Thursday January 24, 11:45 AM
Siemens says graft probe talks with US SEC to begin soon
By Aurelia End
MUNICH, Germany (AFP) - Siemens (Xetra: 723610 - news) supervisory board chairman Gerhard Cromme said Thursday the US Securities Exchange Commission (SEC) and Department of Justice had agreed to talks on probes into "alleged corruption and proven misconduct" at the company.
Cromme added ahead of a general assembly of Siemens shareholders in Munich that the discussions were "aimed at reaching a comprehensive and fair settlement."
"These discussions - this is my hope - could begin as early as February," Cromme said.
He added however that they could last for several months because it was a "case without precedent."
Press reports said Siemens, which lists shares in the United States and is thus subject to US law, fears it might face a record fine of four billion euros (5.8 billion dollars).
For more than a year, Germany's biggest private employer, with 400,000 workers worldwide, has battled revelations of dubious transactions, often in the form of money alleged to have been paid under the table to obtain foreign contracts.
According to the daily Sueddeutsche Zeitung's Thursday edition, which quoted sources close to the company's supervisory board, more payments, worth around 140 million euros, had been found in the firm's medical equipment division.
Up till now, Siemens has said such payments totalled around 1.3 billion euros.
"Fiscal 2007 was probably one of the most difficult years ever in the history of Siemens with allegations of corruption, proven cases of misconduct, and more than just isolated cases of so-called slush funds," a Siemens statement quoted Cromme as saying.
New chief executive Peter Loescher stressed: "What counts for me is clean business everywhere and always, and highest performance meeting the highest ethical standards."
Loescher added the group had been hit with compliance costs to date of around 1.1 billion euros, plus around 520 million in tax liabilities and sanctions "whose scope cannot be estimated."
"Intangible damage is much harder to measure - the loss of reputation and trust in the general public," Loescher said.
As a result of the scandal, shareholders would not be asked for a vote of confidence in the management board, even though Loescher was brought in from outside the company last year to straighten it out.
But the supervisory board, including Cromme and his right-hand man Josef Ackermann, the chairman of Deutsche Bank (Xetra: 514000 - news) , were to face such a vote.
Loescher told media: "I absolutely cannot understand" suspicion of the two key supervisory board members.
"When the company ran into turbulence, they were the ones to initiate changes," he said.
Siemens has simplied its structure since Loescher took over, launched costly internal probes and gotten rid of 130 staff suspected of dubious conduct.
Meanwhile however, it also posted a huge increase in first quarter profit from 788 million euros to 6.5 billion owing to the sale of the auto equipment parts company VDO.
Operating profit for the first three months of its 2007-2008 fiscal year, which began on October 1, increased by 16 percent to 1.7 billion euros, on sales which grew by 10 percent to 18.4 billion.
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