Siemens 2006 Annual Report Download - page 135

Management’s discussion and analysis 131
Subsequent events
During the first quarter of fiscal 2007, Siemens decided to provide funds for job placement
companies for employees affected by the bankruptcy of BenQ Mobile GmbH & Co. OHG and
for Inservio GmbH with a corresponding impact on Siemens’ income in fiscal 2007.
On November 15, 2006, Munich public prosecutors (the Prosecutors) conducted searches of
Company premises and private homes in Munich, Erlangen and in Austria during which a
large volume of documents and electronic data were confiscated. These actions were taken in
connection with an investigation of certain current and former employees of the Company on
suspicion of embezzlement, bribery and tax evasion. Several arrest warrants were issued for
several current and former employees who are or were associated with Com. Among those
arrested were a former CFO of Com as well as the heads of Com’s internal audit and accounting
and controlling departments. Another former employee was apprehended in Austria and
extradited to Germany. In addition to the interrogations of those arrested, statements were
taken from a number of witnesses including Company officials.
The Prosecutors announced that those arrested are suspected of collaborating to open
slush fund accounts abroad, and of operating a system to embezzle funds from the Company.
More specifically, the Prosecutors allege that from 2002 to the present, these individuals
siphoned off money from Com via off-shore companies and their own accounts in Switzerland
and Liechtenstein. The Prosecutors indicated that whether and the extent to which the diverted
funds were used for bribes remains to be determined. The investigation is ongoing, and the
Company is fully cooperating with the authorities.
The Prosecutors’ current investigation grew out of an anonymous complaint and requests
for judicial assistance from Switzerland and Italy.
Bank accounts in Geneva, Switzerland, held by a former officer of Com of Siemens Greece
were seized in August 2005. The Company became aware of the seizure at the end of 2005
having been notified by both the officer and the financial institution in which the accounts
were held. As part of its internal investigation, the Company filed a civil action in Greece
against the officer on November 14, 2006.
In June 2006, the Company also became aware of the existence of an escrow account in
Lugano, Switzerland. In July 2006, the trustee was requested to provide documentation of the
account and to transfer the funds to the Company: The account was seized prior to receiving
the funds.
Bank accounts in Liechtenstein were also seized in late 2004. Funds from these Liechten-
stein accounts were transferred to Siemens in 2005 after being released by governmental
authorities.
On March 30, 2006, the premises of Intercom Telecommunication Systems AG in Switzer-
land (Intercom), a subsidiary of Siemens, were searched by Swiss prosecutors. The Company
subsequently learned that, via Intercom, so-called Business Consultant Agreements were
processed directly or indirectly through intermediary companies. Intercom currently finds
itself in liquidation. It has been established that Intercom made payments to the above men-
tioned bank accounts. Investigations are ongoing to determine the rightful owner of the
accounts in Geneva and Lugano.
The Swiss investigation was preceded by Liechtenstein criminal investigations. The crimi-
nal investigation in Liechtenstein related to money laundering and corruption allegations
against certain former Siemens employees and other persons. In January 2006, Siemens became
aware of a request by Liechtenstein for judicial assistance from Switzerland. Siemens subse-
quently determined that the Swiss and Liechtenstein investigations pertain to related activities.
In Italy, an already pending criminal investigation there focusing on money laundering
and corruption allegations against third parties in respect of activities in the 1990s pertains
to similar activities in the Com Group. Based on a request for judicial assistance from Italy to
Germany in 2005 premises and private homes in Munich were searched.
Management’s discussion and analysis