Prosecutors with the U.S. Attorney’s Northern District of Illinois announced they anticipate that three individuals will plead guilty Feb. 27 to their part in an alleged fraud scheme that involved setting up a "sham joint venture" in order to satisfy minority contracting requirements for a $49.3 million radiology deal with Malvern, Pa.-based Siemens Medical Solutions and 460-bed John H. Stroger Jr. Hospital of Cook County, Chicago (then Cook County Hospital).
Siemens already pleaded guilty Feb. 8 to a charge of obstruction of justice and agreed to pay a $1 million fine and more than $1.5 million in restitution to Cook County, Ill.
Indictments for wire fraud, mail fraud and other charges were issued in January 2006 for Faust Villazan, chief executive officer of Faustech, Siemens USA attorney Ellen Roth and Siemens Medical Solutions (then Siemens Medical Systems) business administrator Daniel Desmond.
"We anticipate that it is likely that none of them would go to trial—but it’s not yet certain," said U.S. Justice Department spokesman Barry Miller. "If the plan goes ahead, each would plead guilty (on Feb. 27), and sentencing dates would be set."
Miller also said that the trial is scheduled to begin March 5, and that U.S. District Judge John Darrah denied motions to dismiss the charges on Feb. 18.
In August 2000, the contract was awarded to DD Industries, which was purported to be a joint venture between Siemens and Faustech Industries, a company certified by Cook County as a minority business enterprise. In October, GE Medical Systems filed a complaint alleging the contract award was contrary to state law, county ordinances and bid terms.
In its plea agreement, Siemens acknowledged that "it did not contemplate Faustech doing 30% of the work on the project or, indeed, any substantial work, other than sales and liaison work," and that this agreement was contrary to the county’s bid requirements. The plea agreement quoted a June 22, 2000, e-mail from a Siemens manager that described the joint venture as "merely a necessary sales tactic to bid on large County project in Chicago. … The entity is a shell and has no relevance beyond winning the contract. Officially approved by legal."
Jack Bergen, a senior vice president for Siemens Corp., said the company has admitted wrongdoing on the part of its employees, that those individuals are no longer employed by Siemens, and so now it's time to move on.
"We are pleased to put this behind us," he said. "It's a fair settlement between us and the government. There was wrongdoing in the case of some folks, and that's the reason we decided to plead" guilty to obstruction of justice.
Bergen would not comment on any possible action that Roth or Desmond might take—except to say their fate is in their own hands.
"It's their play if they plead guilty," he said. "I feel for them as people, but—from the company's standpoint—we have a policy of zero tolerance for any wrongdoing in the compliance area."
Read the indictment.
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