Germany’s Siemens AG (ADR)(OTCMKTS:SIEGY) informed that it is in the process of investigating a media report that stated company boosted its sales figures in healthcare equipment segment in China by boasting fake contracts. Yicai, Chinese business daily stated that Siemens’ healthcare segment had been creating fake contracts with Chinese distributors and in any case are not backed up by real sales.
The Chinese distributors paid a 10% down payment, permitting Siemens to record the contracts. Once it was done, Siemens would break the contract and return the advance payment by other means. It is seen as a common step among all major distributors. They were helping out each other in the game. Siemens said that regarding the issues raised by some of the business associates as mentioned in the news reports, the company has attached utmost attention to problems and has started internal investigations.
Siemens said that the company pays utmost attention to initiate pre-emptive steps against unfair competition. It is also applicable in case of any other inappropriate business practices. The newspaper said the company started with so-called fake contracts in 2H2014. It only told distributors to pay 10% of down payments. Siemens appointed Lothar Herrmann as head of its Chinese segment in April 2014.
The newspaper reported 37distributors formed a group to get back advance payment. The total sum related to fake contracts amount to over $5 million. Siemens reported sales of $7.23 billion in China last year. It constituted almost 8% of its total sales. The Chinese segment of the company employed more than 32,000 people.
The healthcare segment
The imported equipments from the Japan, Europe and the US account for three-quarters of healthcare equipment market in China which was valued at over 200 billion yuan in 2013. Siemens posted weak order intake and pricing issues at its healthcare segment in the last quarter of 2014.