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Siemens admits kickbacks in six divisions

Business Materials 25 January 2008 03:55 (UTC +04:00)

( dpa )- German electronics and engineering conglomerate Siemens admitted Thursday to shareholders that it had found evidence of significant kickbacks in six divisions in all.

Siemens had previously stressed that its division supplying telephone switching equipment was the main one that spent a total of 1.3 billion euros improperly.

At a marathon shareholders meeting in Munich, chief financial officer Joe Kaeser said that the total included huge, unexplained payments to "consultants" by a division supplying power-generation equipment.

Similar payments, thought to mask bribes to corrupt staff of Siemens customers, were also detected on a lesser scale in transport systems, energy distribution, medical technology and industrial services.

Amid suggestions that board members may have been aware of the bribery, shareholders agreed by a 9:1 margin to not yet grant indemnity to most of the management board other than Siemens' new chief executive Peter Loescher .

Angry shareholders attacked the pre- Loescher management.

Such indemnity, normally passed as a matter of routine at German companies, protects executives from damages claims for any wrongdoing for past acts.

Loescher had said earlier that Siemens was still struggling with the kickbacks scandal but saw no threat from this week's stockmarket tumble.

Siemens, which has been concerned that it may be hit by a huge fine of more than 1 billion dollars from the US Securities and Exchange Commission (SEC) over the kickbacks revelations, disclosed that it was negotiating a settlement with the SEC.

Supervisory board Chairman Gerhard Cromme said that the SEC and the US Department of Justice had praised the clean-up at the company and agreed to discuss a "fair and comprehensive settlement." The talks were likely to begin next month.

Cromme told 10,000 shareholders in a huge Munich auditorium that 2007 had been "one of the most difficult years in Siemens' history."

In the last quarter, which counts as the first quarter of the Siemens financial year ending September 30, 2008, the company spent a further 127 million euros on the investigation and improving surveillance against bribery.

In a bid to find and punish the key executives behind the corrupt practices in Greece, Italy and other nations, Siemens investigators have offered an amnesty to smaller fish who reveal their role in the kickbacks.

Loescher said that 33 staff had applied for the amnesty. It had been granted to four and denied to two, and the rest of the cases were still being investigated.

Loescher said that a further weakening of the US economy was only a longer-term worry to Siemens.

"We assume that the effects of the US economic crisis will not hit us directly," he told shareholders.

Disposing of its automotive components unit VDO and improving profitability at other units pushed Siemens' last-quarter earnings to a whopping 6.5 billion euros (9.4 billion dollars). That contrasted with just 788 million euros one year earlier.

The company's only major commercial problems were a tram, the Combino , that has been dogged by structural problems, and low yields on sales of Siemens power-generation equipment.

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