive in one case (as discussed here), but suffering setbacks in other cases, such as the hung jury in the first of several trials in the FCPA sting case against employees of companies in the military and law enforcement products industry (discussed here) and the recent decision by Judge Matz to vacate the convictions of executives of Lindsey Manufacturing (and the company itself) (as discussed here).
In December 2008, Siemens AG resolved FCPA charges with the DOJ, the Munich Public Prosecutor’s Office and the SEC with multiple guilty pleas and the payment of $1.6 billion in fines, penalties and disgorgement of profits, including $800 million to U.S. authorities. U.S. v. Siemens Aktiengesellschaft, Case No. 08-367 (D.D.C. Filed Dec. 15, 2008); SEC v. Siemens Aktiengesellschaft, Case No. 1:08-cv-02167 (D.D.C. filed Dec. 15, 2008). The charges in those cases were based on violations in Latin America and the middle east, including involvement with United Nations Oil-for-Food Program in Iraq. According to several commentators, including Richard Cassin’s FCPA Blog, the December 2008 Siemens cases still stand as the highest settlement paid to resolve FCPA charges.
Criminal Charges. The criminal charges filed on December 13, 2011 names eight former executives and agents of Siemens AG and its subsidiaries. According to the DOJ Press Release, the individuals conspired to pay over $100 million to Argentine officials in an effort to win the contract to "replace an existing system of manually created national identity booklets with state of the art national identity cards," a project valued at $1 billion (the DNI project), which was awarded to a Siemens AG subsidiary in 1998:
The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means.
The indictment further alleges that when the DNI project was terminated in 2001, the conspirators continued their scheme, seeking "to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim." DOJ asserted that the conspirators tampered with witness statements and pleadings to conceal the corrupt nature by which the contract for the DNI project had been awarded.
The criminal charges against the eight defendants included conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.
SEC Civil Charges. The SEC brought charges against seven individuals (six of whom were also indicted in the criminal case) for their involvement in the scheme. The SEC Press Release stated that "approximately $31.3 million of the $100 million in bribes paid were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws." The Press Release further explained the fraudulent arbitration claim resulted in an arbitration award in 2007 against the government of Argentina of more than $217 million plus interest for the DNI contract (which Siemens waived in 2009).
The charges against the seven including violating the FCPA, aiding and abetting FCPA violations by Siemens and violating Exchange Act § 13 by authorizing or directing the falsification of documents in furtherance of the scheme.
Bernd Regendantz, who was named in the civil case, but not the criminal proceedings, settled with the SEC by consenting to the entry of a final judgment that permanently enjoins him from committing future violations. In addition, he paid a €30,000 administrative fine ordered by the Munich prosecutor (equal to approximately $40,000 in U.S. dollars).