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Former Siemens exec arrested in bribery probe

Ex-head of company's telecom gear division is taken into custody in probe into hundreds of millions of euros worth of suspected bribes.

A former top executive at Siemens has been arrested in a corruption affair that has shaken the German engineering giant--the most senior ex-manager to be detained in the investigation so far.

Munich prosecutors said late Tuesday they had taken Thomas Ganswindt, the former head of Siemens' telecommucations equipment division, into custody as part of a probe into hundreds of millions of euros in suspected bribes siphoned off from Siemens accounts.

Ganswindt, once seen as a potential chief executive of Siemens, left the group after 17 years in September to become CEO of Luxembourg-based metering services firm Elster Group.

A Ganswindt representative had no immediate comment Wednesday on his arrest.

The Munich state prosecutor has been investigating a dozen individuals, several of whom are now in jail, since November.

The affair was at first said by Siemens to involve no more than a few tens of millions of euros, but Siemens now says it is probing more than $556 million (420 million euros) in payments to consultants over seven years as part of its own inquiry into the matter.

Chief Financial Officer Joe Kaeser said Tuesday that not all the payments under investigation were necessarily dubious.

The affair has compounded a run of bad publicity in recent months for Siemens, which was forced to postpone planned hefty pay hikes for top executives after a public outcry that coincided with the bankrupcy of its former mobile phones unit.

The 159-year-old engineering conglomerate, one of Europe's biggest employers, has also cut its reported profit for its last fiscal year by $96.6 million as a result of revised tax estimates as it questions the payments.

On Monday, the company revised its net profit figure for the fiscal year that ends in September to $4 billion.

Its handling of the affair drew criticism on Wednesday from leading German business daily Handeslblatt.

Siemens' supervisory board chairman, Heinrich von Pierer, who was CEO of the company until the beginning of last year, has rejected suggestions that the affair could have consequences for senior management.

"If we were to construe a political responsibility in every case, we'd have a new management every couple of months," he said, adding that it was not the CEO's job to check each single payment that was made.

The supervisory board said earlier this week it had hired legal firm Debevoise & Plimpton as well as Michael Herschman, one of the founders of corruption watchdog Transparency International, to examine its compliance rules and systems.