Siemens in breach of its commitment to US courts on Electrogas deal

The family of murdered journalist Daphne Caruana Galizia has called on Siemens AG to honour its commitments made in the US courts, saying that as a partner in the corrupt Electrogas deal, the company was failing to do so.

In an open letter addressed to Josef Käser, Siemens AG Chief Executive Officer, the Caruana Galizia family called out the company for failing to abide by its legal obligations including to fight corruption as agreed with the US Department of Justice under its Deferred Prosecution Agreement.

Under US law, when a huge corporation such as Siemens AG is found guilty of corporate crimes, the prosecution offers what is known as a Deferred Prosecution Agreement, where the company admits guilt and commits to change their ways of doing business. Failure to do so means the company will risk prosecution and, given the admission of guilt, harsh and swift sentencing.

“Siemens has made public and legally binding commitments, as part of a settlement for criminal action in the United States, to change the company’s role from a negative to a positive one in the fight against corruption. As a party to the corrupt Electrogas deal, Siemens is failing in those commitments,” the family wrote in the letter.

Siemens was the first company ever to be offered such an agreement by the US government, which involved extensive coordination among multinational enforcement bodies along with a fine of $1.3 billion in 2008. The agreement also meant that the company had to take an active role in the fight against corruption and committed itself to fight it through what it refers to as “collective action“.

Siemens is one of the three partners in the controversial Electrogas consortium, which was awarded the contract to supply Malta’s energy through a highly controversial deal.

The German engineering-giant has been on the radar of the US justice system for years before being found guilty of bribery and of using corrupt practices in multiple foreign business dealings.

In its “unprecedented settlement” in 2008, the US Securities and Exchange Commission (SEC) said the company had paid bribes on “such widespread transactions as the design and construction of metro transit lines in Venezuela, power plants in Israel, and refineries in Mexico. Siemens also used bribes to obtain such business as developing mobile telephone networks in Bangladesh, national identity cards in Argentina, and medical devices in Vietnam, China, and Russia.”

In an attempt to fall in line with its obligations, the company set up a $100 million dollar global initiative to help organisations in their fight against corruption through training, action and education. As part of the initiative, the collective action works on ‘integrity pacts’ set by Transparency International, which “ensure that the award of orders in the case of public-sector contracts is free from corruption”.

Siemens “exacerbated Malta’s corrupt environment”

Despite this, the Caruana Galizia family said Siemens was in “flagrant violation of all of its own ‘collective action’ commitments” as, firstly, the company did not form any alliance with politicians, business or civil society to combat kleptocracy in Malta, “preferring to remain a silent partner in corruption”.

Instead, the company had created the opposite of a “level playing field” in Malta by partnering with business operators – Yorgen Fenech, Joseph and Mark Gasan, and Paul Apap Bologna – “who have no energy expertise, invested negligible capital and who were possibly chosen for the influence they exert over decision-makers”.

Finally, “even if without meaning to”, Siemens exacerbated Malta’s corrupt environment and made market conditions more unfair “by assisting in the creation of a private monopoly borne out of corruption and with no legitimate economic rationale,” the letter said.

Fenech has been charged with being the mastermind of the murder of Caruana Galizia who died by a car bomb in October 2017.

Caruana Galizia uncovered a kickback scheme, surrounding the role of Siemens and SOCAR in Electrogas, that connects Fenech to public officials in Malta and Azerbaijan, the letter said.

“As she set about exposing these links, Fenech set in motion the plot to assassinate her,” the journalist’s family said.

Caruana Galizia’ son Matthew pointed out that Prime Minister Robert Abela met with his predecessor Joseph Muscat following the publication of the letter in an “urgent after-hours meeting”.

Reports now coming out that after our letter to Siemens regarding their involvement in corruption in Malta, our former prime minister @JosephMuscat_JM held an urgent after-hours meeting with his successor, @RobertAbela_MT.

— Matthew Caruana Galizia (@mcaruanagalizia) May 4, 2020

Muscat was accompanied by Kurt Farrugia, his former head of communications and now Malta Enterprise CEO, and Economy Minister Silvio Schembri.

The Shift had published the complete list of those benefiting from the corrupt energy supply deal, highlighted in a damning report by the National Audit Office.

The family called on Siemens to declare the extent of its knowledge of the Electrogas money laundering and kickback scheme.

“Until it does, Siemens will not be able to move forward from the scandal, and we will not be
able to get full justice for Daphne,” the letter said.

Siemens should also take the contracts Electrogas has signed into arbitration, or sue to have them rescinded, on the basis that they were “procured by the corruption that Daphne was assassinated for exposing”.

Until this was done, Malta would be unable to renegotiate a fair and legitimate deal.

“We ask you to show commitment to full, restorative justice by undoing the corruption in the deal that led to Daphne’s assassination. The judicial proceedings in Malta, as well as the work of investigative journalists, will sooner or later show the complete extent of corruption at Electrogas,” the family said in the letter.

In a separate Facebook post, Caruana Galizia addressed the government’s disinformation campaign which said the action “aimed to leave Malta without electricity”.

“We can only get a fair, legitimate, corruption-free power infrastructure in Malta if these contracts are invalidated or re-negotiated in arbitration. The Maltese government, SOCAR and Fenech are willing accomplices in corruption and murder. So they are unlikely to undertake this renegotiation themselves. This is why we are turning to Siemens. For us, for you, for our country, for democracy,” he said.

Caruana Galizia also pointed out that a contract procured through corrupt practices could generally only be invalidated through a legal process filed by one of the involved parties.

Nationalist MEP David Casa had asked the German authorities to investigate bribery in commercial business transactions in relation to Siemens’ involvement in allegations relating to the company 17 Black, which emails have shown promised kickbacks to top government officials.