Daimler Escapes U.S. Criminal Charges in Foreign Bribery Case

Company admitted to making hundreds of improper payments worth tens of millions of dollars to foreign government officials in at least 22 countries

In a longstanding U.S. probe into the German automaker's habitual bribing of foreign officials, Daimler escaped criminal charges in a deal presented to a judge on March 24.

Daimler admitted to making hundreds of improper payments worth tens of millions of dollars to foreign government officials in at least 22 countries between 1998 and 2008, according to a deferred prosecution agreement filed in a Washington court.

The kickbacks of cash and gifts of luxury armored cars, golf clubs and vacations helped secure government contracts worth millions of dollars in China, Russia, Thailand, Greece, Iraq and other countries.

Prosecutors recommended that a judge impose a $93.6 million fine and accept the guilty plea of two Daimler subsidiaries. They noted that Daimler has mended its ways and cooperated fully with the investigation.

Daimler will also pay a $91.4 million fine to settle an investigation by the U.S. Securities and Exchange Commission.

The fines are significantly smaller than the $800 million German industrial giant Siemens paid in 2008 to settle a U.S. investigation into its bribery of officials to secure contracts in Argentina, Bangladesh, Iraq and Venezuela.

"The Department (of Justice) considers Daimler's cooperation in this investigation to have been excellent," prosecutors wrote in a sentencing memo. "Specifically, Daimler conducted a worldwide internal investigation, involving dozens of countries and every major market in which the company does business." Daimler regularly presented its findings to prosecutors, fired 45 employees implicated in the bribery and reformed its practices, prosecutors wrote. An external monitor will be appointed for three years to make sure Daimler abides by its strict anti-bribery code.

The bribery first came to light in 2004 when a former Daimler employee filed a whistleblower complaint saying he'd been fired for voicing concern about secret accounts maintained to pay the bribes.

Daimler, maker of Mercedes-Benz cars and the world leader in heavy trucks, admitted to engaging in a "longstanding practice of paying bribes" to foreign officials, court records show.

The bribes included:

-More than 3.0 million euros (US$4 million) to Russian government officials in order to secure 64.6 million euros (US$86 million) in sales.

-4.1 million euros in "commissions," "gifts" and lavish vacation to Chinese government officials.

-A "birthday gift" of a $300,000 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 $41,000 to win contracts in Indonesia.

Many of these payments were made through "third party accounts" that were supervised by the most senior management of Daimler's sales operations, the complaint alleged. 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.

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

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.

Copyright Agence France-Presse, 2010

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