Siemens moves to defend reputation

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Siemens on Thursday stepped up efforts to stem the reputational risk from escalating allegations of fraud that have rocked the German industrial conglomerate.

Prosecutors in Munich have arrested and questioned six people over alleged attempts to transfer funds from Siemens to external accounts outside Germany. Prosecutors last week made the first arrests and searched Siemens’ offices in Munich including that of Klaus Kleinfeld, its chief executive.

Prosecutors now say €200m ($259m) is unaccounted for, ten times more than the figure announced on November 15. The company on Thursday said its business conduct guidelines would be “substantially tightened” as it launched a special taskforce to look into its practices.

Although Siemens stressed that it and Mr Kleinfeld were witnesses and not suspects in the case, the company on Thursday acknowledged the potential damage it could have on its reputation.

“Employees who violate our compliance regulations hurt Siemens in every respect. We cannot tolerate this,” said Mr Kleinfeld in a statement.

The taskforce will be headed by its chief compliance officer and report to Jürgen Radomski, a board member.

The Munich-based group said it would immediately suspend the accused employees if “suspicions of illegal behaviour have hardened”.

The company has also hired Hans-Otto Jordan, an external lawyer, to act as an ombudsman who Siemens staff can contact anonymously and confidentially with tips about potentially illegal practices.

The Munich prosecutor is investigating a dozen people, including current and former Siemens employees, about possibly illegal transfers of funds to accounts in Switzerland and Lichtenstein from Com, Siemens’ telecoms equipment business, which it is merging with Nokia of Finland.

Authorities are also looking into whether the funds, which they say were transferred since 2002, were used as bribes to gain business advantage.

Siemens declined to comment on the identities of the arrested employees.

The prosecutors in Munich could not be reached for comment.

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