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Siemens | “Undivulged Secret Account”


Source: Estado de S. Paulo

Topic: Former Siemens director who blew the whistle on cartels failed to disclose a secret bank account in his plea bargain with antitrust authority CADE.

Responsible for the energy division of Siemens in Brazil signed off on financial transactions involving offshore corporations. The fact that these deals were not reported in the plea agreement reinforce suspicion that whistleblowers have yet to tell the entire story.

By: Fernando Gallo and Fernando Scheller

Translation: C. Brayton

One of the Siemens ex-executives who blew the whistle on cartel formation in the São Paulo subway and commuter rail system knew of the existence of a secret bank account in a tax haven used by Brazilian employees, but did not report this fact to CADE as part of his plea bargain with the agency.

Newton Duarte, head of the energy division of Siemens in Brazil, signed a financial transaction related to the secret account in 2003. Its discovery, in 2011, resulted in the firing of Adilson Primo, president of Siemens Brasil at the time.

The account, housed at the the Banco Itaú Europa Luxembourg, in the Grand Duchy of Luxembourg, moved nearly 6 million euros.

Its registered owner was the offshore corporation Singel Canal Services CV, 99,99% of the shares of which were in the power of the private foundation Suparolo Private Foundation, established by Adilson Primo and three partners. The reasons for opening the account are unknown. Investigators suspect that it was used for for illegal fund transfers.

Siemens maintained accounts in a number of tax havens in order to pay bribes to public agents in various countries around the world — before 1999, paying a bribe was not a crime in Germany.

In Brazil, the federal police, federal prosecutor and state prosecutor of São Paulo are investigating the cartel’s ties with politicians and civil servants. Sérgio Avelleda, former president of the commuter rail company — Companhia Paulista de Trens Metropolitanos (CPTM) — who occupied the office during the Serra (PSDB) government and then directed the Metrô subway company under Alckmin (PSDB) is already a defendant in a case of administrative impropriety.

Compensation. Adilson Primo says, in an interview published in the Sunday edition of the Estado, that the secret account was a “compensation account,” created and managed by the financial director of Siemens Brasil with the support of Siemens in Germany, a standard practice at the company until 2007. In Brazilian law, there is a legal provision regarding compensation accounts, which harbor funds that may later be added to a company’s balance sheet.

Siemens says it cannot comment due to a confidential law suit  — Primo is questioning his dismissal for just cause before the Labor Tribunal.

The Estado has obtained a copy of the labor dispute between Primo and his ex-employer — you will bind it embedded below.

In this suit, attorneys for the German multinational declare that the account did not belong to it or any of its affilates, and claim that the transfer of assets to tax havens was not authorized.

Judge Camila de Oliveira Rossetti Jubilut of the São Paulo Labor Tribunal, rendered an opinion about the account only insofar as it reflects on the question of just cause. “This is an irregular account and for this reason it is obvious why its existence was denied by the plaintiff and his co-plaintiffs,” the judge commented.

Among the executives covered by the plea deal, Newton Duarte was the highest ranking. He was involved in the transport division of Siemen, the principal focus of the investigation by local authorities and Siemens itself. He reported directly to Adilson Primo.

The transactions involving the account were confirmed by the company’s current financial manager,  Sérgio de Bona. “During the deposition of Sérgio Bona, who produced the document, it was possible to observe  that the original, transferred to the Bank of Luxembourg, was signed by partners Raul Melo and José de Mattos and initialed by Newton Duarte and the plaintiff (Primo),” the judge said.

The judge would later rule favorably on the credibility and impartiality of this witness.

Raul Melo de Freitas was a director in the industrial division of Siemen, and José de Mattos was an auditor. Neither they nor Duarte remain at the company. Prosecutors assigned to the case believe that four ranking directors of the company in Brasil were aware of the account is an indication that Siemens was concealing information.

Sérgio de Bona was more informative: He said that in 2006 he had a conversation with Primo in the latter’s office about the accuont. According to Bona, Primo told him not to close the account because it contained US$40,000 — a large sum.

It doesn’t seem that large, but that is what the court transcript — see below — reflects.

Two months after this conversation, Bona said, the money was transferred out and the account, close.

In a note, Siemens said it would not comment on the matter. It would not answer when asked whether it failed to diclose information to the justice system.  Duarte could not be located Lawyers representing the parties to the plea deal could not be reached. Raul Melo and José de Mattos were not reached.

Questions & Answers

The purpose of the account remains unknown

1. Who opened the Luxembourg account?

Siemens Brasil ex-president Adilson Primo says it was opened in 2003 by the financial director of Siemens Brasil at the time. In December 2004, ownership was transferred to a company whose shares belonged to a private foundation managed by Primo and 3 other persons.

2. What purpose did it serve?

Unknown. Siemens says it was not aware of the account by means of which its own assets were transferred. Adilson Primo maintains that it was a compensation account — a legal mechanism for sheltering resources that will later be added to the company’s balance sheet — and that Siemens headquarters not only knoew of the account but also “operated” it.

3. Who operated the account?

According to Adilson Primo, it was the financial director of Siemens Brasil, with the approval of the Germans.  Siemens said it never operated the account.

4. Did funds from Siemens circulate through the account?

Yes. Both Siemans and Primo sustain this version of events. Primo also says that the money that flowed into the Luxembourg account did not originate from Siemens Brasil.

5. Where did the money go?

The destination of the 6 million euros that flowed through the account is unknown. With the assistance of Siemens in Germany, the Luxembourg police is looking into where the funds went.

Primo denied knowledge of the account innumerable times, according to the court papers, Including during an external audit by PricewaterhouseCoopers. Says the judge:
Now, it is difficult to believe that an executive of the level achieved by the plaintiff would simply forget that he was a partner in company that owned a bank account that received various transfers and amounts in an irregular fashion for so many years, if only because his signature on the documents opening the account was necessary and because during this period various transactions were made, all with the signature or support of the plaintiff … including the request to close the account.
His firing for just cause is also ratified by the fact that,
… in a personal deposition, which served to bring to light certain facts not mentioned beforehand, he confessed, or better, confirmed that the existence of an irregular bank account in Luxenbourg had been discovered, based on a thorough sweep of transfers made by the parent organization in which it was found that these particular transfers were not documented … that this account did not belong to the defendant (Siemens) and that all requisitions giving rise to undocumented transfers came at the behest of the Brazilian affilate.
Ultimately, the judge found Primo’s claims “partially valid” — based on legal arguments that give me a headache and having to do with severance pay and the like.