Ex-sales manager faces jail in £1bn Siemens bribes trial

The first criminal trial to come out of the biggest bribery scandal in German corporate history started in Munich yesterday, with a former sales manager at Siemens accused of setting up a complex network of fronts and sham contracts to disguise illegal payments.

The engineering giant, which is co-operating with the investigation, estimates as much as €1.3bn (£1bn) may have passed through a series of slush funds and bogus companies set up to bribe potential clients to give contracts to the company.

Reinhardt Siekaczek, 57, who worked for Siemens for almost 40 years until 2004, is one of 300 suspects being investigated by prosecutors.

He is charged with 58 counts of breach of trust, and, although there is no suggestion of theft or personal financial gain from his activities, he faces a prison sentence of up to five years on each count.

The Siemens bribery furore has rocked Germany's business world and led to the resignations of both the chief executive, Klaus Kleinfeld, and the chairman, Heinrich von Pierer, last year, although neither were implicated in the affair. Mr von Pierer is one of the board members who may be asked to testify in the current case.

The irregularities first came to light 18 months ago, and police have conducted raids on both office buildings and managers' homes.

German prosecutors are not the only ones to be pursuing the case. A number of countries have investigators looking at Siemens' activities, and the investigation by the US Securities and Exchange Commission could lead to the group being blacklisted with regards to certain US contracts.

Mr Siekaczek has already admitted setting up slush funds to handle bribe money in 1999 or 2000. He told the court yesterday that he had created the system at the request of bosses in the telecoms equipment division in which he worked, and described certain of his superiors' practice of signing post-it notes on incriminating documents, rather than the documents themselves, so they could remove the evidence. The people named by Mr Siekaczek are below the top level of management in the division.

Before the trial started, Anton Winkler, Munich's senior public prosecutor, said it should act as a deterrent to corporate corruption. "We hope it will bring a new awareness in corporate culture that bribery will not be tolerated, either in Germany or abroad," Mr Winkler said.

Siemens has already been fined more than €200m for bribes in Nigeria, Russia and Libya.