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UPDATE 3-U.S. charges Daimler with violating bribery laws
March 23, 2010 / 5:27 PM / 8 years ago

UPDATE 3-U.S. charges Daimler with violating bribery laws

* Source says Daimler to pay $185 mln to settle charges

* Court document typically used in plea agreements

* US alleges long-standing practice of paying bribes

* Daimler declines to comment ahead of April 1 hearing (Adds Daimler description to first paragraph, brings armored car detail and mention of whistleblower higher)

By Jeremy Pelofsky and Dan Margolies

WASHINGTON, March 23 (Reuters) - German car and truck maker Daimler AG (DAIGn.DE) was charged on Tuesday with violating U.S. bribery laws by showering foreign officials with millions of dollars and gifts of luxury cars to win business deals.

Daimler plans to pay $185 million to settle charges by the U.S. Justice Department and Securities and Exchange Commission while its German and Russian units plan to plead guilty to the criminal charges, a source familiar with the case said.

U.S. prosecutors accused the maker of Mercedes cars of engaging “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, according to a criminal information filed in U.S. court.

Examples in court documents included an armored car given to an official in Turkmenistan and another to a Liberian official.

The U.S. Justice Department charged Daimler with conspiracy and falsifying books and records under the Foreign and Corrupt Practices Act, which makes it illegal to pay bribes to obtain or keep business overseas.

Criminal informations are typically used in plea agreements with the U.S. government.

Daimler owned U.S. automaker Chrysler from until 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.

A Justice Department spokeswoman declined to comment on the court papers. A Daimler spokeswoman also declined to comment until a scheduled April 1 hearing.

If the settlement proceeds, it would mark the latest in a string of recent agreements between the United States and major companies to settle foreign bribery allegations. Siemens (SIEGn.DE) agreed in December to pay $1.3 billion to end corruption probes in the United States and Germany.

Daimler has previously acknowledged payments that raised concerns about legal violations and has said the company was cooperating with investigations by the Justice Department and the SEC.

“Daimler has taken various actions designed to address and resolve the issues identified in the course of its investigation and to safeguard against the recurrence of improper conduct,” the company said in its 2009 annual report.

As part of the settlement, Daimler AG will not plead guilty or admit any wrongdoing in the Justice Department and SEC cases, said the source familiar with the case. The company will pay $93.6 million to resolve the Justice Department probe and $91.4 million for the SEC case, the source said.

Daimler and its China unit will enter a two-year deferred prosecution agreements, the source said.

DEALS SPANNING A DECADE

The charges filed Tuesday detailed transactions spanning from 1998 to early 2008 that involved hundreds of payments worth tens of millions of dollars to foreign officials in return for contracts worth hundreds of millions of dollars.

Transactions with connections to the United States resulted in more than $50 million in pretax profits for Daimler, according to the court filing.

“In some cases, Daimler wired these 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 court papers said.

The alleged bribes were frequently made by over-invoicing customers and paying the excess back to top government officials or their proxies, according to the charges against Daimler. Many of the payments were made through more than 200 internal “third-party accounts,” U.S. prosecutors charged.

In one case, Daimler and its distributor gave an unnamed Turkmenistan government official an armored Mercedes passenger car that was valued at more than 300,000 euros for his birthday in February 2000. At the time the automaker was negotiating to sell dozens of vehicles to the Turkmenistan government.

In another instance, an unnamed official in Liberia in 1999 was given an armored car worth about 267,000 euros as part of a deal to sell trucks for a logging operation there, the documents said.

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

The SEC opened its probe after David Bazzetta, an auditor at DaimlerChrysler Corp, filed a whistleblower complaint.

Bazzetta alleged that he learned in a July 2001 corporate audit executive committee meeting in Stuttgart that business units “continued to maintain secret bank accounts to bribe foreign government officials,” though the company know the practice violated U.S. laws.

Daimler sold its Chrysler business to private equity firm Cerberus Capital Management LP [CBS.UL] in 2007. Chrysler is now controlled by Fiat SpA FIA.MI.

The primary case is USA v. Daimler AG, U.S. District Court for the District of Columbia, No. 10-00063. (Additional reporting by Christiaan Hetzner and Michael Shields in Frankfurt, and David Bailey in Detroit; Editing by Maureen Bavdek and Tim Dobbyn)

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