Multimodality vendor Siemens Medical Solutions, two Siemens employees, and a joint-venture business partner have been indicted on federal fraud charges related to a radiology equipment contract in the Chicago area that required minority participation.
The complaint names Siemens of Malvern, PA; Daniel Desmond, a district business manager for the firm; and Ellen Roth, an in-house attorney for Siemens USA. In addition to the indictments against Siemens and its employees, Faustech Industries and its CEO, Faust Villazan, were also charged.
The defendants are charged with engaging in a procurement fraud scheme relating to a $49 million radiology equipment contract that required minority business participation, and was awarded during the construction of Stroger Hospital in Cook County, IL. The defendants allegedly formed a "sham" joint venture with a minority business enterprise, Faustech Industries, to successfully bid on the contract in 2000. They are also charged with trying to cover up the alleged fraud when the contract was challenged by competitor GE Healthcare in a lawsuit.
The joint venture won the radiology contract for Stroger Hospital in August 2000 after submitting a bid in which the company said it met requirements for minority participation due to the inclusion in the bid of Faustech, a certified minority business enterprise, the government said. The indictment, however, claims that the Siemens-Faustech relationship was a facade that did not comply with the county's bid requirements because Faustech and Villazan's risk in the venture was zero and Villazan's compensation was a flat fee of $500,000, which was not tied to the venture's loss or profit.
In October 2000, GE of Chalfont St. Giles, U.K., filed a civil lawsuit against Cook County in federal court in Chicago seeking to block the radiology contract based on claims it was fraudulently obtained. The parties settled the lawsuit and almost all of the Stroger Hospital radiology contract was transferred to GE.
A Siemens spokesperson denied the charges and said that the company was simply ensnared while trying to comply with Cook County's complicated and bureaucratic minority contracting rules -- rules that were overturned as unconstitutional six months later.
"If we were bidding on this contract six months later than when we did we wouldn't be discussing this," said Paula Davis, director of public relations at Siemens Corporation. "At the end of the day the losers are the citizens of Cook County, as they ended up paying more for the equipment and with no minority-owned business participating in that contract."
All five defendants will be arraigned at a later date in U.S. District Court for the Northern District of Illinois in Chicago. Davis said Siemens would defend the company and its employees against the charges.
By AuntMinnie.com staff writers
January 27, 2006
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