SEC Probes DaimlerChrysler Bribe Charge

A whistleblower in the audit department reportedly claimed that he was fired after telling senior officials about corruption at the company.
Stephen TaubNovember 1, 2004

The Securities and Exchange Commission is investigating charges made by a former employee in Daimler Chrysler’s audit department that the auto maker used secret bank accounts to bribe government officials, according to the Associated Press.

The SEC notified the company in August that it had opened an investigation concerning the company’s compliance with the U.S. Foreign Corrupt Practices Act, according to the third-quarter earnings report that DaimlerChrysler filed last week. The act bars U.S. public companies and foreign issuers here from bribing foreign officials to gain business and from setting up slush funds to bar such bribery.

The former employee filed an official “whistleblower” complaint with the U.S. Department of Labor (DOL) under the Sarbanes-Oxley Act after he was fired earlier this year, according to the company, which also reported that the employee had filed a lawsuit in September containing similar charges.

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The AP identified the whistle-blower as David Bazzetta, a former employee in the automaker’s corporate auditing department. Bazzetta alleged in the lawsuit that he was fired in January after he told senior company officials about the use of secret bank accounts to bribe government officials, according to the wire service.

Bazzetta reportedly asserted that during a corporate audit executive meeting in Germany, Hubertus Buderath, the company’s vice president of corporate audit in Stuttgart, explained that bribery was a common practice dating back to before the 1998 merger between Daimler-Benz and Chrysler Corp.

The whistleblower also claimed he learned during the meeting that business units within DaimlerChrysler continued to maintain the secret accounts despite knowing the practice was illegal under U.S. law, the AP added.

The wire service also reported that Bazzetta asserted the Buderath said he had told Jurgen Schrempp, then DaimlerChrysler chairman, that 40 secret bank accounts existed and that DaimlerChrysler CFO Manfred Gentz knew of the practice. Gentz reportedly mentioned the SEC probe in a conference call last week, but provided no details.

Bazzetta claimed that he protested the use of the bank accounts to Charles Struve, the company’s American vice president in charge of corporate audit and Bazzetta’s immediate supervisor, the AP reported. Struve, however, reportedly told him to “forget what was said” and that “issues that arise in corporate audit must remain in corporate audit,” according to the wire service’s account of the lawsuit.

In a press release issued last Thursday, DaimlerChrysler said it believes there is no merit to the lawsuit or the earlier claim by the “whistleblower” that he was improperly terminated. The company maintained that the terminated employee was “not happy to have left the company.”

The company stated that “its definitive, official position concerning the SEC’s formal investigation is that it has no comment except to say the company is cooperating with the SEC.”