Plea bargain reached on IEC-Siemens bribery case

Israel Electric Corp

Five of the seven defendants were convicted and given prison terms of 24-45 months.

A plea bargain has been reached in the Israel Electric Corporation (IEC) (TASE: ELEC.B22)-Siemens bribery case. Five of the seven defendants were convicted under the plea, with prison terms of 24-45 months being agreed. The Tel Aviv District Court today convicted five former IEC executives, after they admitted having committed offenses including bribery, fraud and breach of trust, and money laundering in 2001-2002.

Under the plea bargain, the five executives admitted to the revised indictment submitted today by the Tel Aviv State Prosecutor's Office (taxation and economics). The plea bargain was reached during a mediation process in the presence of Tel Aviv District Court Judge Benny Sagi. Under the plea bargain, the parties agreed to ask for sentences ranging from 24 to 45 months for the defendants, in addition to fines and foreclosures amounting to millions of shekels. At the same time, the plea bargain does not include Siemens Israel or IEC planning and development department deputy director David Elmakis, who after 2012 was promoted to VP planning, development, and technology at IEC. The court is still hearing their case.

The indictment filed in the case describes how give and take relations were formed between representatives of Siemens Israel and senior IEC employees, in which the former IEC executives received favors constituting bribery from Siemens Israel. The bribes were allegedly paid in order to obtain favoritism from them and induce them to promote the interests of Siemens Israel at IEC in the context of the company's tenders and agreements in 1999-2005. These relations were concealed from IEC institutions by the defendants.

According to the plea bargain, the following defendants admitted to the offenses attributed to them in the revised indictment:

Former senior deputy director general David Cohn was convicted of taking $500,000 in bribes from Siemens relating to his job and asking for more money. The money was deposited for him in cash in a safety deposit box in the UK. Under the plea bargain, he will be sentenced to 45 months in prison, an addition term on probation, and NIS 1 million confiscated by the prosecution will be foreclosed. The prosecution will also seek an additional fine and foreclosure.

Former engineering and planning department director Yona Schweitzer admitted and was convicted of taking $200,000 in bribes relating to his position from Siemens. The money was transferred to an account in Switzerland controlled by his company. Under the plea bargain, he will be sentenced to 29 months in prison, an additional term on probation, and NIS 200,000 confiscated by the prosecution will be foreclosed. The prosecution will also seek an additional fine and foreclosure.

Deputy production department manager Jacob Hain, who was IEC senior deputy CEO until late 2014, admitted and was convicted of taking $290,000 in bribes relating to his position from Siemens. The money was transferred to his account in Switzerland. Under the plea bargain, in view of his exceptional personal circumstances, the prosecution agreed that he would be sentenced to 24 months in prison and an additional term on probation. NIS 850,000 confiscated by the prosecution will be foreclosed, and he will also be fined NIS 300,000.

Engineering department deputy manager Haim Brenner admitted and was convicted of taking $430,000 in bribes relating to his position and asking for more money from Siemens. The money was transferred to his account in Switzerland. Under the plea bargain, he will be sentenced to 33 months in prison, an additional term on probation, and NIS 1.7 million confiscated by the prosecution will be foreclosed.

Planning department departmental head Zvi Eyal admitted and was convicted of taking $260,000 in bribes relating to his position from Siemens. The money was transferred to his account in Switzerland. Under the plea bargain, he will be sentenced to 28 months in prison and an additional term on probation. NIS 470,000 confiscated by the prosecution will be foreclosed, and he will also be fined NIS 570,000.

The revised indictment states, "The affair involves $9.5 million. Siemens transferred the money for the bribes, and reached agreements with IEC in tenders and in agreements mentioned in this indictment. Siemens Israel, the local arm of Siemens, took part in the bribes, and was paid €480,000 for Siemens's win in the tenders."

Siemens transferred a total of $13.5 million (NIS 54 million) for making bribes. $4 million of this sum not included in the indictment was given to former District Judge Dan Cohen, an IEC director, who was convicted of bribery in the affair and served a prison term.

As part of the affair, in addition to filing the indictment against the defendants, the state reached a contingent arrangement with global Siemens, in which Siemens admitted to bribing senior IEC executives and paid NIS 160 million to the state. Among other things, an external supervisor was appointed for its business in Israel, whose job it is to oversee the instilling of a culture of compliance with respect to bribery in the corporation.

The State Prosecutor's Office said that the decision to reach a plea bargain with the defendants was based on the special circumstances of the affair. The defendants admitted to committing serious offenses, and will receive substantial prison terms. A major consideration in determining the penalties concerns the long time (15 years) that has passed since most of the offenses were committed. The full evidence was only discovered around the same time that the open investigation began, due to the defendants' acts of concealment, including the use of safe deposit boxes and accounts at foreign banks, which required strenuous investigative efforts in order to crack the case, including oversea inquiries. The personal and medical circumstances of some of the defendants were also taken into account.

"In view of these and other consideration, the state decided that the plea bargain served the purpose of enforcement and the public interest under the circumstances of the case," the State Prosecutor's Office wrote in its announcement of the plea bargain, noting, "The conclusion of the affair with the defendants' admissions and taking responsibility for their actions in the plea bargain before the case was brought to court reflects effective and efficient law enforcement, saves judicial time, and sends a message to civil servants that those taking bribes will be caught and sent to prison, even many years after the offenses are committed."

The affair included strenuous and difficult investigation by the trading investigations, intelligence, and control department in the Israel Securities Authority, in which investigations were conducted in many different places overseas, due to the need to expose the mechanism for concealing the bribe money through straw accounts,

Advocates Yehudit Tirosh-Gross, Avi Aronis, and Asaf Isuk from the Tel Aviv State Prosecutor's Office (taxation and economics) conducted the case.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 9, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Israel Electric Corp
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