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Daimler to settle bribery claims with €134 million in fines

AFP · 24 Mar 2010, 08:09

Published: 24 Mar 2010 08:09 GMT+01:00

Daimler is accused of paying out millions in cash and gifts of golf clubs, vacations, and luxury Mercedes armoured cars to officials in 22 countries to win government contracts.

The deal would end investigations by both criminal prosecutors and securities regulators, said the source who spoke on condition of anonymity.

"There is no (official legal) settlement yet," the source said. "That's what the judge is going to decide on April 1" at a hearing.

Spokesmen for Daimler and the US Justice Department declined to comment on the case.

Daimler has previously acknowledged that "improper payments" were made in a number of countries and said it voluntarily shared information from internal investigations with US and German prosecutors.

"Daimler has taken various actions designed to address and resolve the issues identified in the course of its investigation and to safeguard against the recurrence of improper conduct," the automaker said in its 2009 annual report.

The charges filed in US court show there is "no margin for error" when it comes to complying with bribery rules, said high profile corporate lawyer Jacob Frenkel.

"US criminal prosecutors have been on an international rampage enforcing US bribery laws wherever and whenever possible," said Frenkel, a former US Securities and Exchange Commission enforcement lawyer and federal prosecutor.

"The message from US prosecutors is if there is a US connection, then they will seize on it to bring charges."

A criminal complaint filed in Washington accuses Daimler, maker of Mercedes-Benz cars and the world leader in heavy trucks, of engaging in a "longstanding practice of paying bribes" to foreign officials.

It alleges that Daimler made "hundreds of improper payments worth tens of millions of euros to foreign officials" in order to secure contracts with government customers.

The bribes allegedly included:

– More than €3 million in bribes to Russian government officials in order to secure €64.6 million in sales.

– €4.1 million in "commissions," "gifts" and lavish vacation to Chinese government officials.

– A "birthday gift" of a €220,000 armored Mercedes Benz S-class car to an official in Turkmenistan.

– Kickbacks to Iraqi officials and an agreement not to seek compensation for damages incurred during the first Gulf War in order to secure sales of trucks used for humanitarian purposes through the UN's Oil for Food program.

– Golf clubs, wedding gifts and other perks totaling about €30,000 to win contracts in Indonesia.

Story continues below…

Many of these payments were made through "third party accounts" which were supervised by the most senior management of Daimler's sales operations, the complaint alleges. It also allegedly maintained a "cash desk" at a factory in Stuttgart.

That cash desk and most of those accounts were eventually shut down after the German government imposed new rules to curtail foreign bribery in 1998.

But the complaint alleges that Daimler did not seriously crack down on foreign bribes until after the US Department of Justice and Securities and Exchange Commission launched investigations.

Some of those payments were made through US-based shell corporations and "corrupt transactions with a territorial connection to the United States resulted in over 50 million dollars in pre-tax profits," the complaint alleges.

The complaint alleges that the bribes went to officials in: China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam and other countries.

Your comments about this article

11:56 March 24, 2010 by trottercarriagehorse
I think this is great! Finally something America can be proud of ! This subject was been reported on in PBS's Frontline show 'Black Money' . . that was a few years back. . there was only talk of prosecutions then, but now it has come realy about.. its a fact that some governments act more like a 'mafia' than a nation state when it comes to securing big contracts.
16:53 March 24, 2010 by Prufrock2010
I'm surprised that peschvogel hasn't chimed in to argue that the U.S. has no jurisdiction over Daimler as it is a German corporation.
20:36 March 24, 2010 by peschvogel
German industrials have been bribing countries to buy their products for years. They are just recently getting caught.
01:01 March 25, 2010 by mrsams
don't try to single out this kind of case, bribery is everywhere.

"British directors arrested in bribery inquiry"

http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article7073658.ece
08:33 March 25, 2010 by mixxim
Finally America has something to be proud of? Will those captains of industry and politicians who accepted the bribes now be named and shamed. If the recipients were not so corrupt the company would not need to pay bribes. (Rather like the british laws on fencing, without receivers, thieves would not have an outlet)
14:08 March 26, 2010 by biker hotel harz
If you think you can do business in another country without bribing someone along the way you're very naive
14:15 March 26, 2010 by mixxim
Agreed, most countries politicians and dictators are easily corruptable, none more than the British MPs `and Lords, Why then do we see people punished for bribing? The greater offence is accepting the bribes.
18:39 March 26, 2010 by Asteroid
The article states that US criminal prosecutors have been on an international rampage enforcing US bribery laws wherever and whenever possible. This is probably because they weren't given a new Mercedes.

Bribery of officials is common practice by businesses in countries because the government wants to be bribed. Business tells governments what to do because the governments can get more money from businesses than they can from the individual working taxpayer. For example, can the average factory worker (earning an average of $33,000 in a Western Industrial nation) afford to pay the government $1.2 million to have special consideration to be allowed to have a contract to operate in a country? Daimler can, and so can BMW, and Opel, and GM, and Chrysler, and Toyota, etc.

Go to Greece, Turkey, China, Saudi Arabia, Latin American countries, and any European Banana Republic-type country and you will find that backsheesh and greasing the other's palm is how things get done. Even America is not immune to the corruption virus. Daimler understands this well and that is why they are more successful than other auto manufacturers - they pay up when required.

It is great to moralize in a corrupt system. This makes governments look good. It is good press. This is what people want to hear. Especially in America.

As the guy in Wall Street said, 'Greed is good!'

Asteroid
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