UPDATE: Siemens Hires Outside Lawyer As Nokia Venture Theatened

LONDON (Dow Jones) -- Siemens on Monday said it's hired the law firm Debevoise & Plimpton to review its compliance system, amid concern that bribery allegations could disrupt its planned networks joint venture with Nokia.

Munich prosecutors are looking into allegations that officials at Siemens' telecommunications arm diverted at least 200 million euros ($265 million) to a slush fund for use to pay bribes, according to several press reports. The Frankfurter Allgemeine Sonntagszeitung over the weekend reported that Siemens executives fear that Nokia may withdraw from its planned 50-50 venture.

Siemens said it's hired Debevoise & Plimpton to conduct an independent and comprehensive investigation of its compliance and control systems. Its auditor, KPMG, will assist the law firm, Siemens said.

"We are employing the knowledge and experience of external and independent experts to track down specific cases of misconduct and gaps in Siemens' regulations, structures and processes and to make our compliance system absolutely watertight," said CEO Klaus Kleinfeld in a statement.

It's also added the co-founder of Transparency International, Michael. J. Hershman, as a compliance auditor. The anti-corruption organization has threatened to terminate Siemens' membership in the group.

Per Lindberg, an analyst at Dresdner Kleinwort with a sell rating on Nokia, said the two companies already are essentially acting as a single company in networks.

"Such a turnaround would most likely cause considerable 'frictional losses' as both parties already have acted internally and externally as if the deal were complete. Otherwise, Siemens may have won a large slice of T-Mobile USA (contract)," he said in a note to clients.

Nokia and Ericsson in late November won a contract to provide third-generation mobile phone infrastructure to T-Mobile USA, a unit of Deutsche Telekom.

Lindberg expects that Nokia will negotiate a clause forcing Siemens to pay any further costs related to the bribery allegations.

U.S.-listed Nokia shares slipped 0.6%, while Nokia shares rose 1%.

Ericsson shares also rose 1%.

(END) Dow Jones Newswires"

Posted to the site on 11th December 2006