Siemens ultimatum in bribery scandal

By Daniel Schäfer in Frankfurt

Published: September 23 2009 18:22 | Last updated: September 23 2009 18:22

Siemens issued an ultimatum on Wednesday to several former executive board members, including former chief executives Heinrich von Pierer and Klaus Kleinfeld, calling on them to agree to pay damages relating to a multibillion euro bribery scandal.

The German company, Europe’s largest engineering group, said seven former managers would face legal action if they failed to show willingness for a settlement by the middle of November.

The statement escalates an out-of-court battle that has dragged on for more than a year in the wake of the largest bribery scandal in the company’s history.

Siemens’ supervisory board decided in July 2008 to claim damages from 11 former executive board members, claiming they had “breached their organisational and supervisory responsibilities”.

Gerhard Cromme, Siemens’ chairman, has taken a tough stance in the dispute after shareholders threatened to sue the company if it did not claim damages.

Siemens wants Mr Kleinfeld, who is now chief executive of Alcoa, the US aluminium company, to pay €2m ($2.95m) and is demanding €6m from Mr von Pierer.

Mr Kleinfeld and Mr Pierer – who were not accused of criminal offences and have always denied any wrongdoing – declined to comment.

Siemens has taken a particularly hard stance on Mr von Pierer, who was chief executive from 1992 until Mr Kleinfeld replaced him in 2005.

He is seeking a compromise, but so far without success. People familiar with the matter said Siemens was threatening to claim much more than €6m from Mr von Pierer if the case went to court.

Siemens is more hopeful that it can reach a settlement with Mr Kleinfeld, but it remains unclear if he is willing to agree.

People close to Mr Kleinfeld say he is open to “constructive solutions” and point out that the US authorities have recognised how he helped to throw light on the scandal.

Siemens accuses the former managers of having failed to stop illegal practices and wide-ranging bribery in a scandal that involved some €1.3bn of suspected payments to officials around the world to win contracts.

The scandal has cost the engineering group in excess of €2bn in legal fees and fines paid to the US and German authorities.

Siemens recently reached settlements with three former members of the management board, who said they were prepared to pay €500,000 to their ex-employer.

People close to the situation said that more settlements could follow in the coming weeks, but some cases would drag on right until the end of the ultimatum – or might end up in court.

Mr Cromme wants to draw a final line under the bribery scandal by approving the settlements at Siemens’ annual meeting next January.

One of the 11 damages claims will drag on longer as it involves a different scandal, where Siemens secretly financed an employer-friendly labour organisation.