Saturday, February 13, 2010

White Collar and Securities: Daimler Reportedly Agrees to Global Settlement with U.S. over FCPA Violations

BusinessWeek magazine is reporting that Daimler AG has reached a global settlement with the U.S. over allegations that the company, during its incarnation as DaimlerChrysler, violated provisions of the Foreign Corrupt Practices Act ("FCPA"). The reported settlement will involve the payment of $200 million in civil penalties and criminal pleas by two Daimler subsidiaries.

The FCPA prohibits the bribery of foreign officials by American corporations. There are both criminal and civil enforcement tools in the FCPA. The Department of Justice has exclusive criminal jurisdiction. The Securities and Exchange Commission has jurisdiction to act civil in the area of civil enforcement.

The magazine reports that the matter revolves around bribery payments to foreign officials by Daimler subsidiaries. The SEC began its investigation in 2004 based on allegations by a then auditor at DaimlerChrysler that he was fired for objecting to supervisors about bribe payments. The whistleblower alleged in a lawsuit that DaimlerChrysler business units maintained secret bank accounts to use for bribe payments. Moreover, he claimed that practice of paying local officials was common. It was alleged that 40 secret accounts existed and were a necessary cost of doing business.

In a July 2005 filing to the SEC the company disclosed that it was conducting an internal investigation and would share its results with the Department of Justice and the SEC. In the annual report for 2005 the company reported that improper payments were made in a number of places, but primarily in Africa, Asia, and Eastern Europe.

In addition to disclosure to American authorities, at the time of the internal investigation DaimlerChrysler self reported potential tax liabilities to several jurisdictions. The tax liabilities stemmed from the mischaracterization of the bribe or gratuity payments for tax purposes.

In 2007 Daimler sold Chrysler LLC to Cerberus Capital Management, LP. Chrysler filed for U.S. bankruptcy protection in 2009. Chrysler sold most of its assets to Fiat SpA, a United Auto Workers union benefit trust and the U.S. and Canadian governments in June 2009.

A spokesman for Daimler confirmed to BusinessWeek that the company was in discussions with DOJ and the SEC about resolving the investigations. Both DOJ and the SEC refused to confirm the settlement agreement.

For the full article reporting the agreement, please see BusinessWeek, "Daimler Said to Agree to Pay $200 Million Over Probe of Bribes," February 13, 2010,

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