Legal News

Daimler Coughs Up $185 Million to Settle Foreign Corruption Charges

By Ashby Jones

It may be tough to do business in the developing world without greasing some wheels, paying off this head of the Ministry of Something or that top dog at the Department of Something Else. But the U.S. government, as we’ve been chronicling for months here on the LB, is increasingly showing it’s the type of behavior, to quote Winston Churchill, up with which it will not put.

That’s been made abundantly clear yet again. Daimler AG has agreed to pay $185 million to resolve a long-running U.S. investigation into allegations that the German auto maker paid tens of millions of dollars in bribes to secure business overseas. Click here for the WSJ story; here for the NYT story.

The agreement ends a Justice Department probe into whether Daimler violated U.S. antibribery laws and a related civil investigation by the Securities and Exchange Commission. Both were sparked by a former employee’s complaint in 2004.

A Daimler spokesman declined to comment on the details of the agreement.

The SEC’s bribery investigation began in 2004 after a former auditor at then-DaimlerChrysler AG, David Bazzetta, filed a complaint alleging he was fired for raising questions about bank accounts controlled by Mercedes-Benz units in South America.

Daimler subsequently conducted its own probe and reported in its 2005 annual report that it had found “improper payments were made in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe,” adding that it was taking action to stamp out such payments and to boost its internal controls. The auto maker hired former FBI Director Louis Freeh as an independent monitor after wrapping up its internal investigation.

U.S. government prosecutors accused the German car maker of making hundreds of improper payments worth tens of millions of dollars to secure government contracts in at least 22 countries, including China, Russia and Greece. The alleged bribes continued to take place as recently as January 2008, according to the documents.

According to the Justice Department, the secret slush funds from which the payments were made were supervised at the highest levels of the company. At least one member of the company’s top management had to sign off on any request to open a secret bank account, the Justice Department alleged.

Full post as published by Law Blog - WSJ.com on March 24, 2010 (boomark / email).