Daimler In The Grips Of U.S. Graft Police: "Pay $185m And We'll Let You Walk."

Bertel Schmitt
by Bertel Schmitt

Money-wise, the United States is in a bit of a tough spot. Must create revenue wherever it can. From red light cameras to shaking down foreign companies. On Tuesday, Germany’s Daimler AG was charged with violating U.S. bribery laws “by showering foreign officials with millions of dollars and gifts of luxury cars to win business deals,” as Reuters has it. After asking “how much will it take for this to go away?” Daimler plans to pay $185m to settle charges by the U.S. Justice Department and Securities and Exchange Commission.

And since when does the U.S.A. have jurisdiction over a German company that engaged “in a long-standing practice of paying bribes” to secure deals in Russia, China, Turkey, Egypt, Nigeria, Iraq and at least 16 other countries between 1998 and early 2008, as court papers allege?

Got you right there: It’s fall-out from Daimler’s failed Chrysler marriage. Daimler owned Chrysler from 1998 to 2007. The SEC probe began in 2004 when an auditor complained he was fired for protesting secret bank accounts used to pay foreign officials.

The documents say that Daimler and its distributor gave an unnamed Turkmenistan government official an armored Mercedes S-Class car, valued at more than €300,000 as a birthday present in February 2000. The official didn’t even honor the deal: The final order for Mercedes vans and trucks was lower than promised.

Armored S-Class cars were popular presents at Daimler. A Liberian official received one in 1999.

Prosecutors even allege that Daimler – tsk, tsk – paid 10 percent kickbacks to Iraqi government officials to secure deals to sell vehicles, violating the United Nations’ Oil for Food Program.

Germany’s Autohaus (which has seen a lot) is especially impressed by this deal, recorded in the criminal complaint: Vietnam needed 78 Mercedes-Benz sedans for a conference. Government officials were shocked by the 100 percent tax THEIR Vietnamese government would have charged. Daimler accommodated them by “loaning” the cars, which reduced the tax to 25 percent. After the conference, the cars were sold with a profit of €1.65m. The government officials received $400,000 – which they charged for an “emission study.” Says Das Autohaus: “The charges read like a script for a C movie.”

According to Reuter’s sources, Daimler AG will not plead guilty or admit any wrongdoing in the Justice Department and SEC cases. The company will pay $93.6 million to resolve the Justice Department probe and $91.4 million for the SEC case.

This is not the first shake-down. Siemens agreed in December to pay $1.3 billion to end corruption probes in the United States and Germany.

The anti-bribery campaign is a new field for European companies. Other than the US, which accepts lavish campaign contributions, but hampers the export promotion activities of U.S. companies with severe anti-corruption laws aimed at preventing the lining of the pockets of foreign officials, Europe had a more realpolitikal view of the matter.

Until a few years ago, expenses to grease a deal in a foreign country, where such lubrication is common and essential, were tax deductible. Since 1999, the law in Germany has changed. However, you may not shower someone with lavish gifts to get a future deal. Once the deal is closed, birthday presents of armored vehicles to Turkmenistan etc. are perfectly legal. It’s very hard to prove what came when, and enforcement is lax. Three years ago, Die Welt wrote: “Bribery is a common part in the international business of German companies. Many managers view bribery as an inevitable business practice.”

The U.S.A. obviously wants in on that deal. After greasing the palms of foreign officials, Daimler has to enrich the U.S. treasury and can walk away.


Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Jimboy Jimboy on Mar 24, 2010

    As I've said many times; Daimler was/is a morally and ethically challenged company, and this only reiterates my comments. If the only way you can do business in a third world country is by bribery and corruption, then perhaps you shouldn't do business there. When these people lose the benefits of first world production, maybe they will rethink their slimy attitudes and practices.

  • TonyJZX TonyJZX on Mar 24, 2010

    if it's a choice between corrupt dealings and no dealings in 3rd world countries, any activity is better than none... unless you believe that poor countries should always remain poor and the rich stay rich.

    • Jimboy Jimboy on Mar 24, 2010

      I disagree. If you present yourself as willing to pander your self/product, what does that say about your business ethics? Any activity is NOT better, mostly because it only benefits the corrupt, not those who actually should benefit. How does selling an S-class mercedes to a dictator help anyone in Turkmenistan? You can argue all you want about bringing products to the third world poor, but if you start by bribery and corrupt practices its virtually impossible to clean your image/ethics at a later date. Once dirty- always dirty. P.S. Bertel- why do you think the West is so hated by so many Third world people - the reasons I just gave you. Look at Russia, etc. and their corruption. Just because it's common practice doesn't make it either right or desirable.

  • ToolGuy North America is already the greatest country on the planet, and I have learned to be careful about what I wish for in terms of making changes. I mean, if Greenland wants to buy JDM vehicles, isn't that for the Danes to decide?
  • ToolGuy Once again my home did not catch on fire and my fire extinguisher(s) stayed in the closet, unused. I guess I threw my money away on fire extinguishers.(And by fire extinguishers I mean nuclear missiles.)
  • Carson D The UAW has succeeded in organizing a US VW plant before. There's a reason they don't teach history in the schools any longer. People wouldn't make the same mistakes.
  • B-BodyBuick84 Mitsubishi Pajero Sport of course, a 7 seater, 2.4 turbo-diesel I4 BOF SUV with Super-Select 4WD, centre and rear locking diffs standard of course.
  • Corey Lewis Think how dated this 80s design was by 1995!
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