| Abstract: | The industrial conglomerate will levy charges against former high-ranking officials in connection with the ongoing corruption scandal. |
| Keywords: | Siemens CEOs, Siemens sues CEOs |
Tumultuous times continued at German industrial giant Siemens, as reports surfaced that the company will take legal action on Tuesday against two former CEOs for their alleged roles in the company’s €1.3 billion corruption scandal. Siemens also provided details on the first 1,800 jobs that it will trim as part of its plan to cut 16,750 positions.
According to reports in the Financial Times and in Germany’s Süddeutsche Zeitung newspaper, Siemens’ supervisory board will take legal action against 10 former executive board members, including ex-CEO Heinrich von Pierer and his successor, Klaus Kleinfeld. The action will implicate the 10 for allegedly not following up signs of corruption while Siemens employees bribed foreign officials for contracts, according to the FT.
Company sources, who asked not to be named, said the FT report is sound, and that Siemens would have more to say after its supervisory board meets early next week.
The FT said the board would approve claims for damages resulting from the scandal and that it would act on the recommendation of law firm Hengeler Möller to sue executive board members who were in charge from 2003 to 2006. International shareholders have threatened to sue Siemens if it does not pursue the former executives, according to the newspaper.
Kleinfeld left the top spot in July 2007 and is now CEO of Alcoa. He had replaced von Pierer as CEO in 2005. Von Pierer, a former adviser to German Chancellor Angela Merkel, was Siemens’ CEO for 13 years. He served as chairman for two years after relinquishing the CEO job. Both former chief executives have denied wrongdoing.
In May, German prosecutors began civil proceedings against von Pierer for his alleged failure of oversight. Siemens itself has identified €1.3 billion in suspicious transactions and last October agreed to a Munich court fine of €201 million in the ongoing saga. The company is also under investigation in the United States, Nigeria, Norway, and Malaysia.
The scandal, which started in the company’s telecommunications division, has spread. In April, an internal Siemens investigation found evidence of wrongdoing in divisions including power, medical, industrial solutions, and transportation. It also found possible violations by former board members.
To help put the scandal behind it, Siemens reached outside the company to hire CEO Peter Löscher from pharmaceutical company Merck. Löscher took over in July 2007.
The news of the legal action broke as Siemens announced plans to cut 1,800 engineering and manufacturing jobs from its “mobility in motion” division, which makes trains within the company’s Industry Sector. Those 1,800 jobs mark the first step in Siemens’ plan to eliminate 16,750 positions and slash €1.2 billion of costs by 2010. Siemens will now negotiate the reductions with unions, a process it hopes to complete this summer, according to a mobility division spokesman.
Pending an agreement with the unions and Siemens’ work council, the 1,800 layoffs will come from train engineering and manufacturing staffs. Of those, 950 jobs will be cut from the company’s Prague factory, which Siemens is trying to sell, but might shut down. Siemens would cut another 220 jobs from its Krefeld-Uerdingen plant in Germany and 630 jobs from Braunschweig, Nuremberg, Erlangen, Berlin, Offenbach, Constance, Düsseldorf, Vienna, and Graz. The job cuts do not affect Siemens’ tram manufacturing plant in Sacramento, CA.
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