Ex-Siemens Managers Deny Bribery But Admit Payments

Two former managers of German industrial group Siemens denied charges of breach of trust and bribery but acknowledged making payments to employees of Italy's Enel to secure gas-turbines contracts.

One of the defendants told a German court on Tuesday such payments were common at the trains-to-light bulbs conglomerate, which is struggling to restore a reputation already damaged by another, wider corruption investigation.

Horst V. said he arranged a total of 6 million euros ($7.9 million) in transfers to bank accounts in Lichtenstein and Switzerland between 1999 and 2002 to be paid to the Enel employees at the request of his superiors.

The now-retired 73-year-old told the Darmstadt district court the payments were in exchange for 450 million euros' worth of business for Siemens' Power Generation division during the period, when he was working for Siemens as a consultant.

V. "believed such practices were well known to many at Siemens," his lawyer, Wolf Schiller, told the court.

His co-defendant, ex-Power Generation executive Andreas K., said he approved the payments in the knowledge that Siemens would have lost the contracts from Italian state-controlled Enel if he had not done so.

The 63-year-old K. is former finance chief at Siemens Power Generation and member of a family of prominent German managers.

Both denied breach of trust, saying the payments were in Siemens' interests and that they did not benefit personally.

"The alternative would have been to turn down the projects, which would have denied Siemens not only that business but also an entry into the Italian market," K. said.

Private Company

The two also deny illegal bribery since they argue the payments were not made to civil servants, even through Enel was state-controlled. Under German law, bribes made in foreign countries are only illegal if made to government officials.

"For me, it was a private energy company," K. said in response to questioning.

Both said they now regretted their actions.

Siemens as a company does not face any charges in the current case but was represented in court by a lawyer because it could be forced to give up any gains it made through bribes, if the defendants are found guilty of bribery.

Siemens declined comment until the trial concluded.

German prosecutors are also investigating the disappearance of about 200 million euros from Siemens's accounts, alleged to have been siphoned into funds for telecoms contracts bribes over a seven-year period.

And Siemens itself is investigating up to 420 million euros in what it calls suspect payments booked as consultancy fees.

The affair has shaken the group, once considered a paragon of corporate Germany, which has hired external consultants and anti-corruption experts to help manage the fall-out and enforce corporate governance standards.

The charges carry a maximum jail sentence of 15 years' imprisonment but prosecutors told Reuters a far lesser penalty was realistically to be expected.

The Power Generation division is one of Siemens's biggest units. It had fiscal 2006 sales of 10.1 billion euros.

A third man accused in Italy has already been sentenced to 23 months' probation for corruption. The affair led to Siemens being banned from bidding for Italian public-sector gas-turbine contracts for a year.