Daimler slugged $203 million on bribery charges

THE shockwaves from an international bribery scandal involving Daimler AG are spreading around the world as successive governments follow America’s lead in leveling criminal charges at the German-based automotive giant.

The scandal – triggered when an auditor at then subsidiary DaimlerChrysler Corp turned whistleblower in the US – is already set to cost the maker of Mercedes-Benz vehicles $US185 million ($A203m) in federal fines and payments to the US Securities and Exchange Commission (SEC) to resolve charges that it violated the Foreign Corrupt Practices Act.

US officials allege the company made hundreds of improper payments involving millions of dollars and free cars to government officials in at least 22 countries to win sales contracts for vehicles worth hundreds of millions of dollars between 1998 and early 2008.

Bloomberg reports that Daimler subsidiaries in Russia and Germany will plead guilty to similar charges, while officials in China, Hungary and Croatia have indicated they are acting on the company’s activities.

Other countries allegedly involved in the bribes include Egypt, Greece, Indonesia, Iraq, Cote d’Ivoire, Latvia, Nigeria, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan and Vietnam.

Reuters says US SEC documents show that Daimler earned $1.9 billion ($A2.09b) in revenue and at least $91.4 million ($A100.5m) in illegal profits from transactions tainted by bribes.

At least $56 million was paid in bribes to officials on more than 200 transactions, the SEC said.

As well as the fines and payments, former head of the Federal Bureau of Investigation (FBI) and federal judge Louis Freeh will act as an independent corporate watchdog over Daimler’s activities for three years as part of the US plea agreement deal which still has to be approved by a federal court judge at a hearing on April 1.

Although Daimler will not plead guilty to the charges, documents filed with a US federal court suggest the company conceded that hundreds of bribes had been made.

The charges were leveled under a law that forbids companies with US operations from bribing foreign officials.

As well, Daimler was charged with conspiracy to falsify books and records to conceal the improper payments, and with falsifying those records and entering into “sham” contracts to hide its payments, according to court documents.

Elsewhere, DaimlerChrysler Russia SAO has agreed to plead guilty to conspiring to violate the Foreign Corrupt Practices Act, or FCPA, and to violating its anti-bribery provisions.

In Germany, Daimler Export and Trade Finance GmbH apparently has told officials it will plead guilty to the same charges.

In China, Daimler and a Chinese subsidiary will agree to a deferred prosecution agreement to avoid guilty pleas, according to the papers.

Reuters said US federal documents show that some of the payments were routed to US bank accounts or to foreign bank accounts of shell companies in the US.

In one case, Daimler tried to curry favor to enter the Turkmenistan market by giving two armored vehicles worth at least €550,000 ($A806,567) to a senior government official, the SEC said. The company also had a book authored by the official translated into German as a gift.

“In another instance, Daimler set aside €11,000 to pay for a lavish vacation through Europe including Paris and Venice for six Chinese officials, the SEC said, adding that the company paid for 16 such trips in connection with $120 million in vehicle sales to the Chinese government customers,” Reuters reported.

The transactions across the 22 countries allegedly involve at least 6300 commercial vehicles and some 500 passenger cars, including luxury sedans given to senior foreign government officials.

The SEC opened its probe after David Bazzetta, an auditor at DaimlerChrysler Corp, filed a whistleblower complaint.

Mr Bazzetta alleged he learned in a July 2001 corporate audit executive committee meeting in Stuttgart that business units "continued to maintain secret bank accounts to bribe foreign government officials", although the company know the practice violated US laws.

Daimler sold its Chrysler business to private equity firm Cerberus Capital Management LP in 2007. Chrysler is now controlled by Fiat SpA.