Siemens Bribery Probe Tied to Jilin Hospital
From page 9, The Economic Observer issue no. 332, September 10, 2007
By Liu Changjie
On September 6, our reporter was refused an interview and locked out of the glass door at the Changchun office of Siemens' Shenyang branch. Just nine days prior, Xiao Weiqun, public relations director of Siemens China, announced that the company's president and CEO Dr. Richard Hausmann would not receive interviews about the bribery cases any more.
An investigation last November that began at the firm's German headquarters has so far tied 420 million euros to bribery. Twenty Chinese employees have been fired in its wake.
But despite the company's silence over the scandal, clues are emerging from a case pending in Songyuan city of Jilin province.
A Model Worker is Arrested
June 19, Songyuan City-- the sunny Dragon Boat holiday could not have been going any better for Hou Yingshan. The director of Songyuan City Central Hospital was being recognized as a "Model Worker" at a city meeting, and the day before, he had represented the hospital in signing a major contract entrusting a Harbin company to purchase digital subtraction angiography systems made by Siemens. But moments after he removed the red flowers showered upon him during the ceremony, he was snatched away by local law enforcement, leaving behind a dumbfounded audience.
Everyone familiar with Hou was shocked. Hospital documents show that during his six years as director he had made significant contributions to its development, which were embodied by the construction of a new building with an area of 16.3 thousand square meters. His other accomplishments include winning over a batch of new skillful doctors and being closely involved in the purchasing of more than 100 new medical equipment systems. Since 2000, the hospital's income had doubled.
But after mid-July, whispers about an investigation commissioned by Jilin province's people's protectorate over Hou's involvement in bribery started to become widely known.
The Wind from Germany
"It would have been impossible for us to discover Hou if Siemens' German headquarters wasn't investigated first. The bribery list given to China by Siemens helped local law enforcement investigate the case," says one official from the Songyuan Health Bureau.
Hou is now awaiting trial in Zhuling city while the investigation moves forward.
The EO has learned that the hospital made two deals with Siemens. First, in 2005, the hospital purchased a nuclear magnetic resonance imaging system worth of 1.35 million dollars after a public auction that was presided over by Hou. Second, it bought a digital subtraction angiography system on April 29, 2007. Finally, on on May 18, 2007, Hou signed the contract with the Harbin company. That contract has been suspended since Hou's detention.
How to Rig an Auction
Hou took over as director of the hospital in 2000. At the same time, the Songyuan medical system was promoting public auctions in purchasing medicine and equipment. "Hou set a good example in the bidding process," says one official of the Health Bureau. They add that Hou often invited other departments to supervise auctions alongside him, gestures that imparted a feeling of fairness and transparency to the proceedings. In this context, how could Hou have influenced the purchases?
One industry insider illustrated for us how Hou could have received bribes and influenced the auctions: First, during private negotiations with the equipment distributor, both the bribe and a low price for the equipment are decided on. Added together these constitute the price submitted by the distributer during the public auction. Hou could have then taken advantage of the authority that his market research reports held in order to sway opinion towards purchasing that equipment; if his reports claimed that Siemens equipment was fairly priced and the best of its kind, then it would be chosen without question, and he could retain the extra bribe sum introduced into the price at a later date.
