Siemens Execs Admit Bribery Was Common

The trial of two former managers on bribery and corruption charges reveals a shady system of front companies and slush funds at the German conglomerate

The trial of two former Siemens managers has started in Germany. The men have admitted to making multi-million euro payments to secure a deal -- but they deny corruption. The case reveals some pretty murky practices at the industrial giant.

Two former Siemens managers have admitted to making payments of millions of euros of bribes to employees of an Italian utility company, but they deny charges of breach of trust and bribery.

The two men, both former managers at the German engineering giant's power generation unit, went on trial on Tuesday in the German city of Darmstadt. They are accused of paying kickbacks to two officials at the state-owned Italian energy company Enel between 1999 and 2002.

Horst Vigener and Andreas Kley admitted that the money was paid in order to secure a €450 million deal for Siemens-made gas turbines. But the men deny corruption. They insist that they didn't push the money on the two Italians, rather the Enel employees suddenly demanded the money just before the contracts were to be signed.

Kley, the unit's former finance chief, emphasized that the payments were always "in the interests of the company" and that at no point was the money used for their own private purposes. He said he had taken the decision alone, rather than consulting his superiors at the company. "The alternative would have been to turn down the projects, which would have denied Siemens not only the business, but also an entry into the Italian market," he told the court.

In a statement read by his lawyer, Vigener acknowledged he had been involved in the payments, and regretted his actions. But his lawyer emphasized that at no point had Vigener been in a position to make decisions on the bribes.

The two men also deny illegal bribery as the payment was not made to civil servants. Under German law only payments to foreign officials constitute bribery, but not those to businesspeople.

The case has revealed a lot about the murky business practices at Siemens, long seen as a paragon of German industry, but now embroiled in a number of different corruption cases.

Vigener said that the bribery payments were common practice at Siemens, and had been before his time at the company. Up until the end of the 1990s, the Siemens power generation unit had employed a system of front companies and slush funds in Liechtenstein for exactly these kinds of payments, Vigener said in the statement read by his lawyer. "There were many people who helped Siemens, but who didn't want to be identified by name," Vigener's lawyer explained.

In order to get money to these anonymous helpers, the company used the accounts of different companies in Liechtenstein. Kley admitted that the company parked money in a fund in Switzerland. The directors of the power generation unit could approve payments of up to 500,000 Deutsche marks (€256,000). Bigger payments required approval at higher levels of management.

Vigener said "such practices were well known to many people at Siemens," and were common in other regions of the world. "Getting a contract isn't easy," he explained.

Siemens as a company does not face any charges in the current case, but it is represented by a lawyer in court because any profits from the Enel deal could be confiscated by the state if the two men are found guilty.

The company has also been the focus of a much wider corruption investigation. Six current or former Siemens employees are

suspected of setting up secret slush funds outside of Germany to help win contracts. Siemens, for its part, says it has identified suspicous payments of around €420 million.

The group's CEO Klaus Kleinfeld has denied knowledge of the alleged corruption and has hired external consultants and anti-corruption experts to help manage the fall-out and

enforce anti-corruption standards at the company.