SDNY Imposes Second Highest Penalty Under Foreign Corrupt Practices Act

The US District Court for the Southern District of New York recently ordered Uriel Sharef, a former Siemens AG board member and German citizen accused of bribing Argentine government officials, to pay a $275,000 civil penalty pursuant to a settlement agreement with the Securities and Exchange Commission. This is the second-highest civil penalty imposed on an individual under the Foreign Corrupt Practices Act (FCPA).

In December 2011, the SEC sued Sharef and six other Siemens executives for their alleged participation in a complex bribery scheme that spanned from 1996 through 2007. The case follows several years after Siemens resolved its corporate liability for bribery schemes by, among other things, paying $800 million in criminal fines and disgorgement of wrongful profits. According to the SEC’s complaint, the group paid a total of $100 million to Argentine officials, including two Presidents and several Cabinet ministers, initially to secure a $1 billion government contract to produce identity cards and, thereafter, in an attempt to reauthorize the contract following its cancellation. Even after Siemens failed to get the contract reinstated, bribes allegedly continued to be paid to suppress evidence in an arbitration Siemens commenced due to the contract’s cancellation. Sharef, who was the most senior executive named as a defendant, allegedly played a role in the scheme from the outset, including meeting with intermediaries in New York and devising a plan to funnel $27 million in bribes to Argentine officials through a sham arbitration and other fraudulent means. The SEC also claimed that Sharef directed his employees to help conceal the bribes from Siemens’s internal accounting controls.

Sharef’s consent to the penalty plus an injunction against future violations is the latest development in a complex case. The settlement in principle with Sharef was reached some months ago, but was only announced this week. Another defendant, Bernd Regendantz, also settled shortly after the SEC filed its case. He agreed to a $40,000 penalty that the SEC deemed satisfied by penalties paid in Germany. The remaining defendants have challenged the SEC’s claims and one has, thus far, succeeded. As reported in Corporate and Financial Weekly Digest of February 22, 2013, the court dismissed claims against one defendant, Herbert Steffen, because his actions did not establish the minimum contacts necessary to exercise personal jurisdiction over him in the United States.

SEC v. Sharef et al., No. 11-cv-9073 (SAS) (S.D.N.Y. Apr. 15, 2013).