A river of bribes has flooded China’s healthcare service
The giants General Electric and Siemens involved in a piloted tendering system
The scandal emerges from the investigation published by the New York Times into the Chinese market for medical, laboratory and imaging equipment.
Golf club memberships, SPAs, luxury watches and a cash flow are just some examples of the bribes distributed to Chinese Public Officials for Siemens Healthineers production lines, CT scanners, MRI devices to establish themselves in the Asian healthcare market.
The fact comes from dozens of convictions and countless documents subject to journalistic investigations initiated by the German newspaper Suddeutsche Zeitung and continued by the New York Times.
According to several press agencies, the US Securities and Exchange Commission has opened investigations into Siemens AG, Philips NV and General Electric Co for using intermediaries to arrange bribes for the sale of medical equipment in China (source: GAN business anti-corruption portal).
A premise.
In the libraries of law faculties around the world, Siemens has repeatedly made the headlines for its sensational conviction of $800 million in 2007, (linked to the discovery of systematic bribes paid in Russia, Argentina, China, Venezuela, Libya, Nigeria).
It is recent the condemnation for the ascertained facts of corruption in Greece, for which the past head of Siemens, Von Pierner, was sentenced to 15 years in prison.
Back to China.
The NY Times has reviewed dozens of cases in which employees of multinationals, including Siemens, have allegedly engaged in acts of bribery in order to gain public official approval in the Chinese health sector.
Following convictions in the last twenty years, Siemens, in line with other Bigs, has equipped the company with corporate compliance tools, codes of ethics, auditing systems, organizational models pursuant to Legislative Decree 231/2001.
However, all these tools have proved to be ineffective.
The corrupt system used, in fact, involved the use of stakeholders and business partners, who materially provided for the payment of bribes in the interest and to the advantage of the multinational.
In the process, the prices of medical instruments increased dramatically (by as much as 50%), causing enormous damage to the state finances.
Siemens, with a defensive line of Craxian memory, replied that from some comparative analyses it emerged that in the judgments of the Chinese courts “a similar number of transactions could be found also among other competitors” and that the German company had “only a limited influence” on the intermediaries used in the transactions.
To get an idea of the size and attractiveness of the Asian market, just think that in 2018 China imported more than 22 billion dollars worth of medical devices.
According to the NY Times investigation, the cost (damage) of the corruption ascertained in Siemens, General Electric, Philips will fall on the shoulders of 1.4 billion Chinese citizens.
However, the interest of public prosecutors in the case has focused on the positions of Chinese public officials, leaving multinationals out of the picture.
From the reconstruction offered by the media, it is interesting to recall the case (among many) of a Siemens representative who said he paid $900,000 in 2016 to the director of a hospital in Qinzhou to secure the sale of a Siemens M.R.I. instrument. The Siemens representative, named Jin in the court documents, reported stacks of money stuffed in boxes and delivered in the trunk of the hospital director’s car, Chen Fengkun.
Curious to note how Chen was sentenced to 15 years in prison. The representative, Jin, was sentenced to three years.
(For more details, GAN-Business Anti-Corruption Portal).
But this is not the only case in which Siemens seems to have used intermediaries to obtain contracts.
The Legal Evening News traced 19 cases of corruption involving Siemens employees or stakeholders. Other media reported 40 convictions.
During one of the trials, a witness said that all the multinationals involved already knew that the bids were mere formalities.
It is easy to deduce that, if the information was confirmed, inducing business partners to bribe would have the effect of circumventing all anti-corruption, compliance and MOGC policies under Legislative Decree 231/2001 formally adopted and publicised by the companies.
Is it possible to believe that none of the directors of the companies would verify the appropriateness of the abnormal selling prices of the equipments?
The NY Times‘ investigative body of inquiry reports that one former chief compliance officer for Siemens’s health care unit in China, in affirming the medical device manufacturers’ awareness of corruption, stated that this was “conspiracy scheme“. Mr. Liu revealed that he was fired for talking about corruption in the Chinese subsidiary. In 2013, Liu subsequently lost a retaliatory lawsuit against Siemens in New York against whistle-blowers.
“Everyone knows. The problem is how to get people to talk. Since everyone lives in this system, no one dares to denounce others” added Mr. Liu, who also passes Louis Liu.
Siemens replied that Mr. Liu’s accusations were investigated and that “they have no merit“.
After the corrupt scandals of the decade 2004-2014 for which Siemens paid more than $1 billion in sanctions, the company set up new, rigorous Internal Control Systems.
According to the media investigations, however, it seems that the new guidelines have shown all their apparent limits. Until 2018, in China.
to study the subject in more detail:
– https://scenarieconomici.it/siemens-batte-i-cinesi-in-corruzione-oltre-40-condanne-ad-oriente/
– https://parstoday.com/it/news/world-i170238-germania_siemens_condannata_da_tribunali_cinesi
– https://www.money.it/SEC-apre-dossier-Siemens-Philips-General-electric-illeciti-in-Cina
– https://www.nytimes.com/2019/06/14/business/china-ge-siemens-bribery-medical-devices.html
– https://www.sueddeutsche.de/wirtschaft/zahlungen-an-chinesische-klinik-chefs-schmiergeld-fuer-siemens-produkte-geflossen-1.4149981#redirectedFromLandingpage
– https://www.ganintegrity.com/portal/news/german-media-reveals-how-chinese-bribes-for-siemens-products-flowed/
– https://www.ganintegrity.com/portal/news/sec-probes-siemens-ge-philips-in-alleged-china-medical-equipment-scheme/
