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Daimler coughs up $200m

Better now: Daimler chairman Dieter Zetsche says his company is better and stronger in the wake of the multinational bribes scandal.

Bribes case settled as Daimler falls on sword with massive payment to US

9 Apr 2010

A UNITED STATES federal judge has rubber stamped a $US185 million ($A200m) out-of-court settlement to resolve bribery charges against German auto-maker Daimler AG.

The company, accused of paying tens of millions of dollars in improper payments and gifts to corrupt officials to clinch deals in 22 countries, will now escape formal prosecution in court after paying a $93.6 ($A100.8m) penalty to the US Justice Department to resolve the criminal charges and a further $91.4 million ($A98.4m) to the Securities and Exchange Commission (SEC) to settle a related civil matter.

Daimler helped its cause by co-operating fully with investigators, owning up to the bribes that violated America’s Foreign Corrupt Practices Act for companies listed on US stock exchanges.

The US authorities alleged that Daimler employees made more than 200 bribes amounting to about $56 million ($A60.3m) in countries such as China, Turkey, Russia, Croatia, Iraq and Cote d’Ivoire between 1998 and 2008, sometimes through US accounts.

The scandal came to light when an auditor at DaimlerChrysler turned whistleblower after hearing about the bribes at a meeting in Europe.

In Washington, US district court judge Richard Leon accepted a deferred prosecution agreement that will allow Daimler to avoid criminal prosecution as it continues to co-operate with regulators, adheres to internal controls and meets other terms.

 center image Judge Leon also accepted guilty pleas by two Daimler subsidiaries in Germany and Russia – Mercedes-Benz Russia SAO and Daimler Export und Trade Finance GmbH – which admitted to similar offences, while Chinese subsidiary Daimler North East Asia Ltd entered into a deferred prosecution agreement.

Under these deferred prosecution agreements, the charges will be dismissed after two years as long as the company complies with all the necessary terms.

While investigators applauded Daimler’s co-operation with the investigation, saying it was taking steps to “clean its own house”, they were scathing about the company’s long-standing culture of corruption.

In a statement, SEC enforcement division director Robert Khuzami said it was no exaggeration to describe corruption and bribe-paying at Daimler as a standard business practice.

"The financial and reputational costs incurred by Daimler as a result are a lesson that should be studied closely by all companies," he said.

According to the charges, the alleged bribes were frequently made by over-invoicing customers and paying the excess back to top government officials or their proxies.

Luxury European holidays, armored Mercedes vehicles for high-ranking government officials and a birthday gift to a senior Turkmenistan official including a golden box and 10,000 copies of the official's personal manifesto translated into German were among the gifts showered on customers and government officials.

Daimler chairman Dieter Zetsche said in a statement that the company had “learned a lot from past experience”.

"Today, we are a better and stronger company, and we will continue to do everything we can to maintain the highest compliance standards."

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