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Medical supplier's officials indicted in cover-up

Saturday, January 21, 2006
Chicago Sun-Times
by ABDON M. PALLASCH AND DAVE NEWBART

An executive and an attorney for medical supply giant Siemens have been indicted for allegedly lying to the FBI and a federal judge to cover up a scheme in which Siemens paid a minority businessman to be their phony partner in a $49 million Cook County contract.

"They went before a judge and took an oath," said U.S. Attorney Patrick Fitzgerald.

Last year, a grand jury indicted businessman Faust Villazan for allegedly bribing an unidentified Cook County official with $20,000 to approve his bid for Siemens to supply radiology equipment at Cook County Hospital for $49 million.

All deny wrongdoing

The superseding indictment handed up late Thursday and made public Friday adds as defendants Siemens Medical Solutions USA, an American subsidiary of Germany's Siemens AG, an electronics powerhouse; Daniel Desmond, the business administrator of SMS's Hoffman Estates office, and Ellen Roth, in-house attorney for Siemens, USA.

Attorneys and representatives for Siemens, Roth, Desmond and Villazan all denied wrongdoing by their clients said they would be vindicated in court.

Instead of following the county's rules, which require a company to have a 30 percent minority partner, Siemens allegedly privately agreed to pay Villazan $500,000 to pretend to be a 30 percent partner.

"He had to share in the risks, the losses, the profits and the work," Fitzgerald said.

Siemens stood to make most of the profits from the $49 million deal under the secret agreement prepared with the knowledge of Siemens officials, Fitzgerald said.

GE -- which lost to Siemens in the bidding -- sued the county and Siemens in federal court, alleging fraud in the bidding process. Siemens officials, including Roth and Desmond, lied in court and said there had been no fraud, officials said. Roth told the FBI she would be "shocked" to learn that Siemens entered into any "side" agreement with Villazan to pay him just $500,000 on the deal instead of 30 percent, Fitzgerald said.

Chicago FBI chief Robert Grant said the true victims of the fraud were minority-owned businesses the county's rules were designed to help.

Fitzgerald would not elaborate on the $20,000 bribe Villazan allegedly paid a still-unidentified county official, or whether the donations Villazan and Siemens made to Cook County commissioners on the eve of the contract implicated any commissioner. Smiling, Fitzgerald acknowledged that count is "a bit skimpy" but noted the investigation continues.

Civil lawsuit credited

Fitzgerald's office has subpoenaed information from Commissioner Roberto Maldonado and interviewed Commissioner Joseph Mario Moreno. Villazan also made donations to County Board President John Stroger and Commissioner Deborah Sims.

Faustech and Siemens gave $3,000 to Maldonado before the bids were to be submitted. They gave Moreno $1,500 on July 2, 1999, and Stroger $500 on April 26, 2000.

"I think the feds should continue their investigation the way that they are doing," Maldonado said.

"It's unfortunate that anyone has to get involved in doing stuff like that to get business," Moreno said. "Certainly it doesn't surprise me."

Fitzgerald and Grant credited GE's civil lawsuit filed four years ago with starting the process of exposing the alleged fraud.

"If not for the light shed on this scheme by a competitor, this fraud might not have been uncovered," Grant said.

"I'm pleased to see that both the individuals and the companies involved are being called to account for their roles in perpetrating this scheme and attempting to cover it up," said GE's attorney Kathy Roach.

U.S. Magistrate Judge Geraldine Soat Brown ruled in the civil case that Faustech appeared to have been brought into the deal merely to facilitate "access" for Siemens executives to county officials.



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