Siemens

The financial crisis exposes emperors with no clothes.  Witness Madoff.  But naked truths are not only emerging for those dealings with obscure financial instruments.  Dramatic exposure in the corporate business sector is also taking place. 

Last month we discussed the corruption scandal surrounding Siemens, the multinational giant, which has agreed to pay billions in fines and fees.  With the holiday came a short truce.  New Year had not even taken place and we are hit by the enormity of the Satyam’s corporate fraud, labelled as India's Enron.

Bribery and fraud by business corporations is not new, of course.  And in fact the Siemens bribery case is a longstanding one, preceding the financial crisis.  Corporate fraud and corruption are not unique to developing or to industrialized countries, obviously.  They can take place anywhere.  They do.

The magnitude and timing proximity between the Siemens and Satyam corporate scandals may tempt some to rush and generalize, lumping such corporate scandals together as belonging to the same kilt.  That would be unfortunate.  There is a fundamental difference between those two cases.  It relates to “Ponzinomics.”  While Satyam shows clear features of a Ponzi scheme, the Siemens case doesn’t.  This difference matters.