Saw this morning that Daimler AG is paying $200M plus subsidies in bribery case

[Jstas]

Yes, you should be outraged. Granted, it goes on everywhere in the world, probably in the U.S. as well but this isn't the first European company to get caught like this.

From what I can tell though, these are not related to anything like safety recalls but rather to overseas business dealings. Some of those dealings are related to the whole Daimler-Chrysler debacle. The actual case was brought to court by a former Daimler auditor who filed a whistle blower case over his firing for questioning the "bribery account" practices.

Seems unfair that the U.S. can prosecute for dealings not related to the U.S. But see, the Foreign Corrupt Practices Act allows for investigations in to wrong doing by companies registered for business in the U.S. Even if the wrong doing took place in another country. It has to do with unfair advantages and labor practices. In addition, the payments made to foreign dignitaries can be held as tax evasion. But the real stink is that when this happened, Daimler was looking to move manufacturing from the more expensive U.S. and Canadian plants to plants in South America where they could get cheaper labor as well as kickbacks. Because the actions happened outside the U.S., the laws here do not have jurisdiction so the DOJ and SEC cannot legally take action in the form of fines and penalties. They can, however, file suit in U.S. Court. That's what happened and it seems Daimler knows it can't win so they are settling. There may more to it as the article also talks about possible sanctions against Daimler AG.

While details of the case are obviously not forthcoming since it is being settled out of the public view, it makes you wonder what were these dealings, what was affected and who was affected?

And yes, I used to work for Lockheed which is a direct competitor to BAE Systems when they got run up the flagpole for similar dealings. They were a partner on some projects as well. Those filings they were subjected to affected Lockheed as well. I've seen the FCPA in action first hand and it does hurt a company. Lockheed lost 6 points per share within hours of the news story release just because they were mentioned in the article about the BAE Systems case even though they had nothing to do with it.

The Daimler Ag story is below.

http://www.bloomberg.com/apps/news?p...d=aEbv8SS85vdA

From Bloomberg...

Daimler Said to Agree to Pay $200 Million Over Probe of Bribes

By David Voreacos, Justin Blum and Joshua Gallu

Feb. 13 (Bloomberg) -- Daimler AG agreed to pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas, according to people familiar with the accord.

The carmaker seeks to conclude a Department of Justice probe of whether it violated the Foreign Corrupt Practices Act by bribing government officials and a related civil probe by the Securities and Exchange Commission, according to the people. The FCPA covers foreign companies with U.S. operations. The people declined to specify the precise charges for the units.

Government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon, who must approve it, according to the people. In 2008, Leon accepted the guilty plea of Siemens AG and three subsidiaries for charges related to the FCPA. Munich- based Siemens, Germany’s largest engineering company, paid $1.6 billion to settle probes in the U.S. and Germany.

“We are in discussions with the DOJ and the SEC regarding consensually resolving the agencies’ investigations,” Ute Wuest von Vellberg, a spokeswoman for Stuttgart, Germany-based Daimler, said yesterday in an interview. “There can be no assurance about whether and when settlement with the DOJ and the SEC will become final and effective.”

Justice Department spokeswoman Laura Sweeney and SEC spokesman John Nester declined to confirm the accord. A law clerk for Judge Leon, who declined to provide his name, declined to comment.

Daimler fell 1.8 percent to close at 32.51 euros in Frankfurt trading yesterday. The company’s U.S. shares dropped 85 cents, or 1.9 percent, to $44.48 in New York Stock Exchange composite trading yesterday.

Secret Accounts

The SEC probe began in 2004 after an auditor at Daimler’s former DaimlerChrysler Corp. subsidiary claimed he was fired in part for complaining to superiors about the bribe payments, according to a company regulatory filing in 2005. Daimler sold Chrysler LLC in 2007 to Cerberus Capital Management LP. Chrysler filed for U.S. bankruptcy court protection in 2009.

The auditor, David J. Bazzetta, filed a whistleblower complaint with the Department of Labor and sued in federal court in Detroit over his firing. He claimed he learned in a July 2001 meeting in Stuttgart that business units kept “secret bank accounts to bribe foreign government officials,” according to his amended lawsuit.

Bazzetta, who was fired in January 2004, dropped his complaint in July 2005, court records show. The Wall Street Journal reported he had settled his claim.

‘Common Practice’

At the 2001 meeting in Stuttgart, Bazzetta claimed, one vice president had just returned from a visit to a top Mercedes- Benz executive in South America. That vice president said using secret bank accounts to bribe government officials was “common practice” before the 1998 acquisition of Chrysler Corp., according to the complaint. The exchange occurred at a corporate audit executive committee meeting, according to the complaint.

The vice president said 40 secret accounts still existed and would be hard to eliminate because the chief executives of business units “not only favored this practice but believed it a necessary cost of doing business,” Bazzetta claimed.

In July 2005, the company disclosed in a regulatory filing that it was sharing its internal investigation with the SEC and the Department of Justice, which had joined the probe.

The company’s internal probe had identified “accounts, transactions and related payments in connection with certain foreign business activity,” according to the filing.

Possible Sanctions

“If the DOJ or SEC determine that violations of law have occurred, they could seek criminal or civil sanctions, including monetary penalties, against DaimlerChrysler and certain of its employees, as well as changes to its business practices and compliance programs,” according to the filing.

In July 2005, the SEC also began investigating DaimlerChrysler’s role in the United Nations oil-for-food scandal, according to the filing.

In its 2005 annual report, the carmaker said its internal investigation found that “improper payments were made in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe. These payments raise concerns under the U.S. FCPA, German law, and the laws of other jurisdictions.”

As part of the internal probe, “DaimlerChrysler has identified and self-reported potential tax liabilities to tax authorities in several jurisdictions,” according to the report.

“These tax liabilities of DaimlerChrysler AG and certain foreign affiliates result from misclassification of, or the failure to record, commissions and other payments and expenses,” according to the report.

The company also was taking steps to “safeguard against the recurrence of improper conduct” and was “evaluating and revising its governance policies and internal control procedures,” according to the report.

A U.S. bankruptcy court is overseeing the wind-down of Chrysler after the company sold most of its assets to Italy’s Fiat SpA, a United Auto Workers union benefit trust and the U.S. and Canadian governments in June.

[polktiger]

Good. This is a very disgusting a sleazy practice, and it is business as usual in the Carribean and South America. I have worked with several contractors that were approached by US companies to build facilities for them in the Caribbean and South America, and the number of people the contractor would have to payoff while performing the work was disgusting. As a result they refused to bid on the jobs despite the huge margins that would be involved.

Of course the UN is not much better, and more and more Washington seems to be the same way.

At least this will recoup some of the pre-fiat bailout money we gave Cerberus.

[nooshinjohn]

Are you related to Preston Tucker by any chance?;)

[dkg999]

The payment of "consulting fees" in South America seems to be a legacy tradition of epic proportions. I'm not sure how you stop it, as there will always be companies from countries that don't care about these practices that will play the game to build in those markets.

[Jstas]

Are you related to Preston Tucker by any chance?;)

I'd tell you what you could go do with yourself but it'll get me banned.

[tonyb]

Good. This is a very disgusting a sleazy practice, and it is business as usual in the Carribean and South America. I have worked with several contractors that were approached by US companies to build facilities for them in the Caribbean and South America, and the number of people the contractor would have to payoff while performing the work was disgusting. As a result they refused to bid on the jobs despite the huge margins that would be involved.

Of course the UN is not much better, and more and more Washington seems to be the same way.

At least this will recoup some of the pre-fiat bailout money we gave Cerberus.

Dude.....here in Chicago,this is common as a robin. Alot of other big cities too. I just wish people would pay more attention to what goes on around them and the media wouldn't cherry pick the stories they run. You have to grease so many palms to get the good work in chicago,then you have to pay off the gangs to leave your equipment alone. Friggin' unbelievable.

[nooshinjohn]

I mean no disrespect Jstas... only observing that you seem to post an awful lot about bad news in the car industry. Preston Tucker was brought down by a combination of Government pressure, Detroit sabotage and bad press resulting from the other two, but I suspect you know this already.

[Jstas]

I mean no disrespect Jstas... only observing that you seem to post an awful lot about bad news in the car industry. Preston Tucker was brought down by a combination of Government pressure, Detroit sabotage and bad press resulting from the other two, but I suspect you know this already.

I don't care.


And if there was something positive besides new model releases to talk about, I'd talk about it.

Well, there is positive stuff like Ford posting a profit 2 quarters before they had predicted and Ford's stock back up to around $12 a share and rising without government assistance. They did it before Toyota took a nose dive in the press too so that kinda adds a bit of legitimacy to it. But you'll just tell me that's a bias. So I don't post anything about Ford unless it's negative stuff just so I don't have to deal with people like you.

And I take offense to the mere fact that you are even addressing me.

[nooshinjohn]

I don't care.

And I take offense to the mere fact that you are even addressing me.

I am respectful of you and yet you continue to be an ass... You must come here to simply be a troll, as I have not seen one helpful thread or post from you since I joined this place. Don't like it.... don't post.

As far as Ford goes, I am glad to see them do well. Never cared for their cars and trucks (exception made for the GT/GT-40 and the original two-seat 'Birds) but the fact they needed no hand up from uncle sam gets my respect.