AP Features, February 27th, 2007
Two former executives pleaded guilty Tuesday to lying to cover up fraud in a $49 million contract between Cook County and a U.S. subsidiary of the German industrial giant Siemens AG.
Daniel P. Desmond, 44, and Ellen Roth, 61, admitted in signed plea agreements that they helped engineer fraud in the contract, which provided radiology and other equipment to the county's John H. Stroger Hospital.
Federal prosecutors will ask that Desmond and Roth be sentenced to around five years each. Sentencing is set for June 14.
When it bid for the contract, Siemens Medical Solutions USA Inc. said it was complying with a law designed to promote minority contracting by entering into a joint venture guaranteeing that a minority-owned partner would share 30 percent of the profit.
But the company admitted _ it pleaded guilty to obstruction of justice on Feb. 8 _ that its so-called minority partner, Faustech Inc., was not really sharing in the profits and risks. Instead it had been guaranteed a $500,000 fee in return for agreeing to masquerade as part of a joint venture.
Siemens Medical Solutions has agreed to pay a $1 million fine and restitution of more than $1.5 million to Cook County for its part in the scheme.
Desmond, a former district manager of the company's Chicago field office, admitted that he committed perjury in a civil lawsuit challenging the contract award, which was brought by rival company GE Medical Systems.
He claimed that Faustech was a true joint venture partner, and that the $500,000 was an estimate of future profits when he knew that it was a flat fee, his plea agreement said. Desmond also acknowledged that he set up a holding company that was to appear as a joint venture between Siemens and Faustech.
Roth, of Ridgewood, N.J., a former in-house counsel for Siemens Inc., admitted she lied to two FBI agents in 2004 when they asked her about an e-mail confirming the $500,000 fee. She, too, claimed it was an advance on profits, not a flat fee.
The case against Faustech owner Faust Villazan is set to continue on March 14.
