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American law enforcement authorities have begun a formal investigation into corruption allegations at the troubled German engineering company Siemens, adding to inquiries already under way by prosecutors in five European countries.

In a regulatory filing today, Siemens revealed that the Securities and Exchange Commission had upgraded an informal inquiry into its accounts to a full-scale investigation.

The US Department of Justice is also involved in examining "possible criminal violations of US law".

Siemens, Europe's largest engineering company employing 400,000 people, is accused of using slush funds of €426m (£291m) to obtain foreign contracts. A second element of the scandal concerns allegations that Siemens improperly funded a trade union, the AUB, to act as a moderate counterweight to the larger IG Metall union.

According to Siemens' filing, prosecutors in Germany, Liechtenstein, Switzerland, Italy and Greece are looking at the claims. To add to its woes, Siemens said a shareholder had filed a civil lawsuit demanding damages in New York state's supreme court.

News of the US investigation came just hours after the resignation on Wednesday of Siemens' chief executive, Klaus Kleinfeld. Two weeks ago, the head of the company's supervisory board, Heinrich von Pierer, quit citing his "deep distress" at the controversy but attacking "blanket prejudgments" about the allegations.

A spokesman for the SEC in Washington declined to comment.

Siemens has engaged a New York law firm, Debevoise & Plimpton, to track down missing funds and examine its compliance systems. During the three months to March, Siemens spent €63m on outside counsel in relation to the scandal.

However, the company's profits have been solid; its second-quarter net income was up 36% to €1.26bn. The company has announced ambitious targets to improve margins over the next three years under a programme named "Fit for 2010".

In New York, its shares rose 2.9% to $121.27.

Andrew Clark in New York
Thursday April 26, 2007
Guardian Unlimited

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