Ethics Newsline®

FRANKFURT
The German technology firm Siemens AG disclosed last week that it faces a widening investigation of bribery allegations.

Those charges have prompted the firm’s chief executive, Klaus Kleinfeld, to tender his resignation, effective in September, according to a report from the Associated Press.

Board chairman Heinrich von Pierer also stepped down, effective immediately. Neither man has been formally accused of any wrongdoing.

Siemens’ board forced out Kleinfeld one day after releasing spectacular profit reports, including a 49 percent increase in operating profits, notes BusinessWeek. But the firm’s new board chairman, Gerhard Cromme, says the board decided not to renew Kleinfeld’s contract after a legal briefing.

“Following presentations (by lawyers) on the scope and magnitude of allegations against Siemens and potentially very serious issues facing the company, and after considering advice from the company’s American lawyers on the concerns of U.S. regulators … many members of the supervisory board concluded it was premature to renew Dr. Kleinfeld’s contract at this time,” Cromme said in a statement republished by Reuters.

As of late last week, it had been confirmed that the company is under formal investigation by the U.S. Securities and Exchange Commission, according to the International Herald Tribune. The firm also said it was expecting to report a “significant increase” in the number of potential bribery incidents identified by internal investigations.

Siemens said it may be forced to restate tax and financial statements and could not rule out civil and criminal action, according to the Herald Tribune. Ratings agency Standard and Poor’s indicated that Siemens may be headed for a downgrade.

According to a report from the Times of London, the main investigation involves allegations of a slush fund used to bribe foreign clients in the 1990s.