Siemens 2009 Annual Report Download - page 274


 Reports Supervisory Board /
Managing Board  Corporate Governance  Management’s discussion and analysis  Consolidated Financial Statements
 Consolidated Statements of Income  Consolidated Statements of Income
and Expense Recognized in Equity
 Consolidated Balance Sheets  Consolidated Statements of Cash Flow
Siemens A.E. entered into a subcontract agreement with Sci-
ence Applications International Corporation, Delaware, USA,
(SAIC) in May of 2003 to deliver and install significant portions
of security surveillance equipment as part of a “C4I” project in
preparation for the 2004 Olympic Games in Athens, Greece.
Siemens A.E. fulfilled its obligations pursuant to the subcon-
tractor contract from 2003 to 2008. In the course of the final
acceptance of the completed system in November of 2008,
representatives of the Greek government claimed that the C4I
System was defective and claimed compensation in the dou-
ble-digit million euro range. The Greek government has with-
held an additional double-digit million euro amount due pend-
ing formal final acceptance. Siemens A.E. and SAIC are con-
testing these claims as unfounded. An arbitration proceeding
has been initiated by SAIC. The resolution of this dispute has
been complicated by bribery and fraud allegations pending in
Greece with respect to Siemens A.E., which have resulted in
extensive negative media coverage concerning the C4I system.
The current proceedings conducted by the public prosecutor
and criminal courts in Greece against former members of
Siemens A.E. based on bribery and fraud allegations and the
outcome of these proceedings might have a negative impact
on pending civil legal proceedings as well as the future busi-
ness activities of Siemens A.E. in Greece.
Along with the regular tax audit for the 2004 to 2007 tax years,
the Greek tax authorities have started to re-audit Siemens
A.E.’s books for the 1997 to 2003 tax years, which had already
been closed. The tax audits could require Siemens A.E. to pay
additional taxes. Due to the complexity of the subject matter,
however, we are currently not in a position to predict the out-
come of this audit or the amounts of any potential additional
liabilities.
In December 2008, the Polish Agency of Internal Security
(AWB) remanded into custody an employee of Siemens Health-
care Poland, in connection with an investigation regarding a
public tender issued by the hospital of Wroclaw in 2008. Ac-
cording to the AWB, the Siemens employee and the deputy
hospital director are accused of having manipulated the tender
procedure.
relevant administrative court that the debarment was com-
pletely annulled.
In July 2008, Mr. Abolfath Mahvi filed a request for arbitration
with the ICC seeking an award of damages against Siemens in
the amount of DM150 million (or the equivalent in euro, which
is approximately €77) plus interest. Mr. Mahvi’s claim is based
on a contract concluded in 1974 between a company that was
then a subsidiary of Siemens and two other companies, one
domiciled in the Bermudas and the other in Liberia. Mr. Mahvi
alleges that he is the successor in interest to the Bermudan
and Liberian companies and that the companies assisted
Siemens with the acquisition of a power plant project in Bush-
ehr, Iran. Siemens believes Mr. Mahvi’s claim to be without
merit, particularly because the contract on which Mr. Mahvi
bases his claim had already been the subject of a previous ICC
arbitration that resulted in the dismissal of the claims against
Siemens. In his statement of claim Mr. Mahvi specified his al-
leged claims and now claims from Siemens the payment of
DM150 million (or the equivalent in euro, which is approxi-
mately €77) or, alternatively, €35.460, or €27.837 plus interest,
payment of 5% commission of any further payments received
by Siemens in excess of DM5.74 billion arising out of any
agreement covered by the contract with Mr. Mahvi as well as
€5 for “moral damages.”
In July 2008, Hellenic Telecommunications Organization So-
ciété Anonyme (OTE) filed a lawsuit against Siemens with the
district court of Munich, Germany, seeking to compel Siemens
to disclose the outcome of its internal investigations with re-
spect to OTE. OTE seeks to obtain information with respect to
allegations of undue influence and/or acts of bribery in con-
nection with contracts concluded between Siemens and OTE
from 1992 to 2006. On September 25, 2008, Siemens was
served with the complaint by the district court. Siemens re-
sponded to the complaint, requesting that the lawsuit be dis-
missed. In May 2009, OTE was granted access to the prosecu-
tor’s files in Greece, which presumably satisfied the disclosure
claim raised by OTE. However, OTE might attempt to use infor-
mation it has obtained to support its claims for damages
against Siemens and/or Siemens A.E. (the Greek subsidiary of
Siemens).