<i>Siemens scam</i>

Reinhard Siekaczek was half asleep in bed when his doorbell rang early one morning two years ago.
Still in his pajamas, he peeked out his bedroom window, hurried downstairs and opened the front door. Standing before him in the cool, crisp dark were six German police officers and a prosecutor. They held a warrant for his arrest.
At that moment, Siekaczek, a stout, graying former accountant for Siemens, the German engineering giant, knew his secret life had ended.
"I know what this is about," he told the officers crowded around his door. "I have been expecting you."
To understand how Siemens, one of the world's biggest companies, ended up paying $1.6 billion last week in the largest fine for bribery in modern corporate history, it is worth delving into Siekaczek's unusual journey.
A former midlevel executive at Siemens, he was one of several people who arranged a torrent of payments that eventually streamed to well-placed officials around the globe, from Vietnam to Venezuela and from Italy to Israel, according to interviews with Siekaczek and court records in Germany and the United States.
What is striking about Siekaczek's and prosecutors' accounts of those dealings, which flowed through a web of secret bank accounts and shadowy consultants, is how entrenched corruption had become at a sophisticated company that externally embraced the principles of a transparent global marketplace built on legitimate transactions.
Siekaczek said that from 2002 to 2006, he oversaw an annual bribery budget of about $50 million at Siemens. Company managers and sales staff members used the slush fund to cozy up to corrupt government officials worldwide.
The payments, he said, were vital to maintaining the competitiveness of Siemens outside of Germany, particularly in his subsidiary, which sold telecommunications equipment.
Siekaczek's telecommunications unit spent $5 million in bribes to win a cellphone contract in Bangladesh, paying the son of the then-prime minister and other senior officials, according to court documents. Siekaczek's group also paid $12.7 million to senior officials in Nigeria for government contracts.
In Argentina, a different Siemens subsidiary paid at least $40 million in bribes to win a $1 billion contract to produce national identity cards. In Israel, the company provided $20 million to senior government officials to build power plants. In Venezuela, it was $16 million for metro rail lines. In China, $14 million for medical equipment. And in Iraq, $1.7 million to Saddam Hussein and his cronies.
Afghanistan, Haiti, Iraq, Myanmar and Somalia are the five countries where corporate bribery is most common, according to Transparency International, a nonprofit group. The SEC complaint said Siemens paid its heftiest bribes in China, Russia, Argentina, Israel and Venezuela.
"Crimes of official corruption threaten the integrity of the global marketplace and undermine the rule of law in the host countries," said Lori Weinstein, the Justice Department prosecutor who oversaw the Siemens case.
All told, Siemens will pay more than $2.6 billion: $1.6 billion in fines and fees in Germany and the United States and more than $1 billion for internal investigations and reforms.
The Siemens general counsel, Peter Solmssen, during an interview in Washington, said the company acknowledged that bribes were at the heart of the case. "This is the end of a difficult chapter in the company's history," he said. "We're glad to get it behind us."
Siekaczek, who cooperated with the German authorities after his arrest in 2006, has already been sentenced in Germany to two years of probation and a $150,000 fine.
Siekaczek's unit was one of the most egregious offenders. Court documents show that the telecommunications unit paid more than $800 million of the $1.4 billion in illegal payments that Siemens made from 2001 to 2007. Managers in the telecommunications group decided to deal with the possibility of a crackdown by making its bribery procedures more difficult to detect.
Siekaczek set things in motion by moving money out of Austria to Liechtenstein and Switzerland, where bank secrecy laws provided greater cover and anonymity. He also reached out to a trustee in Switzerland who set up front companies to conceal money trails from Siemens to offshore accounts in Dubai and the British Virgin Islands.
Each year, Siekaczek said, managers in his unit set aside a budget of about $40 million to $50 million for the payment of bribes. For Greece alone, Siemens budgeted $10 million to $15 million a year. Bribes were as high as 40 percent of the contract cost in especially corrupt countries. Typically, amounts ranged from 5 percent to 6 percent of the value of a contract.
The most common method of bribery Siemens engaged in involved hiring an outside business consultant to help "win" a contract. This was typically a local resident with ties to the country's leaders. Siemens paid a fee to the consultant, who in turn delivered the cash to the ultimate recipient.
In addition to Siekaczek's detailed payment records, investigators secured five terabytes of data from Siemens offices - a mother lode of information that was the equivalent of five million books. Siekaczek turned out to be one of the biggest prizes of the day. After calling his lawyer, he immediately announced that he would cooperate.
US officials began investigating the case shortly after the raids became public. Knowing that it faced steep fines unless it cooperated, Siemens hired a U.S. law firm, Debevoise & Plimpton, to conduct an independent, internal investigation and to work closely with US government investigators.
(Abridged version)