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United States Securities & Exchange Commission v. Sharef

United States District Court, S.D. New York

February 19, 2013

Uriel SHAREF, Ulrich Bock, Carlos Sergi, Stephan Singer, Herbert Steffen, Andres Truppel, and Bernd Regendantz, Defendants.

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Denise Hansberry, Esq., Kara Novaco Brockmeyer, Esq., Paul W. Kisslinger, Esq., Robert Irving Dodge, Esq., Tracy Linkins Price, Esq., Securities and Exchange Commission, Washington, DC, for Plaintiff.

Amanda Grier, Esq., Erich T. Schwartz, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, Gary DiBianco, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, London, England, for Defendants.


SHIRA A. SCHEINDLIN, District Judge.


The Securities and Exchange Commission (" SEC" ) commenced this action against Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel, and Bernd Regendantz (" defendants" ), former senior executives at Siemens Aktiengesellschaft (" Siemens" ), a multinational engineering and electronics conglomerate headquartered in Germany. The SEC alleges four causes of action: (1) violations of Section 30A of the Exchange Act of 1934 (the " Exchange Act" ); (2) violations of Section 13(b)(5) of the Exchange Act; (3) aiding and abetting violations of Section 13(b)(2)(A) of the Exchange Act; and (4) aiding and abetting violations of Section 13(b)(2)(B) of the Exchange Act.[1]

Herbert Steffen now moves to dismiss the Complaint pursuant to Rules 12(b)(2)

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and 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that this Court lacks personal jurisdiction and the Complaint was untimely.[2]


Siemens, a German corporation headquartered in Munich, Germany [3], is one of the world's largest manufacturers of industrial and commercial products. [4] Steffen, a 74-year-old German citizen was the CEO of Siemens S.A. Argentina, a wholly owned subsidiary of Siemens [5], from 1983 through 1989, and again in 1991.[6] He was then the Group President of Siemens Transportation Systems from 1996 until his retirement in 2003. [7]

A. Overview of the Alleged Bribery Scheme

The Complaint alleges that between 1996 and 2007 the defendants orchestrated a bribery scheme which paid millions of dollars in bribes to top government officials in Argentina.[8] Over the course of the bribery scheme, Siemens paid an estimated $100 million in bribes, approximately $31.3 million of which were paid after March 12, 2001, when Siemens became subject to U.S. securities laws.[9] In the course of paying these bribes Siemens made false certifications pursuant to the Sarbanes-Oxley Act representing the truthfulness of its quarterly and annual certifications.[10]

In 1998, Siemens and its Argentine affiliate were awarded the contract for a one billion dollar project to create national identity cards.[11] The Complaint alleges that throughout the bid process, and the life of the contract, the Argentine government sought bribes, which were paid by Siemens. [12] In August 1999, the contract was suspended due to political turmoil, and Siemens was notified that it would not be renewed unless the terms were renegotiated with the new government.[13] Beginning in December 2000, Steffen and Sharef, a Siemens Managing Board Member, began renegotiating with the Argentine government, including the newly elected President. [14] The government demanded that Siemens pay it bribes in order to reinstate the contract.[15] As a result, Siemens, via its operating group Siemens Business Services (" SBS" ), began to pay $27 million in bribes to obtain the reauthorization of the contract.[16] SBS signed a $27 million sham consulting agreement with Mfast Consulting AG (" Mfast" ), a front company. [17] The purpose of this transaction was to provide a cover for the bribes funneled to the Argentine government. Despite these efforts the contract was canceled.[18]

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In May 2002, Siemens initiated an arbitration proceeding with the World Bank's International Centre for Settlement of Investment Disputes (" ICSID" ) to recover lost profits and costs resulting from the cancellation of the contract.[19] Because evidence of corruption in the initial award of the contract would have provided Argentina with a defense to Siemens' ICSID claim, Siemens worked to conceal its bribery.[20] As part of this effort, Steffen and the other defendants continuously urged Siemens management to funnel more money to Argentine officials to ensure that the earlier bribes were not disclosed.[21] In 2007, Siemens was awarded $217 million in the arbitration proceeding.[22] The SEC alleges that the award was issued because Siemens paid additional bribes to suppress evidence that the contract itself was awarded to Siemens as a result of bribes it paid to the government. [23]

Between 2002 and 2006, defendant Bernd Regendantz, Chief Financial Officer of SBS, signed quarterly and annual certifications under the Sarbanes-Oxley Act in which he represented that SBS's financial statements were not false or misleading.[24] The SEC alleges, that in ...

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