Siemens Medical Solutions USA Inc., two of its employees, and two partners in a joint venture were indicted on federal fraud charges. A grand jury indicted the company for allegedly forming a sham joint venture to successfully win a bid on a radiological equipment contract worth $49 million at Stroger Hospital in Chicago. Siemens denies any wrongdoing.
From May 2000 and November 2001, the indictment states that the defendants engaged in a fraud scheme by creating a fake joint venture in which they represented a true joint venture partnership with Siemens Medical Solutions.
The Stroger Hospital and Cook County require bidders to earmark 30 percent of the contract for a county-certified minority-owned business. One of the sham joint venture partners, Faustech Industries Inc., was a certified minority-owned business. However, the Siemens-Faustech relationship did not comply with the county's bid requirements because Faustech (and its parent company Faust Villazan) risk in the venture was zero, and its sole compensation was an apparent payoff of $500,000. Thus, the county made the determination that the joint venture was not in compliance with county minority set-aside guidelines.
Siemens has said it intends to continue defending its employees and that its partnership with Faustech was on the level and adhered to minority business rules.
"We are disappointed with the announcement that came out last week. We believe that Siemens broke no law, and the worst one can say is we were in the wrong place at the wrong time," said Paula Davis, a spokesperson from the Siemens Corporate office in New York. "Siemens provides medical technology from around the world, and we have found Cooke County to have some of the most complicated and bureaucratic rules restricting how companies do business," Davis added.
Siemens' employees made a good faith effort in working with Cooke Country to "comply with the letter and spirit of the law about minority and women owned businesses," said Davis. In addition, the statutes that Cooke County set with regards to minority owned businesses were found to be unconstitutional several months after we bid, she added.