Copyright 2010 by South-Western/Cengage Learning Chapter 6 International Law

Siemens, the Bribes, and the Countries COUNTRYPRODUCTBRIBES PAID DATE Russia Medical devices$55 million Argentina Identity cards project$40 million China High-voltage transmission $25 million lines ChinaMetro trains$22 million IsraelPower plants$20 million BangladeshMobile telephone works $5.3 million VenezuelaHigh-speed trains$16.7 million Russia Traffic control systems$0.75 million VietnamMedical devices$0.5 million2005 ChinaMedical devices$14.4 million NigeriaTelecommunications projects €4.2 million2003 IraqPower station$1.7 million2000 ItalyPower station€6.0 million2003 GreeceTelecommunications€37 million2006

Copyright 2010 by South-Western/Cengage Learning Siemens: The Language of Institutionalized Corruption Useful money: accounting term used for bribes paid Bribes budget: Amount planned each year for payments; determined on a country-by-country basis BCAs: business consultant agreements (contracts with consultants who funneled money to government officials; Siemens had 2,700 such contracts)

Copyright 2010 by South-Western/Cengage Learning Reinhard Siekaczek, Siemens executive in charge of accounting for bribes “We thought we had to do it. Otherwise, we’d ruin the company.”

Copyright 2010 by South-Western/Cengage Learning Reinhard Siekaczek, former Siemens employee, largely responsible for Siemens accounting system that hid bribes for 5 years “People will only say about Siemens that they were unlucky and that they broke the 11 th Commandment. The 11 th Commandment is: ‘Don’t get caught.’”

Copyright 2010 by South-Western/Cengage Learning Reinhard Siekaczek, former Siemens executive in charge of accounting for bribes “It was about keeping the business unit alive and not jeopardizing thousands of jobs overnight.” “I was not the man responsible for the bribery. I organized the cash.”

Copyright 2010 by South-Western/Cengage Learning Foreign Corrupt Practices Act (FCPA) –Applies to all 1934 Act companies –Making, authorizing, promising payments or gifts of money or anything of value with intent to corrupt –Applies to gifts to government officials, parties, candidates, NGOs and anyone who transmits money to these persons/entities

Copyright 2010 by South-Western/Cengage Learning FCPA Grease or facilitation payments under FCPA –Securing a permit or license –Obtaining paper processing –Securing police protection –Providing phone, water or power services

Copyright 2010 by South-Western/Cengage Learning 6-8 Case 6.1 U.S. v. Kay (2004) –Did the Defendants payments to Haitian officials “assist in obtaining or retaining business”? –What benefit did ARI gain from these transactions? –In your opinion, did Defendants violate the FCPA? Foreign Corrupt Practices Act

Copyright 2010 by South-Western/Cengage Learning Corruptions Perception 2008 Denmark New Zealand Sweden Singapore Finland Switzerland Iceland Netherlands Australia Canada Luxembourg Austria Hong Kong Germany Norway Ireland United Kingdom Belgium Japan USA Santa Lucia Barbados Chile Somalia Myanmar Iraq Haiti Afghanistan Sudan Guinea Chad Equatorial Guinea Congo, Democratic Republic Zimbabwe Uzbekistan Turkmenistan Kyrgyzstan Cambodia Venezuela Sierra Leone Guinea-Bissou Gambia Congo Republic

Copyright 2010 by South-Western/Cengage Learning The Story of AES in Kazakhstan Miners dug coal in freezing temperatures Took tea breaks every other hour to warm up and then went right back to digging High technical abilities It took only 5-7 AES managers to supervise 6,500 Kazakhs Customers paid on time, even with 20% rate increases in some years