Germany’s Daimler AG has been charged in a criminal information with Foreign Corrupt Practices Act-related violations involving “at least 22 countries over almost a decade.” China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia, Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, and Vietnam are among the countries mentioned.
The company faces one count of conspiracy to violate the FCPA (18 U.S.C. §371) and one count of violating the books and records provisions (15 U.S.C. §§78m(b)(2)(A), 78m(b)(5), and 78ff(a), and 18 U.S.C. §2).
The 76-page information recounts years of systematic payments and gifts made through third-parties, many of them shell companies, to state-owned customers and government officials, including Changquing Petroleum Exploration Bureau, and Sinopec, both in China. In Turkmenistan, it gave a government official “an armored Mercedes Benz S class passenger car, valued at more than €300,000, for his birthday.” Bribes in Iraq also violated the U.N.’s oil for food program.
Daimler’s top brass knew about the bribery. The criminal information describes a 1999 meeting of the Board of Management:
[P]articipants in the meeting discussed that adopting such policies (and stopping the practice of making “useful payments”) would result in Daimler losing business in certain countries. At that meeting, an integrity code with anti-bribery provisions was adopted. However, Daimler subsequently failed to make sufficient efforts to enforce the code, train employees on compliance with the FCPA or other applicable anti-bribery statutes, audit the use of [third-party accounts], or otherwise attempt to ensure that the company was not continuing to make improper payments in order to obtain or retain government business overseas.
In February, Daimler was reported to be close to settlement with U.S. authorities and ready to pay about $200 million.
The DOJ’s filing of a criminal information instead of an indictment usually indicates a settlement has been reached, subject to court approval. A hearing is scheduled for April 1 in U.S. District Court in Washington, D.C.
A Daimler spokesperson said in February: “We are in discussions with the DOJ and the SEC regarding consensually resolving the agencies’ investigations.” See our posts here and here.
The information says before 2005, Daimler — despite being an “issuer” since 1993 and subject to the FCPA, despite having by then “more than 270,000 employees and 60 affiliates and business units that sold vehicles to governments and government-related entities in many high-risk countries for corruption” — had a feeble compliance program. There was no head of compliance; legal and accounting people reported directly to sales executives; the audit department was small and chronically understaffed; cash controls were absent — employees could draw tens of thousands of dollars with little justification or oversight; the selection, use, and payment of agents was largely unregulated; employees received inadequate compliance training, and whistleblower hotlines were decentralized.
The FCPA investigation into Daimler began in 2004, triggered by the firing of an alleged whistleblower from the audit group at DaimlerChrysler Corp., Daimler’s former U.S. affiliate.
“In total,” the information alleges, “the transactions with a territorial connection to the United States resulted in over $50,000,000 pre-tax profits for Daimler.”
Download the March 22, 2010 two-count criminal information in U.S. v. Daimler AG here.
Our thanks to Washington, D.C.’s Marc Alain Bohn for his help with this post.
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