Last month Heinrich von Pierer, chairman of the supervisory board of the
German electronics giant Siemens, stepped down amid the biggest corruption
scandal in the company’s history. At 66, von Pierer, an internationally
respected business figure and adviser to Helmut Kohl and Gerhard Schröder,
had put in 40 years at the company. But although profits were up, Siemens
had been racked by bribery scandals and von Pierer fell on his sword,
denying responsibility for anything that had gone on lower down the pecking
order.
Two investigations are under way: the first into allegations of a slush fund
set up to channel bribes worth €426 million (£291 million) to foreign
clients during the 1990s (Nigeria’s late dictator, Sani Abacha, is alleged
to have received several illicit millions). The second is looking into
claims that cash was paid to employer-friendly workforce representatives.
The Frankfurter Allgemeine Zeitung, Germany’s leading business
broadsheet, had this to say about the man known in business circles simply
as “Mr Siemens”: “ ‘Somebody has to look after the shop’ was one of Pierer’s
favourite phrases. It’s a phrase that smacks of megalomania, which is in
stark contrast to his willingness to acknowledge his own responsibility. Yes
to power, no to responsibility – it’s an attitude that can thrive only in an
atmosphere of sycophancy or astonishing blindness.”
Although angry, few Germans were surprised at the revelations. In recent years
there have been too many similar instances in other German firms for the
Siemens scandal to be anything more than eyebrow-raising: the BMW executive
who received a three-year jail sentence last autumn for having accepted
bribes worth €1 million from an auto parts supplier; the German arm of the
Dutch electronics company Philips where it was admitted that staff had
bribed German high-street chains to display its products more prominently
(and the chains themselves, found guilty of having accepted those bribes);
the revelation last January that Heros, once Germany’s biggest cash delivery
firm with nearly half a million staff, had pilfered €240 million of its
clients’ money over a 20-year period to fill shortfalls, buy the silence of
top executives and fund the bizarre whims of the firm’s owner; the manager
at Daimler-Chrysler who was charged in November with having cheated the
company out of €40 million – this during an investigation by the US
Securities and Exchange Commission into whether the car-maker kept secret
bank accounts around the world to bribe government officials in Africa and
Asia (the case came to light after a sacked employee claimed that he had
been dismissed for complaining that the company was using secret bank
accounts to bribe people) . . . the list goes on.
“We have been seeing increasing cases of this kind of corruption over the past
ten years in Germany,” says Hansjorg Elshorst, chairman of the German arm of
the anticorruption watchdog, Transparency International. “The country has
had to adjust to a world where the going is tougher, much like English
businesses had to under Thatcher. The difference is that German businesses
have been slow or unwilling to change their compliance practices to catch up
with Anglo-Saxon standards. The concept of ombudsmen, for example, is still
quite alien. But the old way of doing business has become a criminal
offence.” No discussion of corruption in present-day Germany is complete
without the most spectacularly comic case of all: Volkswagen. A month ago,
while Siemens was facing down 9,000 angry shareholders in Munich, Peter
Hartz, Volkswagen’s high-profile head of personnel and a former government
adviser, was pleading guilty to paying bribes worth €2 million over a
ten-year period to Klaus Volkert, one-time head of Volkswagen’s works
council. Another charge of paying Volkert’s former Brazilian mistress,
Adriana Barros, €400,000 was dropped as part of a deal with the prosecutors.
Hartz was fined €500,000 and given a suspended jail term – but not before Bild,
Germany’s leading tabloid, had spilt the fascinating details of VW’s
corporate jollies across its pages. It claimed that the company had bought
the support of union officials by supplying prostitutes and luxury holidays,
and described a meeting in Lisbon during which a string of escort girls
arrived to order. One senior manager, later identified as Hartz, was said
specifically to have requested a “young and lively dark-skinned girl” –
Joselia R, a 35-year-old Brazilian woman, who was subsequently flown
first-class to meet Hartz again, at the George V Hotel in Paris, where he
was attending a board meeting. She told Bild that she was paid the
equivalent of about 8,000 reals (£1,975) for Paris, then a further 7,000
reals in São Paulo when she met Hartz again at his request. But it didn’t
cost Hartz anything. Instead, the fees came out of a €700,000 slush fund
provided by VW and managed by Klaus-Joachim Gebauer, a personnel manager at
the company.
Gebauer also used VW money to buy Viagra for his colleagues and to rent a flat
in Brunswick in northern Germany where several VW union leaders and a “top
manager” then secretly met prostitutes, Gebauer claimed. “Nobody had a bad
conscience,” he said. “A few of us tried to get as much as they could –
women and money. They had nothing else in their heads. More than once I
heard the cry: ‘Gebauer, where are the girls?’ ” Gebauer, who was forced to
resign from Skoda, VW’s Czech division, last summer amid accusations of
fraud, said that he began procuring women in 1996, when the works council
travelled to Brazil and visited a nightclub called Help. He said that he
arranged several women during the week in Rio, including one for Klaus
Volkert, his boss. Volkert subsequently had a seven-year relationship with
Adriana Barros, subsidised by “pocket money” from Gebauer of between €10,000
and €15,000. Barros was flown around the world first-class and took up so
much of Volkert’s time and energy that he once arrived for a meeting in his
tracksuit bottoms.
If Volkert ever had a bad conscience it was about the state of his marriage,
and it was presumably to this end that he asked Gebauer to fund the
occasional €5,000 trinket for his wife. But in all other respects the party
continued uninterrupted, as smooth-running and well organised as most other
aspects of German life. There were company sex parties in Hanover and a
company love-nest – the apartment rented by Gebauer for his colleagues cost
€50,000 to renovate: “The whole thing started in Brazil,” Gebauer said.
“Afterwards a business trip without prostitutes was almost unthinkable.”
Birgit Galley, a forensic management consultant from Berlin whose job is to
weed out corruption in companies, says that the men involved in the VW
scandal fit the mould exactly. What exactly does a corrupt German look like?
“He is middle-aged, male, old-school in his business attitudes – most of the
time he doesn’t believe that he has done anything wrong,” she says. “They
are already getting enormous salaries, so this isn’t really about money. It
is about belonging to an exclusive club. In this case the perks were sex
parties and exotic travel, but in other cases it’ll be something like a free
penthouse in London for the boss’s daughter.”
Galley is at pains to emphasise the difference between corruption for the
purpose of personal gain and illegal business practices (usually in the form
of bribes between buyers and sellers) undertaken for the supposed good of
the company. Most of the latter were not illegal in Germany until recently:
bribery of foreign politicians and civil servants was made a crime only in
1999 and it took another three years for the ban to be extended to include
employees at private companies. Before that, bribes to foreign officials
were not only legal but tax-deductible under German law – and in the early
1990s Siemens, among other firms, was known for paying bail money as well as
legal fees for employees who became entangled in bribery allegations.
Germany had spent the years after the war building itself into an exports
power-house. But with new laws restricting the behaviour of its exporters,
the country is having to question exactly how it achieved its remarkable
economic success. The postwar years were typified by chummy business
relationships – the so-called “amigo” culture in which
executives sat on each other’s boards in a complex network of mutually
beneficial arrangements.
Wolfang Schaupensteiner, a leading corruption prosecutor in the country’s
financial capital, Frankfurt, argues that not much has changed in the German
business world since then: “German executives have turned the country into
one of the world’s largest exporters over the past five years – illicit
dealings helped to create that success and have encouraged many executives
to believe that crime pays,” he says.
Imagine bribery in its crudest, almost self-parodic, form and you more or less
get the picture. It was not unusual for executives at German export
companies to head off on foreign business trips with their brief-cases
stuffed with company cash.
“There was cash, a receipt, otherwise nothing,” says Die Zeit.“If
some of the cash ended up siphoned off in a private bank account in Andorra
there’d be trouble . . . but the case would never be put on record.”
Many managers still see bribery as a necessary part of doing business. “What
other countries call corruption, many managers see as unavoidable,” says
Galley. And indeed, they may be right. In a recent survey, a third of German
companies said that they had lost a contract within the past five years
because a rival firm had resorted to offering a bribe. “In the short term
bribery will get you contracts but over time it will cost,” Galley argues.
“You become a company known for being corrupt, and bribery will be expected
of you.”
The accountancy firm Ernst & Young estimates that corruption is costing
the Germany economy about €8.3 billion (£5.7 billion) a year.
Of course, any talk of corruption is relative. In many senses Germany is one
of the world’s most upstanding nations – as demonstrated by the recent spate
of soul-searching about the nature of its business practices. It is hard to
imagine the American, or even the British, press falling into a similar
self-flagellating depression. Indeed, Transparency International ranks
Germany as the 16th least corrupt nation in the world, below Britain (at No
11) but above Spain (23), France (18) and America (20). Most bribery indexes
show Germany to be more law-abiding than many of its neighbours in Europe.
Any smug British captains of industry should remind themselves of this
country’s not-altogether-spotless record – for example, BAE’s alleged Saudi
slush fund.
Nevertheless, prosecutions for white-collar crimes in Germany have risen
sharply over the past year and many experts say that the problem has
worsened. New laws mean that German companies are tempted to resort to
complicated manoeuvres to win tenders and to hide their payment methods.
“Corruption starts when you do something that you don’t want anybody else to
know about,” says Galley. “Germans have a strong sense of morality and
justice – which is why, in all these cases, these things are carried out in
secret. The people in charge know that what they are doing is forbidden.”
Despite the risk of fines, jail sentences and humiliation, bending the rules
has an undeniable appeal. And for all the “bad” publicity generated, the
Siemens crisis hasn’t bothered the people who matter. The company’s share
price has, rather tellingly, remained buoyant.
