Siemens to pay $2.5 million fine in bogus contract case

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The U.S. District Court, Northern District of Illinois, this week accepted the guilty plea of Siemens Medical Solutions USA Inc. regarding an indictment filed in January 2006. The $2.5 million fine settles a case with the federal government over a bogus contract for work at Stroger Hospital in Chicago. The plea was originally entered in February 2007. The judgment resolves all allegations made against Siemens in the indictment.

Under the plea agreement, Siemens said it pleaded guilty to a single federal criminal charge of obstruction of justice in connection with civil litigation that followed a competitive bid to provide radiology equipment to Cook County Hospital in 2001. In addition, the company agreed to pay a fine of $1 million and restitution of approximately $1.5 million.

In early 2006, 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 forming an illegitimate joint venture to successfully win a bid on a radiological equipment contract worth $49 million at the hospital.

Siemens has been ordered to pay the specific amount of $1,516,683 in restitution to Cook County and an additional fine of $1 million. This amount was settled back in February as part of a plea agreement that had been put forward.

During the original bidding process for the $49 million medical equipment contract with Stroger Hospital, Siemens declared that it had entered into a partnership with Faustech Industries, a minority-owned company. To be awarded the contract, the bidding rules required that any company must partner with a minority-owned business that shared at least 30 percent of the profits.

However, the Siemens-Faustech relationship did not comply with the county's bid requirements because Faustech’s risk in the venture was zero, and the only planned compensation was an apparent payoff of $500,000.