German engineering giant Siemens admitted 1.3 billion euros (one billion dollars) in dubious transactions on Thursday, showing the extent of a corruption scandal that has engulfed the company. Siemens posted solid results for the final quarter of its 2006-2007 fiscal year, with sales growing by 9.0 percent to 20.2 billion euros, in line with market expectations.
The results gave full-year net profit of 4.0 billion euros, an increase of 21 percent, on sales that rose 9.0 percent to 72.4 billion euros. But the revelation of the extent of the slush fund came as a surprise as Siemens had previously only admitted a fund of 449 million euros and had said it was limited to its telecommunications division.
It said on Thursday it had uncovered an additional 857 million euros in money believed to have been used to obtain contracts for the group and the list of countries where it is now investigating possible corruption extends to China, Greece, Hungary, Indonesia, Israel, Italy, Norway and Russia.
Siemens' new chief executive, Peter Loescher, who took over the reins in July, said the internal investigation into the corruption was "largely completed," suggesting that the company now believed it had discovered the full extent of the slush funds.
Loescher, an Austrian who was the first external candidate to be named chief executive in the company's 160-year history, said he hoped a fine of 201 million euros imposed by German authorities in October would help it draw a line under the affair in its home country.
Siemens has also paid 347 million euros to US consultants who are scrutinising the company's accounts and repaid hundreds of millions of euros to tax authorities. However, the worst could be still to come, with Loescher saying he would soon meet officials from the US stock market watchdog, the Securities and Exchange Commission, which could impose a heavy fine on the Wall Street-listed company.
In the fourth quarter, the group suffered a net loss of 74 million euros, compared with a profit in the same period a year earlier, owing to a tax charge in connection with the sale of its VDS subsidiary to the auto equipment group Continental. Earnings of 11.4 billion euros from the sale will be included in Siemens' next quarterly results. Operating profit soared however by 166 percent to 1.99 billion dollars, and the company said it would raise its dividend for the fiscal year to 1.60 euros from 1.45 euros one year ago.
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