Siemens must pay $2.5 million for obstructing justice

February 8, 2007

Siemens will pay $1 million in fines and about $1.5 million in restitution after admitting guilt Feb. 8 in U.S. Federal Court to a single charge of obstructing justice in regard to a hospital contract for radiology equipment.

Siemens will pay $1 million in fines and about $1.5 million in restitution after admitting guilt Feb. 8 in U.S. Federal Court to a single charge of obstructing justice in regard to a hospital contract for radiology equipment.

Siemens agreed to plead guilty in return for prosecutors' agreement to drop a fraud charge against the company, which grew from Siemens' successful bid in 2001 to install some $49 million in radiology equipment at Cook County Hospital in Chicago. The original indictment, filed by federal prosecutors in January 2006, accused Siemens and two executives of creating a sham partnership in order to meet Cook County contracting regulations that called for minority business participation in the deal, according to Jack Bergen, senior vice president of Siemens corporate affairs.

In an interview with DI SCAN, Bergen emphasized the importance of the final outcome of the case.

"We did not plead guilty to fraud. We pleaded guilty to obstruction of justice," Bergen said. "That is an important distinction."

The federal indictment and, ultimately, the obstruction charge stemmed from a civil case that GE Medical Systems brought after Siemens won the Cook County contract in 2001. In the ensuing legal action, Siemens' employees withheld documents and gave false testimony, according to Bergen, leading to the involvement of federal prosecutors.

"When you are in court, regardless of whether it is a civil or criminal matter, if you give false testimony and withhold documents, it becomes a criminal case," he said.

Two executives were singled out for their role in the alleged activities. Bergen refused to name them, however, citing corporate policy to protect staff confidentiality.

The guilty plea resolves all federal issues in this matter, according to Bergen, who noted that GE has since won the Cook County contract originally awarded Siemens. On the positive side, Siemens has instituted changes in the training given its field personnel and tightened oversight in the contracting process to guard against such an incident happening again.

While this issue has now been laid to rest, Siemens is struggling with other allegations of misconduct outside the imaging arena. These involve hundreds of millions of dollars in bribes allegedly paid to officials in various countries to smooth the way for contracts in telecommunications and possibly other business areas within Siemens.

The just-concluded case involving Siemens Medical Solutions and others now unfolding in Europe that involve Siemens staff in Munich do not indicate a pattern of questionable practices, according to Bergen. He argues that they are, instead, an "unfortunate coincidence."

"We have in this (Siemens Medical Solutions) case two employees and in the Munich case we have eight who are implicated," he said. "This is 10 out of 480,000 employees."