Corruption in Pakistan: Is Siemens Guilty?

As I saw the reports this week out of Munich about Siemens pleading guilty to bribing politicians and officials in Nigeria, Russia and Libya, it reminded me that Siemens is a large player in Pakistan. Has any one looked into Siemens engaging in similar corrupt practices in Pakistan?

And, how about the behavior of other American and European companies operating in Pakistan? There are definitely laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. All ethics classes taught in management schools and company training cover this topic. The fact is that there have been serious allegations and at least preliminary evidence to suggest that illegal payments were made to Bhutto-Zardari controlled fronts by companies in France, Switzerland and Poland. There was some action pursued in Switzerland at the request of Pakistani Government. However, France and Poland have not pursued the charges of corruption involving their companies in Pakistan. The only explanation I have heard is that the FCPA style laws did not exist in France prior to the year 2000.

However, the question is whether these laws are really enforced and how often are the companies investigated and prosecuted? Or do they simply rely on the foreign governments to report misbehavior? It made me wonder whether there is an inherent conflict when it comes to German or American government taking action against their own companies. After all, there are jobs in these countries that depend on exports to the developing nations. Would they rather be pristine in their efforts even if it means losing business and jobs to the Japanese, the Koreans and others?

With regard to Pakistan, I saw at least one repor in Forbes Magazine:

"The World Bank is looking at a electrical power plant project in Pakistan concluded in the mid-1990s, which was built and later partially maintained by Siemens and financed by the World Bank.

The World Bank is concerned that Siemens' costs for the project may have been overpriced.

Siemens is currently engulfed in a slush-fund scandal, in which prosecutors allege that managers siphoned off hundreds of millions of euros in company money to obtain foreign contracts.

Siemens' own internal investigation uncovered 420 mln euros in suspicious payments going back to 1999 which may have been made to obtain telecommunications equipment contracts in a range of foreign countries.

The Bavarian State Prosecutors office has said the sum is estimated in the triple-digit millions of euros."

Do these reports represent only the tip of the iceberg of political and official corruption in the developing world? Are there more such investigations and prosecutions on the horizon? I certainly hope there are. In my view, serious action by the Western prosecutors seems to be an effective way to reduce the scourge of rampant corruption in developing nations such as Pakistan.

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Comment by Umair Feroze Awan on November 19, 2007 at 3:32am
After a brief experience at Siemens Pakistan of 3 years , I can safely comment yes this subsidiary is also involved in bribing activities and since the very top management is involved they are getting away in audit checks. Every week there is a product check from the major Transformer buyers like WAPDA and upon their arrival they are served a sumptuous lunch such as to minimize inspection time and whatever inspection WAPDA ppl do is just to mark check boxes :(
Comment by Riaz Haq on November 19, 2007 at 7:48am
Umair, I'm ok with expensive lunches being served as courtesy to customers. But, there is probably a lot more going on behind the scenes between Siemens and WAPDA top management, and there may even be govt ministers and politicians in on this. That is where the real problem lies. It would be a fantasy to expect the Pakistani officials/politicians to stop it as they are the main beneficiaries. But I think the German govt and other developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws. That is the only hope we have of containing such widespread corruption in our land that is robbing our people blind.
Comment by khalid Hassan on November 19, 2007 at 10:10pm
I am so doubtful about the existence or even a slightest possibility of having corruption free business (either local or multinational) in our PAK homeland that I doubt even my own doubts. I am not sure but I do know that the saying, "In Rome do as the roman’s does" (may be quoted incorrectly but hope ya'll get the point) came from the same developed western nations who claim to be the torch bearers of high morals & expecting the enforcement of their rules & regulations of ethical conduct & behavior from corporations which spend billions of $$$ on lobbying (which I consider as a fancy term of official bribery) in their own so called civilized & developed countries would be a wishful thinking. We are talking about getting away with corruption in a country where the CERTIFIED CORRUPT institutions & individuals are given amnesty in the name of GREATER INTEREST of the Nation...............I would just say Al AMAN!...AL HAFEEZ!
Comment by Adeel Razi on November 19, 2007 at 10:24pm
Riaz Sahab: I deeply appreciate your concerns about bribing in multi-national companies alongside all other national institutions where it is rife. It is considered as the part of daily routine at all levels in the hierarchy in our society. Specifically talking about Siemens, I have spent some time in Germany where Siemens is considered as a lethargic giant where it is difficult to get things done. It is primarily because of the big infrastructure they posses spanning continents.

At the same time I am quite apprehensive of the cure advised by you of bribing in multi-nationals. It may be a short termed solution that foreign governments keep a check on companies originating from their respective countries. In the end it is our responsibility to expose such elements in society even if these elements are politically active or backed by military (the recent example was the collapse of a bridge in Karachi inaugurated by the President himself). These multi-nationals are doing business in our country where it is customary to get things done quickly by bribes or if there are opportunities get commissions and kickbacks. ‘Goras’ in these companies are also humans. They are not involved in such dirty acts in their own countries because of the strict regulations that are also duly implemented. They are fearless in Pakistan where they know they can get away even if they are spotted for their wrong doings. To sum up it is more of our inability to uphold the rule of law rather than their responsibility to adhere to the high moral values they preach (it is not always true that people act according to what they preach).

I agree that this is hyper-fantasizing given the prevailing circumstances in Pakistan where nothing looks in order. But again you see, in this situation we are looking towards US or Commonwealth to help restore the democratic process. Why they should be sincerely concerned about our plights? If they help us it is surely going to be tailored to fulfil their own needs and will safeguard their own vested interests in the region not ours.
Comment by Riaz Haq on November 21, 2007 at 11:10am
I like all the comments and discussion this topic has generated. It's clearly something we are all concerned about. While I do not have any illusions that the West will act in its own self-interest, I do think it's important to challenge them on the issues of morality and all the rhetoric that we hear from them. It certainly does not absolve us as Pakistanis to do what we can to fight corruption within our land.
Comment by Riaz Haq on July 10, 2017 at 10:27pm

#US government fines #Boston firm $4 million for bribing #NHAI officials in #India. The FCPA Blog - The FCPA Blog 
Privately held CDM Smith Inc. entered into a declination with disgorgement Thursday with the Justice Department to resolve FCPA offenses in India.

The DOJ said employees and agents of CDM Smith and a wholly owned subsidiary in India paid $1.18 million in bribes to government officials. In return, the company won highway construction supervision and design contracts and a water project contract.

The Boston-based company made profits of $4 million from the tainted contracts.

The enforcement action is the seventh under the FCPA Pilot Program since the DOJ adopted it in April 2016. The program gives companies incentives to self-disclose, cooperate, and remediate FCPA violations.

Companies that qualify can receive a 50 percent discount on fines they might face under the U.S. Sentencing Guidelines.

CDM Smith has about 5,000 employees worldwide. Revenues were $1.2 billion in 2015. It provides engineering and construction services.

The DOJ said the bribery in India occurred from 2011 until 2015.

The illegal payments for the highway contracts were generally 2 percent to 4 percent of the contract price. The bribes were paid through "fraudulent subcontractors who provided no actual services and understood that payments were meant to solely benefit the officials," the DOJ said.

The company also paid $25,000 to local officials in the Indian state of Goa for a water project contract.

"All senior management at CDM India . . . were aware of the bribes . . . and approved or participated in the misconduct," the DOJ said.

CDM Smith agreed to disgorge $4.03 million. It "acknowledged" that it can't take a tax deduction for the disgorged funds.

The DOJ said it closed the investigation under the Pilot Program because CDM Smith disgorged its profits, made a timely voluntary self disclosure, did a comprehensive investigation, gave full cooperation, enhanced its compliance program, and fired all executives and employees involved in the FCPA offenses.

The declination with disgorgement from the DOJ to CDM Smith Inc. is here (pdf).


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