Risk & Compliance

Daimler Discloses Improper Payments

The SEC and the Justice Department are investigating charges that the automaker used secret bank accounts to bribe government officials, and that s...
Stephen TaubMarch 7, 2006

DaimlerChrysler AG disclosed that it has dismissed or suspended several employees after the company determined that “improper payments” were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe, according to published accounts.

In a regulatory filing, the automaker stated that these payments raise concerns under the U.S. Foreign Corrupt Practices Act, German law, and the laws of other jurisdictions. The company added that it is revising its governance policies and internal control procedures to address the issues identified in the course of its investigation.

DaimlerChrysler also stated that it identified and reported potential tax liabilities to authorities in several jurisdictions resulting from misclassifications of, or the failure to record, commissions and other payments and expenses.

In November 2004, we reported that the Securities and Exchange Commission was investigating charges made by a former employee in Daimler Chrysler’s audit department that the automaker used secret bank accounts to bribe government officials. After he was fired, the individual filed a Sarbanes-Oxley whistle-blower complaint with the Department of Labor.

That investigation is ongoing, according to The Wall Street Journal. The newspaper also pointed out that the Department of Justice is conducting a parallel criminal investigation into allegations that DaimlerChrysler paid bribes in at least a dozen countries and that senior executives may have been aware of the practice.

The Journal noted out that last July, Rudi Kornmayer, managing director of the company’s plant in Nigeria, committed suicide. According to the paper, German investigators said the executive left a note referring to bribery inquiries.

Bribery is currently illegal across the European Union, the newspaper noted. The Journal also observed, however, that before passage of the Organization for Economic Cooperation and Development Anti-Bribery Convention in 1997, several European governments, including Germany’s, openly allowed tax deductions for bribery overseas.