By on March 24, 2010

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.

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16 Comments on “Daimler In The Grips Of U.S. Graft Police: “Pay $185m And We’ll Let You Walk.”...”

  • avatar

    Ahh… the Carter-era Foreign Corrupt Practices Act. A well-intentioned, feel-good kind of law. Only it hurts U.S.-based companies so that Boeing can’t get that Pakistan contract while Airbus does.

    Now if the Euros get aboard the same train, great for them! Then we both can feel good about ourselves. Only problem is, the guys who will be getting that Pakistan contract from now on will be the Embraer fellas. The Brazilians must be salivating.

    The road to hollowed-out economies is paved with good intentions.

  • avatar

    I want to chime in before all the PC out there complain about Retarded Cop. Do your research on the series first. It’s very funny AND not offensive.

    Disclaimer: No special needs people were harmed in the making of the film.

  • avatar

    The Europeans including the British know what you have to do to secure billion dollar contracts in the middle east or africa… sure that means greasing the wheels of a whole slew of Arab politico/royalty.

    The Chinese must love the FCPA!

    I still remember what a FCPA/DOJ spokesman said… “if the Chinese had an office in the US, well we’d fine them too for their underhand dealings on the global playing field”.

    The implication was that the Chinese should behave in a manner that is fitting for the DoJ on any business affair anywhere on the planet. Pretty delusional.

  • avatar
    Telegraph Road

    Thirty-eight nations have ratified the OECD Anti-Bribery Convention, which requires each to pass legislation that criminalizes the act of bribing a foreign public official: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States.

  • avatar

    But isn’t this “how good legislation is passed” in the USA? I fail to see the difference between this and other recent events involving overt bribes.

  • avatar

    If there is a lesson to be learned by Daimler, it’s to not be so stupid as to fire a whistleblower but to promote them.

  • avatar

    This is an example of the practicallity of Jewish (and by extension Christian law). It was illegal to except bribes but not to make them. Some might say that isn’t fair, but Jewish law recognized that sometimes it is necessary to bribe an official to get a fair deal. The fault doesn’t lie with the person providing the bribe so much as with the person accepting (or even expecting) the bribe. Maybe we should focus on arresting US officials from County Judges to US Senators who accept bribes rather than concern ourselves with foriegn companies who offer bribes to foriegn officials. Oh wait, there’s no money in that for the government.

  • avatar

    I don’t think the article is totally fair. These kinds of prosecutions are not exclusive to the US. Just because a past practice was allowed (i.e. tax-deductions for Schmiergeld, which itself was outlawed by both German and EU law, around the time the crimes in question were committed) is not a robust defense of the practice, nor a robust indictment of the DoJ/SEC’s prosecution.

    My former Germany-based employer fell afowl of the law in Europe and payed fines for bribery and record fines for collusion (several times for both with super-penalties levied for being a repeat offender). As part of the settlement with the Eu prosecutors, the company agreed to school middle and upper management and apply a near-zero-tolerance to corrupt and collusive practices.

    One thing that I well remember from the annual tranings was that gifts or presents presented after the fact (or even just to accelerate the process of an official doing their job, and reaching the same conclusion they normally would have) were going to draw intense interst from prosecutors in (IIRC) Bochum and Darmstadt and were therefore prohibited under corporate policy. (There were many other strict policy items but I just touch on these two here.)

    Siemens lost both their active Chairman (von Pierburg) and CEO (Klaus Kleinfeld) due to activities surrounding these two topics which came under scrutiny of German Federal Prosecutors.

    In the end, unchecked corruption results in high prices for sub-par products and ultimately makes everyone poor.

    • 0 avatar

      Fair? If the Germans, or we, the people of Russia, China, Turkey, Egypt, Nigeria, or Iraq indict Daimler for bribery, then it’s one thing. But what business does the U.S.A. have to bring criminal charges against a foreign company that perpetrated crimes in a foreign land?

      Sometimes, I have the feeling that the sovereignty of the state of Delaware wears heavier than the sovereignty of another country. Which we will see April 15th, when China will be branded a currency manipulator by the U.S.A. For the crime of having the Chinese currency pegged to the dollar.

    • 0 avatar

      Ah, and I remember the words of one of my clients at Volkswagen:

      “Just got the new policy on gifts. We are only allowed to accept gifts valued below 75 Deutschmarks. Doesn’t say how often.”

      Obviously, that was long before the Euro.

    • 0 avatar

      “But what business does the U.S.A. have to bring criminal charges against a foreign company that perpetrated crimes in a foreign land?”

      Well, maybe the fact that the bribes were coming from U.S. bank accounts and U.S. shell companies might have something to do with it.

      “Daimler wired the improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies in order to transmit the bribe, the Justice Department asserted in the court papers filed Monday, but not disclosed until Tuesday.

      The papers said that in at least one instance, a U.S. shell company was incorporated for the specific purpose of entering into a sham consulting agreement with Daimler in order to conceal improper payments routed through the shell company to foreign government officials.”

  • avatar

    This reminds me of the study I read that correlated economic wealth with corruption and it was pretty clear, the richer the country the less corrupt it was, the poorer countries all suffered from rampant corruption. Eliminating graft and corruption around the world would help a great deal in greasing the wheels of trade, instead of just a few greedy peoples palms. A better place to start though would be with the politicians in Washington.

  • avatar

    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.

  • avatar

    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.

    • 0 avatar

      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.

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