In 2000, Stroger Hospital in Cook County, Ill. sought bids for a complete turnkey package for radiology equipment and a Picture Archiving and Communications System (PACS). One of the stipulations for submitting a bid was the bidding entity had to have at least 30% minority participation, and that participant must share proportionally in the risk-reward if the joint-venture was awarded the contract.

A Siemens district business manager and a Siemens in-house attorney set up a joint-venture with minority-owned Faustech Industries, thus appearing qualified to bid on the project.

A suit was brought by GE Healthcare in 2000 that Faustech was not a legitimate part of the joint-venture as defined by law, which, if true, would invalidate Siemens' bid. Siemens just this week has settled the case with a plea agreement in which the company admitted its employees were guilty of obstruction as charged. The substance of the case was that Faustech was to be paid a flat fee of $500,000 for being part of the joint-venture, and did not share proportionally in the risk-reward of the venture.
Ironically, the Cook County rules requiring minority participation were overturned as unconstitutional six months after Siemens was awarded the contract, so if the requests for bids went out six months later, Siemens would have not been in trouble.

As part of the plea agreement, Siemens will pay a fine of $1 million and $1.5 million in restitution. The case is now closed for the company.

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