Siemens, bribery & SarbOx
How much money can you fit in a briefcase?
The Economist, 12/20/2008, reported that Siemens pleaded guilty to bribery and corruption charges. They also agreed to pay fines of $800 million USD in the US and an additional 395 million Euros in Germany.
This tidbit was particularly interesting:
Surprisingly, considering their crooked purpose, the cash desks seem to have operated on an honour system. Few questions were asked, no documents were required and managers who asked for money were allowed to approve their own requests. Until 1999 Siemens openly claimed tax deductions for bribes, many of which were listed in its accounts as “useful expenditure”. Between 2001 and 2004 some $67m was merrily carted off in suitcases. “There was no complex financial structuring such as you would find among drug smugglers or money launderers,” says Mark Pieth, chairman of the working group on bribery at the OECD. “People felt confident that they were doing nothing wrong.”
Well, I really wonder if Sarbanes-Oxley would have caught this. Someone could have documented this procedure, ensured that the amounts paid to third parties were properly accounted for and then say they met the requirements of the this law. Did it meet the requirements of other laws concerning the bribery of foreign officials? No. But you could probably get this by SarbOx though.
Reading this article makes me wonder if there are other tech firms with an open cash drawer. I haven’t seen one but I’d love to know if they are out there.
The key point here is that laws, regulations, compliance activities and audits won’t prevent law-breaking, bankruptcies and other unwanted business outcomes. You can’t legislate good business decisions – good boards can prevent some of the bad decisions. There is no way to make people make good, legal business decisions. I know. I’ve seen some pretty snarky behavior in my day.
The Siemens business practices should make a great Harvard Business case study someday. I just wonder what conclusions MBA students would draw from this…..