Siemens Energy agrees to pay $104M over Dominion bidding scheme

Siemens Energy pleaded guilty and agreed to pay $104 million this week to settle a federal criminal investigation into stealing trade secrets in order to undercut competitors’ bids in 2019 to build a Dominion Energy gas turbine “peaker” power plant in the Richmond metropolitan area.

The settlement comes after three former Siemens employees and a former Dominion employee pleaded guilty to various charges, including conspiracy to convert trade secrets and conspiracy to commit wire fraud, as part of a scheme to help Siemens prevail over two competitors — General Electric and Mitsubishi Heavy Industries Ltd. — in winning the contract to build the plant, a deal valued upwards of $500 million. Peaker plants are backup facilities that provide extra electricity when there is a high grid load.

Siemens Energy is scheduled to be sentenced on Dec. 5. Along with the financial penalty, the U.S.-based subsidiary of German global manufacturing conglomerate Siemens Energy AG has agreed to a three-year term of organizational probation, according to a U.S. Department of Justice announcement released Monday.

“Corporate accountability remains a top priority for the Department of Justice,” Jessica D. Aber, U.S. attorney for the Eastern District of Virginia, said in a statement. “The actions of these defendants undermined the integrity of the competitive marketplace, harming both competitors and consumers. The department has established whistleblower programs to encourage corporations and individuals to come forward with timely information regarding misconduct and criminal behavior. Failing to do so invites prosecution and serious consequences.”

Siemens Energy issued the following statement: “The agreement between Siemens Energy Inc. (SEI) and the U.S. Department of Justice (DOJ) conclusively resolves a matter related to the misconduct of former employees which took place more than five years ago. The company proactively discovered the conduct in 2020 and voluntarily disclosed it to its customer and two affected competitors whose claims it subsequently settled.

“SEI also investigated the matter extensively with the assistance of a prominent law firm and has cooperated fully with the U.S. government investigation. It took disciplinary action against several individuals, including separation, and has further enhanced the company’s already-strong compliance program.

“SEI is committed to the highest standards of integrity and compliance and the aberrant conduct that occurred in this case does not reflect who we are as a company.”

According to the DOJ, GE and Mitsubishi submitted closed bids for the project to Dominion in May 2019, and a Siemens account manager, Michael P. Hillen, “coordinated with a Dominion insider,” Theodore S. “Ted” Fasca, then director of generation system planning, “who used his sensitive position to improperly obtain GE and MHI confidential information.”

Using private and work email accounts, Hillen “then disseminated the confidential information to Siemens Account Manager Mehran Sharifi, who analyzed the confidential bid information with other employees. Realizing that Siemens had a less competitive bid than GE by some metrics, Sharifi recommended to Siemens Executive Vice President and Head of Sales for North America John Gibson that Siemens resubmit a lowered bid to undercut GE’s bid price.”

Gibson passed along the other companies’ bid details to other Siemens senior executives, the DOJ said, and submitted a lower bid for the Dominion project, “undercutting GE’s bid” and winning the Dominion project. “Even after submitting the lowered bid, Siemens continued misappropriating GE and MHI confidential information on numerous occasions throughout June 2019,” according to the DOJ. Dominion was not accused of wrongdoing.

Gibson and Sharifi both pleaded guilty to conspiracy to convert trade secrets, with Gibson receiving a sentence of three years and seven months in prison. Sharifi faces a maximum sentence of 10 years in prison when he is sentenced Oct. 11. Hillen and Fasca both pleaded guilty to conspiracy to commit wire fraud and were sentenced to three years and one month in prison.

“The FBI will work to hold those accountable who steal confidential information to obtain a competitive advantage, whether they be agents, employees, executives, or corporations themselves,” said Stanley M. Meador, special agent in charge of the FBI’s Richmond Field Office.  “We will rigorously investigate those who criminally conspire to defraud companies for their personal gain.”

The natural gas plant was canceled in 2020, but Dominion has plans to build a similar combustion turbine plant in Chesterfield County. Known as the Chesterfield Energy Reliability Center, the gas plant would be on the retired Chesterfield Power Station site northwest of Dutch Gap Conservation Center, Dominion announced in September, with General Electric having won the bid to manufacture its turbines.

The plant was intended to be built elsewhere in Chesterfield, but some residents opposed the project and fought county rezoning to allow the new plant to be built at the James River Industrial Park. In the new location, the plant is allowed at the former power station site under a 2010 conditional use permit, Chesterfield officials have said.