Germany, the country whose engineering giant Siemens AG paid over $1.6 billion to U.S. and German regulators for a huge bribery scheme, got some recognition from the Organization for Economic Co-operation and Developments's peer-review monitoring group for its crackdown efforts—in addition to a host of recommendations for improvement. 

The agency's working group on bribery—this time a team from Japan and New Zealand—suggested that to combat foreign payouts, German companies should develop more internal controls, strengthen the audit system, and legally protect whistleblowers, according to a March 17 report.

German companies are not obligated to put internal controls, ethics, and compliance programs in place that could structure an anti-bribery training program, for example. Further, small companies are exempted from external audit requirements—and this applies to 20 percent more companies since 2009, when an accounting law modernization was introduced. “The lead examiners consider that detection and reporting of possible cases of foreign bribery by auditors and accountants could be improved,” the inspectors said in the report.

German labor law also does not protect whistleblowers, although case law shows that employees cannot be fired for reporting a firm's misconduct, the report said. “The lead examiners consider that Germany could do more to enhance reporting of suspicions of bribery by company employees, for example, by codifying the protection identified by jurisprudence and disseminating information on such protection,” the team said.

The OECD group praised the country's sanctioning of 69 people between 2005 and the end of 2010, but cautioned that German courts' “pragmatic” tendency to prosecute these as cases of commercial bribery and breach of trust, rather than as bribery of foreign public officials, lessens sanctions, since they are considered in line with other economic crimes. For example, of the individuals sanctioned, only 10 were actually convicted of paying officials for business abroad.

The 2009 Siemens case, too, was largely prosecuted as a breach of trust on the basis of an active slush fund, rather than as a case of foreign bribery. German prosecutors who met with the OECD team during their visit to Berlin and Munich in September predicted that this trend will grow, given that the Federal Constitutional Court recently confirmed that a slush fund constitutes a breach of trust.

During the on-site visit, prosecutors and private sector representatives told the working group that the “general expectation of bribes” abroad should be taken into account in court—a logic that  is not in line with the OECD's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions Though this defense is not upheld in the German offense of foreign bribery, the inspectors were still alarmed.  

“The Working Group is concerned by the extent to which solicitations are taken into account to determine the level of guilt and to mitigate the sentence,” the OECD members said in their review.

Germany has one year to follow up orally on its implementations of this reports recommendations and it must submit a written report within two years.

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