Siemens Executive Settles FCPA Charges With SEC

Uriel Sharef whose name became prominent in the FCPA area for a ruling dismissing one of the defendants in his case settled corruption and books and records charges with the SEC. Mr. Sharef was a member of Siemens A.G. Managing Board, or “Vorstand,” and the senior most executive from the company charged by the SEC. He resolved the charges against him by consenting to the entry of a permanent injunction prohibiting future violation of Exchange Act Sections 30A and 13(b)(5) and from aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B). He also agreed to pay a civil penalty of $275,000. SEC v. Sharef, No 11 Civ 9073 (S.D.N.Y.).

The case focuses on a segment of the actions brought by the DOJ and the SEC against Siemens. Specifically, it focused on a large contract in Argentina. Subsidiaries of the German parent paid bribes to secure the contract in 1998. When the agreement was suspended the next year additional discussions were held with the new President of Argentina. Eventually more bribes were paid.

Subsequently the contract was canceled. Siemens brought an arbitration in 2002 with the World Bank’s International Centre for Settlement of Investment Disputes in Washington, D.C. to recover the lost profits. Since disclosure of the bribes would constitute a defense, more bribes were paid as part of a cover-up. Corruption claims arising from these transactions and others were settled by Siemens with the DOJ, the SEC and the Munich prosecutor for a record $1.6 billion along with other relief. The SEC subsequently brought Shraef against seven company executives alleged to have been involved, Uriel Sharef, Ulrich Bock, Carlos Sergl, Stephan Signer, Herbert Steffen, Andres Truppel and Bernd Regendantz. Each is a former senior executive at Siemens Aktiengesellschaft.

In an opinion issued on February 19, 2013, Judge Scheindlin granted a motion to dismiss filed by defendant Herbert Steffen, concluding that the Commission failed to establish jurisdiction as to him. The ruling hinged on the limited role of Mr. Steffen in the bribery scheme. According to the SEC, Mr. Steffen was brought into the scheme based on his connections with Argentine officials. He did participate in the negotiations regarding the bribes. He did, however, repeatedly urged his superior who had to approve the payments to make certain bribes in furtherance of the scheme. The Commission did not allege that he ordered or even knew of the cover up that went on at the company or that he had any involvement in the falsification of SEC filings as part of that arrangement.

The Court concluded that while signing or manipulating financial statements that will be filed with the SEC represents sufficient contacts, simply being a participant in a foreign bribery scheme is not. Indeed, the ruling concluded that if “this Court were to hold that Steffen’s support for the bribery scheme satisfied the minimum contacts analysis, even though he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified filings, minimum contacts would be boundless . . . under the SEC’s theory, every participant in illegal action taken by a foreign company subject to U.S. securities laws would be subject to the jurisdiction of U.S. courts no matter how attenuated their connection with the falsified financial statements. This would be akin to a tort-like foreseeability requirement, which has long been held to be insufficient.” (emphasis original). The case remains pending as to the other defendants. See also Lit. Rel. N. 22676 (April 16, 2013).