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Daimler to pay $185M in fines, plead guilty to felonies

by Bill Cawthon on

Daimler AG has agreed to pay $93.6 million to the U.S. Justice Department and $91.4 million to the Securities and Exchange Commission to settle criminal and civil charges of bribing foreign officials. The German automaker will also plead guilty to multiple felony counts before a federal judge next week.

The charges stemmed from a lawsuit filed by former Chrysler auditor David Bazetta which led to a 2004 investigation by the SEC. The government discovered violations of the Foreign Corrupt Businesses Act which led to the charges. Daimler will plead guilty to bribing officials in a number of countries including China, Russia, Egypt, Nigeria and Vietnam, to purchase Daimler vehicles, netting the company hundreds of millions of dollars worth of business and an estimated $50 million in profits. Daimler’s practices gave the company a competitive advantage over other automakers, including American companies. U.S. companies are prohibited from such practices and a treaty between the U.S. and Germany has extended that prohibition to German firms since 1998. Even without the treaty, the U.S. government would have had jurisdiction as DaimlerChrysler shares were traded in the U.S. and some of the bribes were funneled through U.S. banks.

Most of the bribes were cash payments from as many as 200 different bank accounts, often disguised as sham consulting contracts, but others included a $420,000 armored Mercedes-Benz S-Class presented to a high-level official for his birthday, large discounts and special favors done for other officials and their families. Daimler’s machinations were even involved the Iraq “Oil for Food” program where the company jacked up the price of Mercedes-Benz vehicles to pay large kickbacks to officials in Saddam Hussein’s government.

Since much of the actual wrongdoing was committed by Daimler employees on the scene, it is unclear how much knowledge was possessed by senior company officials in Stuttgart. As of this time, no current or former Daimler employees have been charged with any criminal acts though the company says some employees have been fired for their roles in the crimes.

The company will take charges to its 2004 and 2005 profits to cover the bribes and may still face back taxes related to them.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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