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Siemens Exec Arrested

Michelle Donegan
News Analysis
Michelle Donegan
3/28/2007

The scandal saga at Siemens AG (NYSE: SI; Frankfurt: SIE) deepened today as board member Johannes Feldmayer was arrested on charges of breach of trust.

Feldmayer, member of the corporate executive committee, is the first serving Siemens executive to be arrested for one of a series of corruption allegations that plague the German manufacturer. The arrest won't stop the launch of the new Nokia Networks on April 1, but the new joint venture will inherit the investigations. (See Nokia Siemens Targets 4/1 and Nokia Siemens Debuts at CTIA.)

Feldmayer is responsible for Siemens's European businesses, IT solutions and services, real estate, the corporate information office, and the corporate supply chain and procurement. He joined the company in 1979. He has been temporarily suspended while he is in custody.

A Siemens spokesman says the arrest is in connection with an investigation into payments that were made to consulting firms that are linked to the trade union AUB. Prosecutors are examining whether the consulting services that were paid for were actually delivered.

Prosecutors returned yesterday to Siemens's offices in Munich, Erlangan, and Nuremberg to review documents again and made the arrest. (See Corruption Probe Targets Siemens Staff and Nokia Slashes, Siemens Still Scandalized.)

Some of Siemens's scandals will hang over the new Nokia Siemens Networks. "The bribery scandal has taken place in some parts that will go into the joint venture with Nokia," says a Siemens spokesman. "The new company will inherit that investigation."

Since the investigations were launched at the end of last year, Siemens says it has taken steps to crack down on compliance issues. And Nokia Siemens Networks is establishing a "really hard compliance system that is different from Siemens's," according to the Siemens spokesman. (See Siemens Appoints CCO and Siemens Extends Probe.)

— Michelle Donegan, European Editor, Light Reading

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