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Did Siemens AG (ADR) (OTCMKTS:SIEGY) Recorded Fake Contracts?

Germany’s Siemens AG (ADR)(OTCMKTS:SIEGY) announced that it would take necessary steps to resolve the allegations made by a media report, which stated that it increased its sales figures in books. The problem of escalating figures is related to healthcare equipment division in China. Yicai, the business daily of China, alleged company that its Chinese healthcare division has been registering fake contracts with distributors. The contracts are said to be fake with no existence of real sales.

Fake contracts

The business daily said that Siemens paid Chinese distributors 10% of the amount as down payment. It enabled Siemens to register the contracts. After it had been done, the company terminated the contract for some or other reason. The distributors returned advance payment, and contract was closed. All the distributors in the process were said to be following the same procedure. The business associates of Siemens demanded an attention on the matter. Siemens said that it had already started with internal investigations.

Inappropriate business practices

Siemens AG (ADR)(OTCMKTS:SIEGY) clarified that the management always takes required pre-emptive measures against unfair competition. It does not entertain any inappropriate business practices. The business daily alleged Siemens to be indulged in the fair practices in 2H2014. The company planned everything and started paying distributors 10% of down payments. The Chinese healthcare division is headed by Lothar Herrmann.

The report details

The business daily reported that almost 37 distributors were involved in the case. The total value of fake contracts is valued at more than $5 million. The company posted sales of $7.23 billion in China in FY2014. The Chinese segment that employs more than 32,000 people accounted for 8% of total sales. The imported parts from the Europe, Japan, and United States constitute more than 75% of Chinese healthcare equipment market. It is a massive market valued around 200 billion yuan in FY2013.

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