• July 2013
    M T W T F S S
    « Jun   Aug »
    1234567
    891011121314
    15161718192021
    22232425262728
    293031  
  • Pages

  • Marginalia

  • Accumulations

Siemens Turns State’s Evidence

cadeLogoNovo (1)

Source: Folha de S.Paulo

Here is a story broken by the FSP that has yet to break internationally. It sits atop the list of most read articles this morning.

Siemens denounces cartel in São Paulo subway bidding

German multinational Siemens has denounced to Brazilian antitrust authorities the existence of a cartel — of which Siemens itself was a member — in public tenders for the purchase of railway equipment, construction and maintenance of railway and subway lines, and the São Paulo and Federal District subway systems.

The enormous engineering firm has been found guilty before of crimes against free and impartial competititon.

The Folha de S. Paulo has discovered that the scheme denounced by Siemens involves subsidiaries of such multinationals as Alstom,  Bombardier, CAF (Spain)  and Mitsui.

These companies and Siemens are the leading candidates to assume the vast government bullet train project that will link Rio and S.Paulo. That auction is scheduled for August.

siemens (5)

Illicit coordination among bidders can result in contracts with prices superior  (10% to 20%, by some estimated) to those produced by normal competitive bidding.

At the beginning of July, The Superintendent-General of the antitrust agency CADE served search and seizure warrants at the officers of the companies in question. “Operation Crossed Wire” — Linha Cruzada — executed bench warrants in São Paulo, Diadema, Hortolândia and Brasília.

According to Siemens, the cartel operated during at least six auctions, but the real size and scope are unknown, as is the period during which the cartel operated and the damages caused.

Plea Bargain

Upon admitting its participation,  Siemens signed a a leniency agreement that could exempt the company and its officials from liability in the event the cartel is confirmed and those responsible condemned.

Administrative and criminal immunity is granted when one participant denounces the cartel, suspends the illegal activity and cooperates with authorities, all before the government begins its own investigations.

If convicted, the cartel is subject to a fine of as much as 20% of gross earnings of the cartel member in the year prior to the filing of the case with CADE.

In the late 1990s, Siemens experienced a change in command in the wake of bribery scandals in various countries. The company was punished for formation of a cartel.

As the NY Times noted at the time (December 20, 2008), in a case involving “well-placed officials around the globe, from Vietnam to Venezuela and from Italy to Israel”:

The Siemens case is notable for its breadth, the sums of money involved, and the raw organizational zeal with which the company deployed bribes to secure contracts. It is also a model of something that was once extremely rare: cross-border cooperation among law enforcement officials.

In its settlement last week with the Justice Department and the Securities and Exchange Commission, Siemens pleaded guilty to violating accounting provisions of the Foreign Corrupt Practices Act, which outlaws bribery abroad.

The Guardian (March 12, 2012) ran a cheerful backgrounder on the Siemen group’s professed determination to raise its level of regulatory compliance.

What will CADE, which has become a much more aggressive agency in the past several years, do if all of the bullet train contractors are disqualified? What will be the political fallout for authorities who negotiated the suspect contracts?

Analysis of the material seized will take as much as three months. If evidence of cartel formation is found, CADE will bring charges against those involved. The criminal conspiracy allegedly included seven other companies, according to the preliminary investigation: TTrans, Tejofran, MGE, TCBR Tecnologia, Temoinsa, Iesa and Serveng-Civilsan.