Case 1:10-cr-00063-RJL Document 3 Filed 03/24/10 Page 1 of 2
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, : : Plaintiff : : v. : : CRIMINAL NO.: 1:10-CR-063 DAIMLER AG, : : Defendant. : ______:
NOTICE OF FILING OF DEFERRED PROSECUTION AGREEMENT
The United States of America, by and through its counsel, the United States Department of Justice, Criminal Division, Fraud Section (the “Department”), hereby gives notice of the filing of the attached deferred prosecution agreement between the Department and Daimler AG in the above-styled matter.
Respectfully submitted,
DENIS J. MCINERNEY Chief, Fraud Section
/s/ John S. Darden Assistant Chief, Fraud Section United States Department of Justice Criminal Division 1400 New York Ave., N.W. Washington, D.C. 20005 (202) 514-7023 Case 1:10-cr-00063-RJL Document 3 Filed 03/24/10 Page 2 of 2
CERTIFICATE OF SERVICE
I hereby certify that on March 24, 2010, the undersigned electronically filed the foregoing document with the Clerk of the Court using CM/ECF.
/s/ John S. Darden
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UNITED STATES DISTRICTDISTRICT COURT FOR THE DISTRICT OF COLUMBIA '2
JJ,S, ijiSTRH::'T COtJHT
UNITED STATES OFOF AMERICA,
Plaintiff, v. NO. ______
DAIMLERAG, DEFERREDDEFERRD PROSECUTION PROSECUTION AGREEMENT Defendant.
Defendant Daimler AGAG ("Daimler"), a public corporation organized under the laws of the
Federal Republic of Germany,Gennany, by its undersignedundersigned attorneys,attorneys, pursuant to authorityauthority granted by
Daimler'sDaiinler's Board Boardof of Management, and the UnitedUnited StatesStates Department Deparment ofJustice, CriminalCriminal Divisiun,
Fraud Section (the(the "Department"Department ofJustice"ofJustice" or the "Department")"Department") enter intointo thisthis DeferredProsecution DeferredProsecution
Agreement (the "Agreement"). (the "Agreement"). The terms and conditions The of terms and conditions of this Agreement are as follows:
Criminal Information andand AcceptanceAcceptance of ResponsibilityResponsibilty
I.1. DaimlerDaimler acknowledges acknowledges that that the the United United States States wilwill fie file the the attached attached two-count criminal
Information in the United States District CourtCour for for thethe DistrictDistrict ofof Columbia chargingcharging Daimler with conspiracy to commit an offense against the United States in violation of 1818 U.S.C. § 371, that is, to violateviolate thethe booksbooks and recordsrecords provisions of thethe Foreign CorruptCorrpt PracticesPractices ActAct ("FCPA"),("FCPA"), asas amended, 1515 U.S.C. §§ 78m(b)(2)(A), 78m(b 78m(b )(5), and 78ff(a) (Count One); and violatingviolating thethe books and records records provisions provisions of of the FCPA, 1515 U.S.C. §§§§ 78m(b)(2)(A),78m(b)(2)(A), 78m(b)(5),78m(b)(5), andand 78ff(a),78ff(a), andand 1818
U.S.c. § 2 (Count§ 2 (Count Two). In so Two). doing, DaimlerIn so knowingly doing, Daimler knowingly waives: (a) its right to indictment on these charges, asas wellwell as allall rights to a speedy trial pursuant to the Sixth Amendment to the United States Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 2 of 98
Constitution,Constitution, Title 18,Title United IS, States United Code Section States 3161, Code and Federal Section Rile of 3161, and Federal Rule of CriminalCriminal ProcedureProcedure
4S(b);48(b); and and (b) any (b) objection any objection with respect towith venue respectand consents to to venue the filing and of consents to the filing of thethe Information,Information, asas providedprovided underunder thethe termsterms ofthis ofthis Agreement, inin thethe UnitcdUnitcd StatesStatcs District District Court Cour forfor thethe DistrictDistrict ofof
Columbia.Columbia.
2.2. DaimlerDaimler admits, admits, accepts, accepts, and and acknowledges acknowledges that that it it is is responsible responsible forfor thethe actsacts of its employees,employees, subsidiaries,subsidiaries, and and agents agents as as set set forthforth inin the Statement of Facts attached hereto as
Attachment A, and incorporated by refcrcnccreference into this Agreement, and that the facts described in
Attachment A are true and accurate.accurate. ShouldShould thethe Department pursue the prosecution that is deferred by thisthis Agreement,Agreement, DaimlerDaimler agrees thatthat itit willwil neither contest the admissibility of, nor contradict, in any such such proceeding, proceeding, the Statement the of Statement of Facts.
Term of the Agreement
3. This ThisAgreement Agreement is effective is effective for fora period a period beginning beginning on on the the date date on on whichwhich the gniltyguilty pleas in inthe thematters matters of of the United States v. DaimierChryslerDaimlerChrsler AutomotiveAutomotive RussiaRussia SAOSAO and United
States v. Daimler Export and Trade FinaneeFinance GmbH are enteredentered and ending two (2) years and seven
(7) calendar days from thatthat date (the "Term"). Huwever,However, DaimlerDaimler agreesagrees that,that, inin thethe eventevent that the
Department determines,determes, in in its its sole sole discretion, discretion, thatthat Daimler has knowinglyknowingly violated any provisionprovision ofof thisthis Agreement,Agreement, anan extensionextension oror extensionsextensions ofof the the termterm ofof the the AgreementAgreement maymay be imposedimposed byby thethe
iI Department, inin its sole discretion, forfor up to aa totaltotal additionaladditional timetime periodperiod ofof one one year,year, without prejudiceprejudice toto thethe Department'sDeparlment's rightright to to proceed proceed as as provided provided in in paragraphs paragraphs 11 11-14 - 1 4 below. AnyAny extension of thethe AgreementAgreement extends allall termsterms of thisthis AgreementAgreement forfor anan equivalent equivalent period.period.
Conversely,Conversely, in the eventevent thethe DeparmentDepartment finds, finds, inin its its solesale discretion,discretion, thatthat therethere existsexists aa changechange inin circumstancescircumstances sufficientsufficient toto eliminateeliminate thethe needneed forfor thethe corporatecorporate compliancecompliance monitormonitor describeddescribed inin
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ParagraphParagraph 10 and 10 Attaclient and Attachment D, and that the other D, and provisions that ofthe other provisions ofthis this AgreementAgreement havehave been satisfied,satisfied, thethe Term Term of of thethe Agreement may be terminatedterminated early.
VoluntaryVoluntary Cooperation
4.4. The TheDeparment Department enters enters into into this this Agreement Agreement based based onon thethe individualindividual factsfacts andand circumstances presented by thisthis case andand Daimler.Daimler. Among the facts considered were that Daimler:
(a)(a) following the allegationallegation by a former employee of bribery by Daimler, voluntarily and timely disclosed toto the DepartmentDepartment and the U.S.u.s. SecuritiesSecurities andand Exchange CummissiunCommission ("SEC")("SEC") the misconduct described described in the Information in the and Information Statement of and Statement of Facts; (b) conducted a thorough internal investigation ofof thatthat andand other misconduct; (c)(c) regularlyregularly reported all ofof its findingsfindigs to the
Department; (d) cooperated (d) cooperated in the Department's in theinvestigation Department's of investigation of this matter, as well as the SEC's investigation; (e) undertuukundertook remedial measures, including retention of an independent compliance
advisor and andthe implementation the implementation of an enhanced ofan enhanced compliance program, program, and and agreed toto undertake undertake further fuer remedial measures asas contemplated byby thisthis Agreement; andand (f)(1) agreed to continue to cooperate with
the Department Department in any ongoing in any investigation ongoing of investigation of the conduct conduct of of Daimler and its employees, agents, consultants, contractors, subcontractors,snbcontractors, and subsidiaries relatingrelating to violations ofof the the FCP FCP A.
5. DaimlerDaimler shall shall continue continue to tocooperate cooperate with with the the Department. Department. At At the the request request ofof thethe
Department, and consistentconsistent with applicableapplicable lawlaw andand regulation, Daimler shall alsoalso cooperatecooperate fullyfully with suchsnch otherother domesticdomestic oror foreignforeign lawlaw enforcementenforcement authorities and agencies, as well asas thethe
Multilateral Development BanksBanks ("MDBs"),("MDBs"), inin anyany investigationinvestigation of Daimler, oror any ofof its present and former directors, employees, agents, consultants, contractors, subcontractors, andand subsidiaries,snbsidiaries, or any other party, in any and all matters relating to corrupt payments and related false books and recordsrecords and internal controls, and inin suchsuch mannermarer as as the the parties parties may may agree. agree. DaimlerDaimler agrees agrees thatthat itsits
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cooperationcooperation shall include, but is not limited to, the following:
a.a. DaimlerDaimler shall shall truthfully truthfully disclose disclose all allfactual factual information, information, that that is is not not protected protected byby a validvalid claim of attorney-client privilege or work product doctrine, with respectrespect totu its activities andand those of its presentpresent andand formerformer directors,directors, employees,employees, agents, consiltants,consultants, contractorscontractors and subcontractors,subcontractors, and subsidiaries and subsidiaries concerning all concerningmatters relating toall corrpt matters relating to corrupt payments andrelatedandrelated false books and records andand inadequate internalinternl controls,controls, aboutabout whichwhich DaimlerDaimler has any knowledge or about whichwhich thethe Department maymay inquire.inquire. ThisThis obligationobligation ufof truthfultruthful disclosuredisclosure includesincludes the obligation of Daimler to provide to the Department,Deparment, uponupon request,request, anyany document, record or other tangible evidence relatingrelating toto suchsuch corruptcorrpt payments, payments, falsefalse booksbooks andand records,records, or inadequate internal controls about about which the which Department the may Department inquire of may inquire of Daimler.
b. UponUpon request request of the of theDepartment, Department, with with respect respect to to any any issue issue relevantrelevant to its investigation of corrpt of payments corrupt in connectionpayments with inthe connection operations of with the operations of Daimler, related false books and records, and inadequate internal controls, DaimlerDaimler shallshall designatedesignate knowledgeable employees,employees, agents or attorneys toto provideprovide toto the the Department Departent thethe informationinformation andand materialsmaterials describeddescribed inin
Paragraph 5( a) above,5( a) onabove, behalf of on behalf of Daimler. ItIt is further fuer understood understood that that Daimler Daimler must must at at all all times provide complete, trthfultruthful andand accurateaccurate information.information.
c. With respectWith to any respect to any issue relevant toto the the Department's Department's investigation investigation ofofcorrupt corrpt payments, related falsefalse books andand records, and inadequate internal controls in connectionconnection withwith the operations of ofDaimler, oror anyany ofof its present or former subsidiaries or affiliates, Daimler shallshall useuse its best efforts to make available for interviews or testimony, asas requestedrequested byby thethe Department,Deparment, present or formerformer directors,directors, employees,employees, agentsagents and consultants of of Daimler as well asas thethe directors,directors, employees, agents and consultants of contractors and subcontractors. ThisThis obligationobligation includes,includes, but
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isis notnot limitedlimited to,to, swornsworn testimonytestimony beforebefore aa federal federal grand grand jury jur or in federal trials,trials, as well as interviewsinterviews withwith federal lawlaw enforcement authorities.authorities. CooperationCooperation underunder this ParagraphParagraph willwil includeinclude identificationidentification ofof witnesseswitncsscs who,who, toto the knowledge of Daimler, may have material infonnation regardingregarding thethe mattersmatters underunder investigation.investigation.
d. WithWith respect respect to anyto any information, infonnation, testimony, testimony, documents, documents, records records oror otherother tangibletangible evidence provided to the Department pursuant to thisthis Agreement, Daimler consents to any and all disclosuresdisclosures consistent with applicable law and regulationregulation toto other governmentalgovernmental authorities, including United States authorities and those of a foreignforeign government, and the MDBs, of such materials as the Department, in its sole discretion, shall deem appropriate.
Payment of MonetaryMonetary Penalty
6. PursuantPursuant to Sectionto Section lB1.2(a) IB1.2(a) ofthe ofthe United United States States SentencingSentencing GuidelinesGuidelines ("USSG" ("USSG" or "Sentencing Guidelines"), includingincluding ApplicationApplication NoteNote 1,I, the Department and Daimler agree that the applicable fine underunder thisthis AgreementAgreement shallshall bebe calculatedcalculated pursuant to USSG Section 2CL.L,2CI.I, and that such such an application an application of of the Sentencing Guidelines toto determinedetennine the applicable finefine rangerange yields the following analysis:
a. The The2006 2006 USSG USSG are are applicable applicable to to this this matter. matter.
b. BaseBase Offense. Offense. Based Based upon upon USSG USSG § 2C§ 2C 1., 1.1, the the total total offense offense level level isis 38,38, calculated as follows:
(a)(2) Base Offense Level 12
(b)(1)(b)(I) SpecificSpecific OffenseOffense Characteristic Characteristic (More than one bribe)bribe) +2
(b )(2))(2) SpecificSpecific OffenseOffense CharacteristicCharacteristic
(Value(Value of of Benefit ReceivedReceived? > $50,000,000$50,000,000 basedbased onon transactionstransactions with U.S. nexus, takingtaking
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the greater ofof thethe corruptcorrpt paymentpayment or thethe benefit received for each transaction pursuant to USSG USSG § 2CU,§ 2C1., comment. comment. (n. 3)) (n. 3)) +24+24 TOTAL 3838 c. BaseBase Fine. Fine. Based Based upon upon USSG USSG § 8C2.4(a)(I),§ 8C2.4(a)(I), the the base base fine fine is is $72,500,000 $72,500,000 (fine corresponding to the Base Offense level as provided in Offense Level Table)
d. CulpabilityCulpability Score. Score. Based Based upon upon USSG USSG § 8C2.5,§ 8C2.5, the the culpability culpability score score isis 8,8, calculated as follows:
(a) Base Culpability Culpability Score Score 55
(b)(1) The organizationorganization had 5,000 oror moremore employees and tolerance of the offense by substantial authority personnel was pervasive pervasive throughout throughout the organization the organzation +5+5
(g) TheThe organization organization fully fully cooperated cooperated in in the investigation and clearly demonstrated recognition and affirmativeaffrmative acceptance of responsibility for its for criminal its criminal conduct conduct - -2 2
TOTAL 8
e. CalculationCalculation of of Fine Range:
Base Fine $72,500,000
Multipliers 1.6(min)/3.20(max)
Fine Range $116,000,000/ $232,000,000
Daimler agreesagrees toto paypay aa monetarymonetar penaltypenalty in thethe amount of $93,600,000, or approximately
20% below below the bottom the of bottom of the applicable Sentencing GuidelinesGuidelines fine fine range range of$116,000,000. of$116,000,000. The
DepartmentDeparment andand DaimlerDaimler agreeagree that such aa reductionreduction isis appropriateappropriatc given givcn thethc naturenatue and extentextent ofof
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Daimler'sDaimler's cooperation inin this matter, including sharingsharing information with the Department regarding evidenceevidence obtainedobtained asas aa resultresult ofof Daimler'sDaimler's extensive investigationinvestigation ofof corruptcorrpt payments payments mademade byby
DaimlerDaimler in various countries around thethe world.world. Daimler agreesagrees toto paypay thisthis monetary monetar penaltypenalty to the
UnitedUnited States States Treasury Treasury withinwithin ten tendays daysof ofthe the execution execution ofof this this Agreement.Agreement. The $93,600,000 penaltypenalty isis [malfinal and shallshall not bebe refunded.refuded. Furthermore,Furthermore, nothingnothing inin thisthis AgreementAgreement shallshall bebe deemeddeemed an agreement byby thethe DepartmentDeparment that thethe $93,600,000$93,600,000 amount is the maximum penalty that may be imposedimposed inin anyany futurefutue prosecution, andand thethe DepartmentDeparment isis notnot precludedprecluded from from arguing argung inin anyany future futue prosecution that the CourtCour should should impose impose a a higherhigher fine,fine, althoughalthough the Department agrees that under those circumstances, itit willwil recommendrecommend toto thethe CourCourt that that the the amountamount paidpaid underunder thisthis AgreementAgreement should bebe offsetoffset againstagainst anyany fine fine the the Court Cour imposesimposes asas partpart ofof aa future futue judgment.judgment. Finally,Finally, the parties agree that that any anycriminal criminal penalty that penalty might be thatimposed might by be imposed by the Court on, or otherwiseotherwise paidpaid by,by, DaimlerDaimler subsidiaries inin connection with their guiltyguilty pleas andand pleaplea agreementsagreements oror deferreddeferred prosecutionprosecution agreements enteredentered intointo simultaneously herewithherewith will wil be deducteddeducted fromfrom thethe $93,600,000$93,600,000 finefine contemplated by this Agreement.by this DaimlerAgreement. acknowledges Daimlerthat no tax deductionacknowledges that no tax deduction may be sought in connection with the with payment the of paymentany part of of any part of this $93,600,000 fine.
Conditional Release fromfrom Criminal LiabilityLiabilty
7. In retu forIn thereturn full and for truthful the full cooperation and truthful of cooperation ofDaimler, and its compliance with the terms and conditions ofof this this Agreement, thethe DepartmentDepartment agreesagrees not toto useuse anyany informationinformation relatedrelated toto thethe conductconduct describeddescribed inin thethe attachedattached StatementStatement of Facts against Daimler or any ofof itsits whollywholly owned or controlled or controlled subsidiaries subsidiaries in any criminal orin civil any case, criminal except: or(a) civilin a prosecution case, except: for (a) in a prosecution for perjury or obstruction of justice; (b) in aa prosecution for making a falsefalse statement;statement; (c)(c) inin aa prosecutionprosecution oror other proceeding relating to any crime of violence; or (d) inin aa prosecutionprosecution oror otherother proceedingproceeding
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relating toto a violation ofof any provisionprovision ofof TitleTitle 2626 ofof thethe UnitedUnited StatesStates Code.Code. InIn addition,addition, the
Department agrees, except as provided herein, that it will not bring any criminal oror civilcivil casecase againstagainst
Daimler or any of its whollywholly ownedowned oror controlled subsidiaries related toto thethe conduct of presentpresent and formerformer directors,directors, employees, agents, consultants, contractors and subcontractors, as described in thethe attached Statement Statement of of Facts, or relating to information Daimler disclosed to the Department prior to the date on whichwhich thisthis AgreementAgreement waswas signed,signed, or or relating relating to to undisclosed, undisclosed, unknown unkown conduct of a similar scalescale and naturenatue that took place prior to the signing of this Agreement.
a. ThisThis Paragraph Paragraph does does not notprovide provide any any protection protection against against prosecution prosecution forfor anyany corruptcorrpt payments, payments, false false books books and and records, records, or or inadequate inadequate internal internal controls,controls, ifif any, any, by Daimler in the future, or by any ofof itsits directors,directors, employees,employees, agents, consultants, contractors, subcontractors, and subsidiaries irrespective irrespective of of whether disclosed disclosed by Daimler, by pursuant Daimler, to the termspursuant of to the terms of this Agreement.
b. In addition,In addition,this Paragraph this does Paragraphnot provide any does not provide any protection against prosecution of any present or former director, officer, employee, shareholder, agent, consultant, contractor, or subcontractor of of Daimler for anyany violationsviolations committed conntted by by them. them. TheThe Department Department doesdoes not contend that any any present present member ofmember the Daimler ofSupervisory the Daimler Board or Board Supervisory of Board or Board of Management had criminal involvement inin the offensesoffenses included in the InformationInformation filedfiled pursuantpursuant toto Paragraph I1 of this
Agreement.
Corporate Compliance Program
8. DaimlerDaimler represents represents that that it it hashas implementedimplemented and and will will continuecontinue to implementimplement a compliance and ethics program designeddesigned to prevent and detect violations of the FCPA and otherother applicable anti-corruptionanti-corrption lawslaws throughoutthroughout its operations,operations, including thosethose ofof itsits affiliates,affliates, jointjoint ventures, and those of itsits contractorscontractors andand subcontractors,subcontractors, with responsibilitiesresponsibilities thatthat includeinclude
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interactionsinteractions withwith foreign officials. ImplementationImplementation of thesethese policies and procedures shall not be construed in any future enforcementenforcement proceeding as providing immunity or amnesty for any crimes
not disclosed disclosed to the toDepartment the Department as of as ofthe the date date of of signing signing of of this this Agreement Agreement for which for which Daimkr wouldwuuld otherwise be responsible.
9. In order Into addressorder to address deficiencies in its internalinternal controls,controls, policiespolicies andand proceduresprocedures regarding compliance withwith the FCPAFCPA and and other other applicableapplicable anti-corruptionanti-corrption laws,laws, Daimlerrepresents Daimlerrepresents that it has undertaken, amiand willwil cuntinuecontinue toto undertake in thethe future,futue, inin aa mannermanner consistentconsistent with all of its obligationsobligations under this Agreement,Agreement, a review of thethe existingexisting internalinternal controls,controls, policies and procedures within within Daimler.Daimler. WhereWhere necessarnecessary and appropriate,appropriate, Daimler Daimler will wil adoptadopt new oror modifymodify existing internal controls, policies and proceduresprocedures inin orderorder toto ensureensure thatthat DaimlerDaimler maintains:maintains: (a) a system of internal accounting controls designeddesigned toto ensureensure thethe makingmaking andand keeping ofof fair and accurate books, records and accounts; andand (b)(b) aa rigorous rigorous anti-corruption anti-corrption compliance code designed to detectdetect and deterand deter violations of of the FCPA andand otherother applicable applicable anti-corruption anti-corrption laws.laws. TheThe internalinternal controls system and compliance code willwil include,include, butbut notnot be limited to, the minimum elements set forth in AttchmentAttachment C, C, which which is is incorporated incorporated by by reference reference intointo thisthis Agreement.Agreement.
Corporate ComplianceCompliance Monitor
10. DaimlerDaimler agrees agrees to toengage engage a acorporate corporate compliance compliance monitor monitor ("the ("the Monitot')Monitor") who shall shall have, at aa minimum, the followingfollowing qualifications:qualifications:
a. demonstrateddemonstrated expertise expertise with with respect respect to to the the FCP FCP A,A, including including experienceexperience counseling onon FCPA issues;
b. experienceexperience designing designing and/or and/or reviewing reviewing corporate corporate compliance compliance policies, policies, procedures and internalinteral controls, controls, includingFCP includingFCP A-specificA-specific policies, policies, procedures procedures and and internalinternal controls;controls;
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c.c. the theability ability to to access access andand deploydeploy resoUÌesresources asas necessarnecessary to to dischargedischarge the
Monitor'sMonitor's dutiesduties asas describeddescribed inin thethe Agreement;Agreement; and
d.d. suffcientsufficient independence independence from from Daimler Daimler to toensure ensure effective effective and imparialimpartial performanceperformance of the Monitor's dutiesduties asas describeddescribed inin thethe Agreement.Agreement.
Daimler hashas proposed, andand the the Department Deparent has has approved, approved, LouisLouis J. J. FreehFreeh toto serveserve as thethe Monitor.Monitor.
II.11. TheThe Monitor's Monitor's term term shall shall be bethree three (3) (3) years years from from the the date date on on which which the the guilty guilty pleas pleas inin the matters of the United States v. DaimlerChrysler Automotive Russia SAO and United States v. Daimler Export and Trade Finance GmbH are entered, subject to extension or early terminationtermination
as describeddescribed in in Paragraph 3. The 3. Monitor's The Monitor'sduties and authority, duties and and the obligations authority, of and the obligations ofDaimler with respect to thethe MonitorMonitor and the Department,Department, areare set forthfort inin Attachment Attaclient D, which isis incorporatedincorporated byby reference into this Agreement.
Defl'ITedDefl'rred ProsecutionProsecution
12. In Inconsideration consideration of: of: (a) (a) the the past past andand futuefuture cooperationcooperation ofof Daimler describeddescribed in
Paragraphs 44 andand 55 above;above; (b)(b) Daimler'sDaimler's payment of aa monetary penalty of $93,600,000;$93,600,000; (c) thethe guilty pleas by Daimler wholly owned subsidiaries DaimlerChrysler Automotive Russia SAO and
Daimler ExportExport andand TradeTrade FinanceFinance GmbH;GmbH; (d)(d) thethe deferreddeferred prosecutionprosecution agreementagreement byby Daimler'sDaimler's wholly owned subsidiary DaimlerChrysler ChinaChina Ltd.; and (e) Daimler's adoptionadoption and and maintenancemaintenance of remedial measures, andand independent review review andand audit of such measures, including the compliance code and reviewreview by thethe MonitorMonitor described inin ParagraphsParagraphs 8 8 through though II11 above,above, the the Department Departent agrees agrees thatthat any any prosecution of of Daimler for the for conduct the setconduct fort in the set attached forth Statement in the ofattached Statement ofFacts, and for thethe conduct thatthat DaimlerDaimler disclosed toto thethe Department Deparent prior prior to to the the signing signing of of this this Agreement, Agreement, be be andand herebyhereby is deferred is deferred for the Term for of the Term ofthis this Agreement.Agreement.
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13.13. TheThe Departent Department fuher further agrees agrees that that if if Daimler Daimler fullyfully compliescomplies with all of itsits obligations underunder thisthis Agreement, Agreement, the the Department Departent wil will not not continue continue the the criminalcriminal prosecution against
Daimler described described in Paragraph in 1 Paragraphand, at the conclusion I and, of at the conclusion of thethe Term, thisthis Agreement shall expire.
Within ten (10) days of thethe Agreement'sAgreement's expiration,expiration, thethe DepartmentDepartment shall seekseek dismissaldismissal withwith prejudice of the Information filed against Daimler described in Paragraph 1.1.
Breach of the Agreement
14. If,If, durg during the the Term Term of thisof this Agreement, Agreement, the the Department Department determines, determines, in in its its solesole discretion, that thatDaimler Daimler has conntted has any committedfelony any felony under federal law subsequentsubsequent toto thethe signingsigning ofthisofthis
Agreement, has, at any time, provided deliberately false, incomplete or misleadingmisleading information, or has otherwise breached the Agreement, Daimler shall thereafter bebe subject to prosecution for any federal criminal violation of whichwhich thethe DepartmentDeparment hashas knowledgeknowledge and the Information attached as
Exhibit 1 may I bemay pursued be by pursued by the Department Department in the U.S. in District the U.S. Cour Districtfor the District Court of for the District of Columbia.
Any such prosecutionsprosecutions may bebe premisedpremised on infonnationinformation providedprovided byby Daimler.Daimler. Any such prosecutionprosecution that is not time-barredtime-barred by thethe applicableapplicable statute ofof limitationslimitations on the date ofof the signing of this
Agreement may be commenced against Daimler notwithstandingnotwithstanding thethe expirationexpiration ofof the statute ofof limitations between the signing of this AgreementAgreement andand thethe expirationexpiration of thethe TermTerm plus oneone year.year.
Thus, by signing thisthis Agreement, DaimlerDaimler agreesagrees thatthat thethe statutestatute oflirnitationsoflimitations with respect to any prosecution that is that not time-barred is not time-barred on the date of on the date of this Agreement shall be tolled forfor thethe Term plus one year.
15. In Inthe the event event that that the the DeparmentDepartment determines detennines that that Daimler Daimler has has breached breached this this
Agreement, the Department the Department agrees to provide agreesDaimler with to written provide Daimler with written notice of suchsuch breach prior to instituting any prosecution resultingresulting fromfrom suchsuch breach.breach. Daimler shall, within thirtythirty (30) days ofof
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receiptreceipt ofof suchsuch notice,notice, have have the the opportunity opportunity to to respond respond to to the the Department Departent inin writing to explain thethe naturenature and circumstances ofof such breach,breach, asas well well asas the the actions actions Daimler Daimler hashas taken taen toto addressaddress and remediateremediate thethe situation,situation, whichwhich explanation the DepartmentDepartment shallshall considerconsider inin determiningdetermining whetherwhether toto instituteinstitute a prosecution.
16.16. In Inthe the event event that that the the DepartmentDepartment determines determines thatthat DaimlerDaimler hashas breachedbreached thisthis
Agreement: (a)(a) allall statementsstatements mademade byby oror onon behalfbehalf of of Daimler Daimler to the Department or to the Court, includingincluding the attached the attached Statement of Statement of Facts, and and any testimony any testimony given by Daimler given before by a grandDaimler before a grand jury or any tribunal, at any legislative hearings, whetherwhether priorprior oror subsequent toto thisthis Agreement, or any leads derived from such statements or testimony, shallshall be admissible in evidence in any and all criminal proceedingsproceedings broughtbrought byby the the Department Departent against against Daimler; Daimler; andand (b)(b) DaimlerDaimler shallshall not assert any claim under the UnitedUnited States Constitution, Rule Rule 11(f)ll(f) ofof thethe FederalFederal RulesRules ofof Criminal Criminal
Procedure, Rule 410 Rule of 410 ofthe Federal Federal Rules Rulesof of Evidence or any otherother federalfederal rule,rule, thatthat statementsstatements made by or or on onbehalf behalf of of Daimler prior or subsequent to this Agreement, and any leads derived therefrom, should be suppressed. TheThe decision whether conduct or statementsstatements ofof anyany individual individual willwil be imputedimputed to DaimlerDaimler for the purosepurpose of of determinig determining whether whether Daimler Daimler has has violated violated anyany provisionprovision ofof thisthis
Agreement shallshall bebe in in the the sole sole discretion discretion of of the the Department. Deparent.
17. Daimler Daimleracknowledges acknowledges that the Department that the Department has made no representations, assurancesassurances or promisespromises concerning what sentence maymay bebe imposed byby the CourtCour ifif Daimler Daimler breachesbreaches thisthis
Agreement and this matter proceeds to judgment. DaimlerDaimler furtherfurther acknowledgesacknowledges thatthat anyany suchsuch sentence is solelysolely within the discretion of the Court and that nothing inin thisthis AgreementAgreement binds or restrctsrestricts thethe Court in in thethe exercise ofof such discretion.discretion.
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Sale oror Merger of DaimlerDaimler
18.18. DaimlerDaimler agrees agrees that that in inthe the event event it itsells, sells, merges, merges, or or transfers transfers all all oror substantially substantially all of its business operations as they exist as of the date of this Agreement, whetherwhether such sale is structuredstrctured as as a a stock stock or or asset asset sale, sale, merger merger or or transfer,transfer, itit shallshall includeinclude in any contract for sale, mergermerger or transfertrnsfer a a provision provision bindig binding the the purchaser, purchaser, or or any any successor successor in in interest interest thereto,thereto, toto thethe obligations described inin this Agreement.
Public Statements by Daimler
19. DaimlerDaimler expressly expressly agrees agrees thatthat itit shall shall not, not, though through present present or or future future attorneys,attorneys, directors, employees, agents or any other person authorized to speak for Daimler make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by Daimler set forth above or the facts described in the attached Statement ofof Facts.Facts. AnyAny suchsuch contradictorycontradictory statement shall, subject to curecure rightsrights ofof DaimlerDaimler describeddescribed below, constitute a breach of this
Agreement and Daimler thereafter shallshall bebe subjectsubject to to prosecution prosecution as as set set forth fort inin ParagraphsParagraphs 14-1714-17 of this Agreement. TheThe decisiondecision whetherwhether anyany publicpublic statementstatement byby anyany such person contradicting a fact contained contained in the Statementin the Statementof of Facts willwil bebe imputedimputed toto DaimlerDaimler forfor the purpose of determining whether they have breached this Agreement shall be at thethe solesole discretiondiscretion ofof thethe Department.Department. If the
Department determines thatthat a public statementstatement by any such person contradicts in whole or in part a statement contained contained in the Statement in the of Statement of Facts, the Department shall so notify Daimler, and Daimler may avoidavoid aa breachbreach ofof this this AgreementAgreement byby publiclypublicly repudiatingrepudiating suchsuch statement(s)statement(s) within five (5)(5) business days after notification. ConsistentConsistent withwith thethe obligationsobligations ofof DaimlerDaimler asas setset forthforth above,above,
Daimler shall be permitted to raise defenses and to assert affirmative claims in civil and regulatory proceedings relating relating to the matters to the set forthmatters in the setStatement forth ofF in the Statement ofFacts. ThisThis Paragraph does not apply
13 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 14 of 98
toto anyany statement statement made by madeany present by or any former present employee ofor former employee of DaimlerDaimler inin the coursecourse ofof anyany criminal,criinal, regulatory,regulatory, or civilcivil casecase initiated initiated againstagainst suchsuch individual, individual, unless uness suchsuch individualindividual isis speakiugspeaking onon behalf behalf ofof Daimler.
20.20. Daimler Daimleragrees that ifagrees that ifitit or anyany ofof itsits direct direct or or indirect indirect affiliates affliates or subsidiaressubsidiaries issuesissues a press releaserelease inin cormectioncOllection with this Agreement,Agreement, Daimler shall first consultconsult thethe DepartmentDeparment to determine whetherwhether (a)(a) thethe texttext oftheofthe releaserelease isis truetre and and accurate accurate withwith respectrespect to matters between the
Department and Daimler; and andDaimler; (b) the Deparment and (b) the Department has nono objectionobjection to the release. Statements at anyany press conference concemingconcerning thisths mattermatter shallshall bebe consistentconsistent with this press release.
21. WithWith respect respect to Daimler'sto Daimler's present present reliability reliability and and responsibility responsibility as as a a government government contractor, the DepartmentDepartment agrees toto cooperatecooperate withwith Daimler, Daimler, inin a a form form and and manner maner toto be agreed, in bringing facts relating to the naturenatue ofof the the conductconduct underlyingunderlying thisthis AgreementAgreement and to Daimler's cooperation and and remediation remediation to to the the attention attention of of governmental governental and other debarmentdebarent authorities,authorities, including the MDBs, as requested.
Limitations onon Binding EffectEffect ofof Agreement
22. ThisThis Agreement Agreement is binding is binding on onDaimler Daimler and and the the Deparment Department but but specifically specifically does does not bind any other federal agencies, or any state,state, locallocal oror foreign foreign law law enforcement enforcement orregulatoryorregulatory agencies, or any other authorities, although thethe Department willwil bringbring thethe cooperationcooperation of DaimlerDaimler and its compliance with its other obligations under this Agreement, to the attention ofof suchsuch agenciesagencies and authorities, including thethe MDBs,MDBs, ifif requested requested toto dodo soso byby Daimler.
Notice
23. AnyAny notice notice to theto the Department Department under under this this Agreement Agreement shall shall be be given given by by personal personal delivery, overnightovernight deliverydelivery byby aa recognizedrecognized deliverydelivery service,service, oror registered oror certified mail,mail, inin each
14 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 15 of 98
case, forfor thethe Department, Departent, addressed addressed to to MarkMark F. F. MendelsohnMendelsohn (or (or his his successor),successor), Deputy Chief, Fraud
Section, CriminalCriminal Division, U.S. DeparmentDepartment ofof Justice, Justice, FourthFourh Floor,Floor, 14001400 New York Avenue,Avenue,
N.W., Washington,Washington, D.C.D.C. 2000520005 and, and, forfor Daimler AG, addressedaddressed to Dr.Dr. GeroGero Herrmann,Herrann, (or (or hishis successor), Senior Vice President, General Counsel, andand ChiefChief ComplianceCompliance Officer,Offcer, Daimler AG,
HPC F 105,105, 7054670546 Stuttgart,Stuttgart, Germany,Germany, and Martin J. Weinstein, WillkieWillkie FarrFaIT && GallagherGallagher LLP,LLP,
1875 KStreet, KStreet, N.W., Washington, N.W., Washington,D.C. 20006, Carl S. D.C.Rauh, 20006, Carl S. Rauh, Hogan & HartsonLLP, 555555 Thirteenth Thieenth
Street, N.W., Washington, D.C.D.C. 20004, andand GaryGary DiBianco,DiBianco, Skadden Skadden Arps Ars SlateSlate MeagherMeagher && Flom
LLP, 1440 New York Ave., N.W., Washington, D.C. 20005.20005. Notice shallshall be effectiveeffective upon actual receipt by Daimler.
15 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 16 of 98
Complete Agreement
24.24, ThisThis Agreement Agreement sets sets forth forth all all the the terms terms ofthe of the agreement agreement between between Daimler Daimler andand the
Deparhnent. NoNo amendments,amendments, modificationsmodifioations or additionsadditions toto thisthis AgreementAgreement shallshall bebe valid unlessunless they are inin writing and signed by thethe Department, the attorneys for Daimler and a duly authorized representative of Daimler.
AGREED:
FOR DAIMLER AG:
By:
/~df-'~/ Martin J. Weinstein & WillkieWî1lkieódd&~ Farr.Farr & Gallagher LLPLLP CarlCad S.S. Rauh Hogan && Hartson LLP
~~--/~Gmy DiBi co Gmy DIB! co Skadden Arps Slate Meagher && FlomFlom LLPLLP
Counsel for DairnlerDaimler AG
16 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 17 of 98
FOR THE DEPARTMENT OF JUSTICE:
DENIS J. MCINERNEY Chief, Fraud Section
By: Phv( Mark F. Mendelsohn Deputy Chief, Fraud Section .~~ John S!, . arden Assistant Chief, Fraud Section
United States Department of Justice Criminal Division
1400 New York Ave., N.W. Washington, D.C.D.C. 2000520005 (202) 514-7023
Washington, D.C., on D.C.,this 22i~ onday ofthis 22i~ day of March, 2010.
17 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 18 of 98
GENERALGENERAL COUNSEL'SCOUNSEL'S CERTIFICATECERTIFICATE
II havehave readread thisthis Agreement Agreementatrd and carefullycarefully reviewedreviewed everyevety partpart of of itit withwith outside counselcounsel forfor
DaimlerDaimler AG ("Daimler"). AG ("Daimler"). I understand the Iterms understand of the terms ofthis this AgreementAgteen)ent andand voluntarilyvoluntli1'ly agree, onon behalf behalf ofof Daimler,Daimler, toto eacheach ofof itsits terms.tenns. BeforeBefore sigringsigning thisthis Agreement,Agreement, Ir consultedconsulted outside counsel for
Daimler.Daimler. Counsel Counsel fully advised fully me ofthe advised rigIrts.ofDaimler, me ofthe of rights of Daimler, ofpossible possible defenses, defenses, of ofthe the Sentencing
Guidelines'Guidelines' provisions, provisions, and of and of thethe consequences consequences of of enteringentering into this Agreement.
II havehave carefullycarefully revi<;wedreviewed thethe termsterms ofthisofthis Agreement with the SupervisorySupervisory BoardBoard.and and BoardBoard of Management of of Daimler. I I have advised advised and caused and outside caused counsel foroutside counsel for DairlerDaimler to to adviseadvise the
Supervisory and Management BoardsBoards f:hUyfhlly of of thethe rightsrights ofof Daimler, of possible.possible defenses,defenses, of the
SentencingSentencìngGuidelines' Guidelines' ptuvisions, and provisions,ofthe consequences and of entering ofthe into consequences the of entering into the Agreement.Agteement.
NoN.opromises promises or inducementsindltCements havehave beenbeen mademade otherother thanthan thosethose containedcontained in this Agreement.
FUltilerIDore,Fuitheimore, nono oneone hashas threatened oror forcedforced me,me, oror toto mymy knowledgeknowledge any personperson authorizingauthorizIiig this
Agreement on behalfbehalf ofof Daimler, in anyany way to enter intointo thisthis Agreement.Agreement. I am also satisfiedsatisfied withwith outside counsels' representation in this matter. II certifythatIcertify that Iam am General General Counsel Counsel for for Daimler Daimler AG AG and that that I have I havebeen duly been authorized duly by Daimlerauthorized to execute bythis Daimler Agreement on tobehalf execute of this Agreement on behalf ofDaimler.
Date: ACA r~ '¿~ , , ,2010
DAIMLERAG
By:By: Dr.Dr. Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 19 of 98
CERTIFICATECERTIFICATE OF COUNSELCOUNSEL
WeWe areare counselcounsel forfor DaimlerDaimler AGAG ("Daimler")("Daimler") inin thethe matter matter covered covered by by this this Agreement. Agreement. InIn connectionconnection withwith suchsuch representation,representation, wewe havehave examinedexamined relevantrelevant DaimlerDaimler documentsdocuments andand have discusseddiscussed the the termsterms ofof this AgreementAgreement withwith the Daimler Supervisory BoardBoard andand BoardBoard ofof
Management.Management. Based onon ourreviewourreview ofthe foregoing materials and discussions,discussions, wewe areare ofthe ofthe opinionopinion that:that: the the representative representative of of DaimlerDaimler has beenbeen duly authorizedauthorized toto enterenter intointo thisthis AgreementAgreement onon behalfbehalf ofof Daimler and that this AgreementAgreement has been duly and validly authorized,authorized, executed,executed, and delivered on behalf behalf of Daimler of Daimler and is a valid and and isbinding a valid obligation and of binding obligation of Daimler. Furher,Further, wewe havehave carefhllycareftilly
reviewed the tenus the of terms of thisthis Agreement Agreement with the the Supervisory Supervisory Board, the Boardthe ofBoard of Management, and
the General Counsel ofDairler. We have fully advised them of the General Counsel of Daimler. We have fully advised them of the rights rights of of Daimler, of ofpossible defenses, of the Sentencing Guidelines' provisionsprovisions andand ofof the the consequencesconsequences ofof entering entering intointo thisthis
Agreement. To our knowledge, To our the knowledge, decision of the decision of Daimler to enter into tliisthis Agreement, based on the authorization ofof the Board of ManagementManagement withwith the consent ofof thethe SupervisorySupervisory Board, Board, is anan informed and voluntaryvoluntary one.
Date: fc.Lfc. k"'M ((? ((0 ,2010,2010 ßtû0ttl-- MartnMartin J. J. WclnsteinWe;stein WilkieWillkie Farr Farr & & GallagherGallagher LLPLLP ¿;~4~vL CarlCarl S.S. RauhRauh HoganHogan & HartsonHartson LLPLLP ~~-~ GaryGaryDiBi DiBi 00 Skadden~~~~Skadden ArpsArs Slate Slate MeagherMeagher & FlomFlom LLPLLP
CounselCounsel forfor DaimlerDaimler AG AG Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 20 of 98
ATTACHMENTATTACHMENT AA
STATEMENTSTATEMENT OFOF FACTSFACTS
TheThe following StatementStatement ofof FactsFacts isis incorporated byby referencereference asas partpart uf the Deferred
ProsecutionProsecution AgreementAgreement ("the ("he Agreement")Agreement") between thethe United States Department of Justice,Justice,
CriminalCriminal Division, Division, Fraud Section Fraud (the "Departent")Section (theand "Department") and DaimlerDaimler AG,AG, andand thethe partiespartes hereby agree andand stipulate that the followingfollowing infonnationinformation isis truetrue andand accurate.accurate. As set forth in Paragraph 2 of the
Agreement, Daimler DaimlerAG admits, accepts, AG admits,and acknowledges accepts, that it and is responsible acknowledges for the acts thatof it is responsible for the acts of itsits subsidiaries,subsidiaries, employees, and agents as set forth below.
Should the DepartmentDeparment pursuepursue the prosecution thatthat isis deferreddeferred byby thisthis Agreement,Agreement, DaimlerDaimler
AG agrees agrees that it that wil neither it will contest neither the admissibility contest of,the nor admissibility contradict, this Statement of, nor of contradict, this Statement of Facts in any such proceeding.
If this matter were to proceed to trial, the DepartmentDeparment wouldwould proveprove beyondbeyond aa reasonablereasonable doubt, by admissibleadnssible evidence, evidence, the the factsfacts alleged belowbelow and setset forthfort in thethe CriminalCriminal InfonnationInformation attached to this Agreement. ThisThis evidence evidence wouldwould establishestablish thethe following:following:
I. BACKGROUNBACKGROUND REGARDING REGARDING DAIMLER'S DAIMLER'S BRIBERY BRIBERY CONDUCTCONDUCT
Daimler AG, formerlyfonnerly DaimlerChrslerDaimlerChrysler AGAG andand DaimlerDaimler BenzBenz AGAG (collectively(collectively
"DAIMLER"), was a German was vehicle a Gennanmanufacturing vehicle company manufacturing company with business operations throughout thethe world.world. AmongAmong other other things, things, DAIMLER DAIMLER soldsold allall mannermaIlIler ofof cars, cars, trucks,trucks, vans,vans, andand buses,buses, includingincluding Unimogs,Unimogs, heavyheavy dutyduty allall terrainterrain truckstrucks primarilyprimarily used forfor hauling,hauling, andand Actros,Actros, largelarge commercial tractor/trailer-style vehicles.vehicles. DAIMLERDAIMLER was aa majormajor globalglobal producerproducer ofof premium premium passengerpassenger cars, cars, asas wellwell asas thethe largest manufacturer of commercial vehicles in the world. AsAs aa resultresult ofof its its luxurluxury car car and and commercial commercial vehicles vehicles lines,lines, DAIMERDAIMLER had had among among its its customers customers government government
1I Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 21 of 98
and state-owned state-owned entities fromentities many countres from inmany which it countries in which it did business.business. DAIMLER sold its products worldwide, had production facilities on fivefive continents,continents, diddid businessbusiness inin many many foreign foreign countries, countres, andand employed more than 270,000 people.
DAIMLER is owned by individual and institutional investors in the US.,U.S., Europe, and elsewhere. More than one billionbilion shares shares of DA1\JLER DA1\1!LER were were inin circulation circulation as as ofof December December 31,31,
2007. For purposesFor purposes of of the UnitedUnited StatesStates securitiessecurities laws, laws, DAIMLER DAlLER became became anan "issuer""issuer" inin 1993,1993, and DAIMLER's comUloncommon stock has been tradedtraded unon thethe New York StockStock Exchange,Exchange, thethe PacificPacific
Exchange, the Chicago Stock Exchange,Exchange, andand thethe PhiladelphiaPhiladelphia StockStock Exchange. Exchange. AsAs a result of
DAIMLER's filingfiing ofof periodic periodic reports with the Securities and Exchange CommissionCommssion ("SEC")("SEC") pursuant to Title to Title15, United 15, States United Code, Section States 18m, Code, and DAIER's Section use of 78m, and DAIMLER's use of US.U.S. bankban accountsaccuunts andand U.S.U.S. companiescompanies in in transacting transacting certain certin businessbusiness with with foreign foreign governments goverments and officials, the company isis subject toto thethe ForeignForeign CorruptCorrpt PracticesPractices ActAct ("FCPA").("FCPA").
DAIMLERDAIER engaged engaged in ain long-stading a long-standing practice practice of ofpaying paying bribes bribes to to "foreign "foreign officials" officials" asas that term isis defineddefined inin the the FCP FCPA A (hereinafter (hereinafter "governmental "governental officials") offcials") throughthough a variety of mechanisms, including the use of corporate ledger accounts known internally as "third-party accounts" or "TPAs," corporate "cash"cash desks,"desks," offshoreoffshore bankban accounts, accounts, deceptivedeceptive pricing arrangements, and third-party intermediaries.
Within DAIMLER,DAIER, bribe bribe payments payments were were often often identified identified and and recorded recorded asas
"commissions," "special"special discounts,"discounts," and/orand/or "nützliche"niitzliche AufWendungen"AufWendungen" oror "N"N .A." .A." payments,payments, which translates to "useful payment" oror "necessary"necessary payment," and was understood by certain employees toto meanmean "official"offcial bribe."
2 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 22 of 98
BetweenBetween 1998 andand JanuaryJanuary 2008, 2008, DAIMLER DAIMER mademade hundredshundreds ofof improper payments worthworth tenstens ofof millionsmilions ofof dollarsdollars to foreign officials inin atat leastleast 2222 countries countres -- includingincluding China,
Croatia,Croatia, Egypt,Egyt, Grcccc, Greecc, Hungary,Hungary, Indonesia,Indonesia, Iraq, Ivory Coast, Latvia,Latva, Nigeria, Russia, Serbia andand Montenegro,Montenegro, Thailand,Thailand, Turkey,Turkey, Turkmenistan, Uzbekistan, Vietnam,Vietnam, and others -- to assist inin securing contractscontracts with with governmentgovernent customers customers forfor thethe purchase ofof DAIMLERDAIMLER vehiclesvehicles valued at hundreds ofof millionsmilions of dollars. InIn somesome cases, DAIMLERDAIMER wired wired these these improperimproper paymentspayments to
U.S. bank bank accounts accounts or to the foreignor to bank the accounts foreign of bank accounts of U.S.u.s. shell companiescompanies inin order to transmittransmit
., the bribe. InIn at at least least one one instance, instance, aa U.S.U.S. shellshell companycompany was incorporatedincorporated forfor thethe specific purposepurose of of entering entering into into a a sham sham consultingconsulting agreement with with DAIMLERDAIMLER in in order order toto concealconceal improper payments routedrouted throughthrough thethe shellshell companycompany to to foreign foreign government government officials. offcials. Certain improper paymentspayments eveneven continued continued as as late late as as January January 2008. 2008. In In all all cases, cases, DAIMLER DAlLER improperlyimproperly recorded thesethese payments inin itsits corporatecorporate booksbooks andand records.records.
DAIMLER's longstanding longstanding violations ofthe FCPA violations resulted from ofthe a variety FCPA of resulted from a variety of factors, including: (1)(1) anan inadequateinadequate compliancecompliance strcture;structure; (2) (2) a a highly highly decentralized decentralized systemsystem ofof selling vehicles tluoughthrough a myriad of foreignforeign salessales forces,forces, subsidiaries,subsidiares, and affiliates,affliates, withwith no central oversight; (3)(3) a corporate cultureculture thatthat toleratedtolerated and/orandlor encouragedencouraged bribery; and (4) the involvement of certaincertain key executives, suchsuch as thethe then head of its overseas sales division
("DCOS"), thethe thenthen headhead ofof internal internal audit,audit, andand thethe thenthen CEOsCEOs ofof several subsidiariessubsidiaries andand affiiates.affiliates.
Many of the details ofof DAIMLER'sDAIMLER's practice ofof makingmakg improper improper payments payments in violation ofofthe the anti-bribery and books and records provisionsprovisions ofof thethe FCPA FCPA are are set set forth fort below,below, includingincluding aa numbernumber of ofbribes bribes and/or andlor transactions transactions in the terrtory in of the territory ofthe the United States.States. In total,total, thethe corrupt corrpt
3 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 23 of 98
transactionstranactions withwith a a territorial territorial connection connection to to thethe UnitedUnited StatesStates resultedresulted inin over 550,000,000S50,000,000 in pre-pre- taxtax profitsprofits forfor DAIMLER.DAIMLER.
II.II. DAIMLER'SDAIMLER'S USE USE OFOF THIRDTHIRD PARTY PARTY ACCOUNTS ACCOUNTS TO TO MAKE MAKE IMPROPER IMROPER PAYMENTSPAYMENTS
At the timetime ofof thethe mergermerger betweenbetween ChryslerChrsler Corporation andand Daimler-Benz inin 1998,
DAIMLERDAIMER maintained maintained over over 200 200 internal internal "third-party"third.party accounts"accounts" ("TPAs"), known in German as
"interne"interne Fremdkonten." Fremdkonten." TPAs were TPAs were maintained as as receivablereceivable ledger ledger accounts accounts on on DAIMLER'DAIMLER's s books and werewere controlledcontrolled byby thirdthird parties parties outside outside the the company company or or by by DAIMLER's DAILER's own own subsidiariessubsidiaries andand affiliates.affliates. DAIMER DAIMLER used these accounts, used among these other accounts, things, to facilitate among the other making things,of to facilitate the making of improper payments and thethe provisionprovision of of gifts gifts to to foreign foreign government governent offcials.officials. FundsFunds were were credited credited to these accounts through price inclusions, discounts, rebates,rebates, andand otherother mechanisms.mechanisms. AlthoughAlthough thesethese accounts appeared in DAIMLER'sDAIMER's books books and and records, records, they they were were accounted accounted for for improperly improperly and and werewere not subject to normal auditing or otherother financialfinancial controls.controls. Moreover,Moreover, certaincertain accountsaccounts remainedremained "off"off the books" books" of of those DAIMER DAIMLER affliates on whose affiliates behalf on whose behalf DAIMLER maintained the accounts.
Internally, the TPTP AsAs were used andand supervisedsupervised by by the the mostmost seniorsenior managementmangement ofof
DAIMLER's salessales organization.organization. ForFor example, example, thethe company's written documentation regardingregardig use use ofofthe the TPTP As As from 1992 to 2002 statedstated thatthat TPTP A opening applications mustmust be signed by senior management and include "at"at least least one one membermember ofof top top management management andand oneone ofof management management leveL."level."
DAIMLER had maintained certaincertin wrtten written policies policies governing governing the the operation operation of of TP TP AsAs since 1977, 1977, although although until recently until none recentlyof none of thosethose policies addressed improperimproper paymentspayments toto government offcials,officials, or or the the inaccurateinaccurate recordingrecording of payments to government officialsoffcials inin thethe company's booksbooks andand records,records, oror requircdrequired intcmalinternal controlscontrols toto preventprevent and and detect detect such such improperimproper
44 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 24 of 98
paymentspayments andand relatedrelated falsefalse accounting.accounting. DAIMLER'sDAIMLER's writtenwritten policiespolicies providedprovided thatthat TPAsTP As werewere managedmanaged internallyinternally byby thethe companycompany atat thethe requestrequest ofof thethe TP TP A A account account holder, holder, and and the the funds fuds on accountaccount werewere managed managcd according according to to the thc instructions instrctions oftheofthe account holder.holder. hiIn one case, an accountaccount waswas managed managed by by DAIMLER DAIMR for for the the benefit benefit ofof a a foreignforeign governentgovernment officiaL. official. OtherOther TP TP A holders included DAIMLER's foreign subsidiaries, outside distributors, dealers,dealers, oror consultantsconsultants thatthat DAIMLERDAIMLER usedused asas intermediariesintermediares toto make payments toto foreignforeign governmentgovernment officials.officials. As reflected in a 1986 audit report, the TPTP AsAs werewere maintainedmaintained withwith "absolute"absolute confidentiality" to protect account account holders fromholders from havinghavig to to reveal reveal funds funds distributeddistributed toto themthem fromfrom theirtheir respective third-partythird-pary accounts,accounts, oror toto anyany otherother ultimate beneficiary. AtAt thatthat time,time, DAIMLERDAIMLER waswas aware that the existence of the accounts may violate the lawslaws of otherother countriescountries andand thatthat disclosure ofof the accountsaccounts to to other other governments governents couldcould posepose "significant"significant difficulties fur for the the accountaccount holder,"holder," asas well as for DAIMLER.
Prior to 2002, DAIMLER'sDAILER's TPA TPA policies policies permitted permitted DAIMLER DAIMLER employees employees to to make make cash cash disbursements whichwhich werewere deducteddeducted fromfrom ledgerledger balancesbalances on the TP As. As. TheThe cashcash was disbursed from a cOlporate "cash "cash desk" desk" located located at at a aDAIMLER DAIER manufacturing manufactnring facility facility in in Stuttgart, Stuttgart,
Germany. hiIn somesome instances, DAIMLERDAILER employees employees then then took took the the cash cash and and transported transported itit to other countries,countries, where where thethe fundsfunds werewere usedused toto paypay bribesbribes to to governmental governental offcials.officials.
II.III. DAIMLER'SDAIMLER'S RESPONSE RESPONSE TOTO GERMANY'S NEW FOREIGN BRIBERYBRIBERY LAWLAW
Germany ratified ratified the Convention the onConvention Combating Bribery on of Combating Bribery of Foreign PublicPublic OffcialsOfficials inin
International Business TransactionsTransactions (the(the "OECD"OECD Convention")Convention") on on November November 1 10, 0, 1998.1998.
Germany's implementing implementing legislation, the legislation,Act on Combating theBribery Act of on Combating Bribery of Foreign Public Officials inin hiternationalInternational BusinessBusiness Transactions,Transactions, enteredentered intointo forceforce togethertogether with thethe ConventionConvention onon
5 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 25 of 98
FebruaryFebruar 15,15, 1999.1999. ThatThat German German legislationlegislation had had the effect of making payments prohibitedprohibited thereunderthereunder non-deductiblenon-deductible for for tax tax purposes. puroses. AtAt that that time, time, DAIMLERDAIMLER maintainedmaintained overover 200 TPAs, andand waswas awareaware ofof methodsmethods throughthough which its employees, subsidiaries,subsidiaries, andand affiliatesaffliates had regularly paidpaid bribesbribes toto assistassist in in securing securng business.business. Efforts over thethe followingfollowing years years by by some some DAIMLER DAIMER employees toto restrictrestrict the the makingmaking of of improper improper payments payments to to government governent officials thoughthrough TP TP As and other methodsmethods in connection with DAIMLER's overseas business were insufficiently addressed by DAIMLERDAIMLER executives prior to 2005.
During a 1999 a DAIMLER1999 BoardDAIMLER of Board of Management meeting, meeting, DAIMLER's DAILER's then then head head ofof internalintemal audit proposed that the company adopt an integrity code thatthat included anti-bribery provisions in light of the new German law which had the effect of outlawing tax deductions for foreign bribes.bribes. InIn response,respunse, participantspartcipants in thethe meetingmeeting discussed that adoptingadopting such policies
(and stopping stopping the practice the ofpractice of making "useful "useful payments") payments") would would result in DAIMLER losing business inin certaincertain countries.countries. At that meeting, an integrityintegrty code with anti-briberyanti-bribery provisionsprovisions waswas adopted. However,However, DAIMLERDAIMLER subsequentlysubsequently failedfailed toto makemake sufficientsufficient effortsefforts toto enforceenforce thethe code,code, train employees on compliance with thethe FCPAFCPA oror other applicable anti-bribery statutes, audit the use ofof TP As,As, oror otherwiseotherwise attempt to ensure that the company was not continuing to make improper payments in order to obtain or retainretain governmentgovernment business overseas.
In 2000, 2000, DAIMLER's DAIMLER's then head of then head of internal audit expressed concern that DAIMLER personnel wouldwould continuecontinue toto useuse TPTP As to make improper payments to foreign officialsofficials afterafter thethe change in German law. InIn a a MayMay 2000 2000 memorandummemorandum addressedaddressed toto seniorsenior salessales andand fmance[mance
personnel, including including the head of the head of DC OS, with a copycopy to to DAIMLER's DAIMLER's legallegal department,departent,
DAIMLER'sDAIMLER's headhead of of internal internal audit audit warned warned that that because because TPAs TPAs were were subject subject to to minimalminimal oversight, oversight,
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pennittedpermitted cash transactions, and and carriedcarred fundsfuds resultingresulting from price mark-ups,mark-ups, rebates, andand commissions, therethere waswas aa highhigh riskrisk thatthat thethe TPAs TPAs did did not not comport comport with with either either DAIMLER's DAIMER's newnew
..integrity integrity code code or or the the new new Germmllaw Geniimi law outlawing outlawing bribery bribery of of foreign foreign officials. offcials. In the May 2000 memorandum, the head of internal audit also stated that the presence of TP AsAs couldcoild be viewed as the company "facilitating fraudulent transactionstransactions withinwithin thethe organization."organization." The head of internal audit warned in the memorandum that, given the lacklack of internal controlscontrols overover TPTP As, As, internal audit could be held responsible for failing tuto take remedial measures should certain transactions occur and become public.
The May 2000 memorandum also recommended that internal audit, amongmuong other things, review all TP AsAs toto detenninedetermine whether commission payments reflectedreflected therein were legitimate, conduct audits of all operational sales departments to "identify tàvorsfavors granted that might be problematic from a legalfrom point a legalof point of view llildand cancelingcanceling themthem asas soonsoon asas possible," possible," andand requirerequie all
DAIMLER contract partnersparers to to provide provide written written confirmation confinnation that that no no commissioncommission oror resaleresale price margins would be passed through to "sub-agents."
In an attachmentattachment toto thethe MayMay 2000 2000 memorandum memorandum entitled entitled "Overview "Overvew ofthe ofthe CurrentCurent
Internal Control Situation inin ComrectionConnection withwith InvoicingInvoicing Instrnctions Instrctions (Incl.(Incl. CommissionsCommissions
Settlement)," thethe internalinternal audit audit department departent pointedpointed out that DAIMLERDAIMER had had no no centrallycentrally documented criteria to ensure that commissioncommission payments complied with the law and
DAIMLER's integrityintegrity code.code. ItIt also also noted noted that that DAIMLER DAIMLER lacked lacked central central regulation regulation for for grantinggranting price inclusions and commissions to accounts in countries "with"with off-shoreoff-shore status."status." InternalInternal audit concluded that such practices placed DAIMLERDAIMLER at serious risk of violating its own integrity code, damaging its corporate reputation, and contravening GermanGennan tax law to the extent that the
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company declared commissionscommissions toto foreignforeign officialsoffcials as an operating expense and thus took a tax deduction. InternalInternal auditaudit alsoalso stated in this document thatthat sales managementmanagement lackedlacked aa willingness wilingness toto allow muremore transparency intointu thethe transactionstransactions throughthrough thethe TPAs.TPAs. Internal audit ultimately concluded thatthat DAIMLER should:should: (1)(1) closeclose allall TPAs unless they met due diligence requirements and were and proven were proven legitimate; and (2) obtain documented proof of actual services rendered by outsideoutside agentsagents andand business business partners parers and and representations representations thatthat commissionscommissions were not passed tuto unauthorized sub-agents.
Following the issuance the issuance of of the May 2000 internalinternal audit memorandum and attachments,
DAIMLER'sDAlMLER's then head ofthen head of internal audit recommended inin 20012001 thatthat allall TPAsTPAs bebe shutdown.shutdown. The then head head of of DC OS and and other othermembers membersof of DAIMLER'sDAILER's overseas overseas sales sales management management resisted resisted thisthis recommendation.
In or or about about 2000 or2000 2001, anor employee 2001, of an employee of DAIMLER'sDAIMER's internal internal audit audit department department wrote wrote an undated undated document document entitled "Systematics entitled and "SystematicsHandling Alternatives and of Handling Alternatives of Useful Expenditures"
(the "Useful"Useful Expenditures Document").Document"). TheThe Useful ExpendituresExpenditues Document set forthforth inin explicitexplicit detail waysways in in which which DAIMLER's DAIMER's internal internal audit audit departentdepartment was was awareaware that DAIMLERDAIMLER employees had made and could make bribe payments, including the following:
(a) cashcash payments payments from from secret secret accounts; accounts;
(b) paymentpayment for for fictitious fictitious shipments shipments or or arificial artificial invoices; invoices;
(c) paymentpayment for forfictitious fictitious services, services, such such as as phony phony consulting consulting services; services;
(d) grantinggranting credits credits without without justification; jnstification;
(e) waivingwaiving claims/charges claims/charges or orcollection; collection;
(f)(1) enteringentering into into fictitious fictitious employmentemployment relationships; relationships;
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(g)(g) takingtaking cash cash from from employees' employees' ownown accounts accounts throughthrough aa falsefalse declarationdeclaration that that the the funds fuds wilwill be be usedused inin thethe privateprivate sector;
(h)(h) personallypersonally delivering delivering cash cash inside inside oror outsideoutside the the country countr ofthe ofthe "home "home countrycountry national;"national;"
(i)(i) grantinggranting an an"agency "agency commission" commission" to to decision decision makersmakers oror through "third"third partypart agency agency commissions commissions toto persons closelyclosely associated with thethe decisiondecision makermaker whowho will will pass pass on on the the funds fuds inin whole or in part;"
G) grantinggranting "donations" "donations" to toinstitutions institutions that that the the decision-maker decision-maker is interestedinterested in supporting;
(k) "price"price surcharges" surcharges" charged charged to to third third partyparty accountsaccounts and used forfor usefulusefu expenditues;expenditrnes;
(I)(1) usingusing the the "grey "grey market market for for corruptioncorrption purposes;"puroses;"
(m) usingusing countries countries with with strict strict bank bank secrecy secrecy laws laws or or weak weak regulations regulations over cash deposits; and
(n) grantinggranting special special ters terms for for DAIMLER DAIMLER products products and and services, services, such such as special discounts.
In thethe UU sefiIl seni1 Expenditrnes Expenditues DoclUnent, Dociinent, the the DAIMLER DAIER internal internal audit audit employee employee also also assessedassessed both thethe levellevel ofof difficultydifficulty to law enforcement authorities authorities in in proving proving corruption corrption carriedcared out out throughthrough the various various methods methods as well as asthe wellrelative as costs the of relative different costsmethods of makingdifferent improper methods ofmaking improper payments.
The document document went on to went describe on technques to describe that techniques that reduced the likelihood of detection. ForFor example, under the section of the documentdocument discussing "payment ofof fictitious 'services'" thoughthrough artificial artificial invoices or consulting services,services, thethe documentdocument reflectedreflected that this is a "relatively"relatively easy" method of committing briberybribery providedprovided thatthat thethe "entrepreneurial"entrepreneurial status ofof thethe partnerparter isis plausibleplausible andand thethe fictitious 'fees' areare within within plausible plausible range."range." TheThe document document also also reflected reflected that that the the probability probability of of discovery waswas low "especially"especially if if a a foreignforeign company company actsacts as serviceservce provider,provider, which may also assumeassurc thethe fuction function of corrption of corruption intermediary," butintermediary," that this paricular but"tye ofthat this particular "type of briberybribery isis comparativelycomparatively
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expensiveexpensive for the for paying the party paying (i.e., partyDAlLERJ due[i.e., to theDAlMLER] participation of due to the participation of thethe statestate onon thethe sideside ofof thethe recipient." recipient." Significantly, Significantly, the document the document notednoted that that the thepayment payment of of "useful"useful expenditures"expenditues" through thesethese methods was subject to criminal prosecution inin countries such as the United States.
InIn 2002,2002, DAIMLERDAIMLER changedchanged itsits officialoffcial TPTP AA policypolicy toto no longer permitpermit cash payments or thethe use of checks charged toto a TPA,TPA, and it closed its cash desk inin Stuttgart, Germany.Germany. However, certainDAlMLERcertainDAlER employees, employees, subsidiares, subsidiaries, and and affliates affiliates continued continued to to utilize utilize offshore offshore bank bank accounts and bank accountsaccounts maintained by DAIMLERDAIMLER and others to makemake improperimproper cashcash payments.payments.
DAIMLERDAIMER also also instituted instituted a anew new policy policy in in 2002 2002 requiring requiring the the beneficiaries beneficiaries of of TP TP As to designate a
"reference bankban account" account" to to which which payments payments couldcould bebe wired oror otherwiseotherwise transferred,transferred, thus avoidingavoiding the need for cashcash disbursementsdisbursements fromfrom thethe cashcash desks. desks. ThereThere waswas nono requirement,requiement, however, that the reference bankban account account be be maintained maintained in in thethe countrycountr in in whichwhich the the accountaccount holderholder resided oror wherewhere the services services provided provided by by the accountaccount beneficiarybeneficiar had had purportedly beenbeen rendered. rendered. ItIt remainedremained thethe case that DAIMLER failedfailed to monitor payments directeddirected by management from the TPAs.
Ultimately, by 2004, DAIMLER had reduced the number of TPAs from more than 200 to approximately 40, with 40,ofï:the-books with on:the-books accounts remaining accounts remaining in connection connection with business with businessin certain in certain high risk countries forfor corruption,corrption, suchsuch asas Nigeria. Nigeria. However,However, DAlMLER DAlLER failed failed to to implement implement policies policies suffcientsufficient toto ensureensure the the remaining remaing TP TP As As werewere not not being used toto makemake improper payments to to foreignforeign governentgoverrunent offcials. officials. In Inaddition, addition, internal internal audit'saudit's resourcesresources were insuffcientinsufficient to conduct transactionaltransactional auditsaudits ofTPAsofTPAs or or other other accounts accounts to to ensure ensure compliance compliance with with the the FCPAFCPA andand otherotber anti-anti corruption statutes.statutes.
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OnlyOnly in 2005,2005, some time after the inception ofof the SEC and DO]DOl investigationsinvestigations ofof
DAIMLER,DAIMLER, did DAIMLER did eliminate DAIMLER the use of TPAseliminate entirely the use of TP As entirely andand impose the controls necessary toto prevent,prevent, deter, and detect the making of improper payments toto foreignforeigu govemmenlgovernment ufficials.
IV.IV. DAIMLER'SDAIMLER'S BRIBERY BRIBERY IN IN SPECIFIC COUNTRIESCOUNTRIES
A. RUSSIARUSSIA
1. BackgroundBackground Regarding Regarding DAIMLER's DAIMLER's Bribery Bribery In In Russia Russia
DaimlerChrysler Automotive Russia SAO ("DCAR"), uuwuUW knuwnknown as Mercedes-BenzMercedes-Benz RussiaRussia
SAO, was wasaMoscow-based, aMoscow-based, whollyowned subsidiary whony owned subsidiary of Daimler AG. DCAR AG. DeAR sold DAIMLERDAILER spare spare parts, assisted assisted with the with sale theof sale ofvehicles from various DAIMLER divisions in Germany, including in particular DCOS, to government customers in the RussianRussian FederationFederation ("Russia"),("Russia"), and also importedimported
DAIMLER passenger and commercial vehicles into Russia for sale to customers and distributors.
DAIMLER sold passenger cars and commercial vehicles directly from its headquarters in
Stuttgart, Germany, Germany, to its Russian to its governent Russian clients government with the assistance clients ofDCAR with and the assistance ofDCAR and DAIMLER' s s representative office in Moscow.Moscow. DAIMLERDAIMLER cariedcarried out out such such sales sales fromfrom DCOSDCOS with DCAR acting as an agent toto assistassist with with such such direct direct sales. sales. DCAR DCAR and and DAIMLER DAILER sold sold passenger passenger cars,cars, commercial vehicles, andand Unimogs in Russia.
DAIMER'sDAIMLER's business business in in Russia Russia was was substantiaL. substantial. DCARDCAR and and DAIMLER's DAIMLER's government government customers in Russia in Russiaincluded the included Russian Ministr the of Russian Ministry ofInternal Affairs, the Russian military, the City of Moscow, the City the ofUfa, City and theofUfa, City of and the City of Novi Urengoi,Urengoi, amongamong others. DAIMLER, throughthrough
DCAR, made improper made payments improper at the requestpayments of at the request of Russian government officialsofficials oror their designeesdesignees inin order order to secure to secure business business from Russian from governent Russian customers. government Payments of customers. Payments ofthisthis naturenatue were were mademade withwith the theknowledge knowledge and participation and ofparticipation ofthe the formerformer seniorsenior management ofof DCAR DCAR andand DCOS.DCOS.
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DAIMLER and DCAR sometimes mademade improper improper payments payments to to government governent officialsofficials in
Russia to secure business by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated tlrirdthid partiesparties thatthat providedprovided nono legilimatelegitimate servicess"rvices to
DAIMLER or DCAR with the understanding that such payments would be passed on, in whole or in part, toto Russian government officials. WhenWhen payments payments werewere mademade toto thirdthird parties, thethe payments were recordedrecorded onon oneone ofof atat least least nine nine DAIMLER DAILER debtor debtor accounts.accounts.
These overpayments w"re were maintain"d maintained as as reserves reserves on un DAIMLER's DAILER's booksbooks andand recordsrecords inin certain internal debtor accounts, including debtor accounts that were identified by the name of the
governmentgovemment customer customerwith which DAIER with and which DAIMLER and DCAR did business.business. Whenrequested, DAIMLER employees wiredwired andand authorized thethe wiring ofof payments fromfrom DAIMLER'sDAIMLER's bankban accountsaccounts inin
Germany to, among other destinations, U.S. and Latvian bank accounts beneficially owned by shell companies with the with understandig the understanding that the money, in whole that or the in par,money, was for inthe whole benefit ofor in part, was for the benefit of Russian governmentgovernent offcials.officials.
A former former senior senior member ofDCAR' s s GovemmentGovernment SalesSales and Passenger Car Sales departments
(the "DeAR"DCAR GovernmentGovernent Sales Sales Executive") Executive") authorized authorized thesethese paymentspayments toto RussianRussian governmentgovernment officialsoffcials andand designateddesignated thirdthird pariesparties via via Daimler's Daimler's debtor debtor accounts, accounts, which which payments payments were were intendedintended to induceinduce passengerpassenger vehicle sales toto RussianRussian governmentgovernment customers. DAIMLERDAIMLER andand DCARDCAR employees oftenoften directed thethe payments toto Russian officials intointo these officials'offcials' LatvianLatvian bankbank accounts that were nominally heldheld inin the name of shell companies,companies, somesome ofof whichwhich werewere U.S.-U.S. registered corporations.
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AsAs setset forthforth below,below, DAIMLERDAIMER and and DCAR DCAR employees employees alsoalso mademade andand authorized the makingmaking ofof cashcash paymentspayments to to Russian Russian government government officials offcials employed employed at at Russian Russian government governent customers,customers, or theirtheir designees,designees, inin order order to to induce induce sales sales ofUnimogs ofUnimogs to to several several Russian Russian government governent municipalities.
DAIMLERDAIMLER andand DCAR DCAR recordedrecorded improper improper paymentspayments toto RussianRussian governmentgovernment officialsoffcials or theirtheir designees, in their books and records asas "commissions," "special"special discounts," and "N.A."
a. OverallOverall Sales Sales
Overall, betweenbetween 2000 and 2005, DAIMLER's vehicle salessales inin Russia,Russia, consistingconsisting ofof sales sales of passengerpassenger vehicles,vehicles, commercialcommercial vehicles, andand Unimogs,Unimogs, totaledtotaled approximatelyapproximately €1.4 billion,bilion, ofof which approximately 5%5% or €64,660,000 waswas derived fromfrom thethe sale of vehiclesvehicles to RussianRussian governmentgovernent customers. customers. AsAs set set forth forth below, below, inin cOllection connection with with these these vehicle vehicle sales, sales, DCAR andand
DAIMLER made made overover €3 millionmilion in in improper improper paymentspayments toto RussianRussian government governent officials employedemployed at their Russian governmentalgovernental customers, customers, their designees, oror toto third-partythid-part shell shell companies companies thatthat provided no legitimate services to DAIMLERDAIMLER oror DCARDCAR with with the the understanding understanding that that the the funds fuds would be passed on,on, inin wholewhole or or in in part, par, toto RussianRussian government governent officials.officials.
b. PassengerPassenger Car Car Sales Sales
DCAR employees employees acted as liaisons acted to Russian as liaisons governent to customers, Russian including government customers, including the Russian
Ministry of Internal Affairs,Affairs, knownknown by by its its initials intials in Russian as "MVD." MVDMVD waswas thethe RussianRussian government agency principallyprincipally responsibleresponsible for for policing, policing, militia, militia, immigration, immigrtion, andand otherother functions. fuctions.
The Russian traffic police fell under the supervision ofof thethe MVD.MVD. TheThe MVDMVD andand thethe SpecialSpecial
Purpose GarageGarage ("SPG")("SPG") were were DAIMLER'sDAIMLER's principal principal Russian Russian government government customers customers for for passengerpassenger cars between 2000 andand 2005. DAIMLERDAIMLER made made improperimproper paymentspayments toto RussianRussian officialsofficials employedemployed
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at itsits RussianRussian governmentgovernent customers customers directly directly and and throughthrough agentsagents and third-partythird-pary shellshell companiescompanies inin order to secure contracts to sell passenger cars.
InIn lolal,total, DAIMLERDAIMLER and DCARDCAR mademade approximately€2,866,28Iapproximately€2,866,28 1 in payments toto 2323 differentdifferent parties that were recorded on the debtor accounts used in connection with sales of passenger cars to the SPG, atat leastleast €1.4€1.4 millionmillion ofof which which waswas usedused toto paypay bribesbribes directlydirectly toto RussianRussian governmentgovernment officialsoffcials withwith thethe SPGSPG oror waswas usedused to to paypay thirdthird partiesparties withwith thethe understanding thatthat suchsuch payments would bebe passedpassed on,on, in in whole whole or or in in part, par, toto RussianRussian government governent officials officials withwith thethe SPG.SPG.
In addition, DAIMLERDAIMER and and DCAR DCAR made made approximatelyapproximately €3.8 millionmilion inin paymentspayments to third parties that were recorded on the debtor accounts used in connection with sales of passenger cars to the MVD, at leastleast €1.8€1.8 millionmilion ofof which,which, in whole or in part,par, waswas usedused toto paypay bribesbribes toto RussianRussian governmentgovernent offcials officialswith the MVD withor was usedthe toMVD pay or was used to pay third parties with thethe understandingunderstanding that such payments would bebe passedpassed on, on, in in whole whole or or in in part, par, to to Russian Russian government governent officials officials withwith thethe MVD.MVD.
DAIMLER and DCAR made payments to MVD consultants with the knowledge that those payments would be passedpassed on,on, inin whole whole or or in in part, part, to to Russian Russian government governent officialsofficials oror their designees in their efforts to obtain and retainretain businessbusiness fromfrom thethe RussianRussian MVD.MVD.
c. CommercialCommercial Vehicle Vehicle Sales Sales
Between 2000 and 2005,2005, DAIMLERDAIMLER sold commercial vehiclesvehicles directlydiectly toto governmentgovernment customers in Russia from its CommercialCommercial Vehicles Division in Germany, with the assistance of
DCAR in areas such as contract negotiation, pricing, and the draftingdrafting ofof contracts.contracts. The two primary
Russian governmentgovernent purchasers purchasers ofof DAIMLER'sDAIMLER's commercial commercial vehicles vehicles werewere MachinoimportMachinoimport andand
Dorinvest, both of both of which were wereRussian Russiangovernent purchasing government agents for purchasingthe city of agents for the city of Moscow.
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BetweenBetween 2000 and 2005, DAIMLERDAIMLER made improperimproper payments to RussianRussian governmentgovernment officialsoffcials employedemployed byby state-ownedstate-owned customerscustomers and to third-party shell companies in order to secure contractscontracts toto sellsell commercialcommercial vehicles to thosethose customers.customers. As with passenger car sales, the improperimproper paymentspayments were sometimes derived by inflating the purchase price of the vehicles and paying the excess amount amount back to employees back toof employees of DAIMLER's Russian governmentalgovernental customerscustomers oror indirectly indiectly throughthrough third-partythird-party shellshell companies. SomeSome of thesethese price differentials or "inclusions" werewere improperlyimproperly recorded recorded in in Daimler'sDaiiier's buuksbooks andand recordsrecords asas "servce"service reserves," reserves," although although certaincertain
DAIMLER and DCARDeAR employees employees understoodunderstood thatthat thesethese priceprice surchargessurcharges were intended to be paid as bribes to RussianRussian government officialsoffcials oror theirtheir designees.designees.
Between 2000 and2005, 2000 and2005,DAIER and DCAR DAIMLERmade at least 12 improperand DCAR made at least 12 improper payments totaling approximately€3 88,724 88,724 to seven different third partiespartes inin connectionconnection with the sale of its commercialcommercial vehicles to Russian to Russian governent governmentcustomers, including customers, improper including improper payments to an individual with close ties to the Russian governmentgovernent with with the the understanding understanding that that the the payments payments wouldwould bebe passedpassed on,on, in whole or in part,part, toto RussianRussian governmentgovernent offcialsofficials inin connectionconnection with DAIMLER'sDAIMLER's salesale of commercial vehicles.
d. UnimogUnimog Sales Sales
DAIMERDAIMLER sold sold Unimogs Unimogs diectlydirectly from from itsits UnimogUnimog division inin GermanyGermany to to its its government governent customers inin Russia. BecauseBecause ofof importimport restrictions,restrictions, mostmost UnimogsUnimogs werewere soldsold toto RussianRussian government purchasingpurchasing agents,agents, including including Dorinvest Dorivest andand Machinoimport.Machioimport.
Between 20002000 andand DecemberDecember 2005,2005, DAIMLERDAIMLER sold 5757 UnimogsUnimogs toto RussianRussian customers,customers, approximately 90% of whichwhich werewere soldsold toto governmentgovernment entities,entities, totalingtotaling approximatelyapproximately €17.89€17.89 milionmillion in in sales. sales. Thirty Thirty Unimogs Unimogs were were sold sold to to the the city city of of Moscow Moscow and and its its various various subdivisions. subdivisions.
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Other Russian governmentgovernent purchasers purchasers includedincluded the Russian military, military, thethe citycity ofUfa,ofUfa, andand the citycity ofof
Novi Urengoi.
lJAIMLERandDAIMLER and DeAR DeAR made made approximately€433,000 approximately€433,OOO inin improper payments to to government governent offcialsofficials inin Russia Russia directlydirectly andand indirectlyindirectly throughthrough third-partythird-par shell shell companies companies inin order order toto securesecure contracts toto sell sell Unimogs Unimogs to to their their Russian Russian government governent customers. customers. DAIMLER DAlERmade made these these improperimproper payments in cashcash andand throughthrough creditscredits maintainedmaintained inin thethe company'scompany's onmibus onmibus credit credit accounts. accounts. lJA1MLERDAIMLER generated generated reservereserve funds fuds for the improperimproper payments payments byissuing byissuing invoices invoices to to its its government governent customer with prices that included only a partialpartial discount. DAIMLERDAIMLER ultimately appliedapplied a larger discount and maintained the differencedifference asas aa credit credit in in DAIMLER's DAIMLER's books books and and records. records. TheseThese funds fuds were then withdrawn andand paidpaid toto thethe governmentgovernent officials officials through through shellshell companies.companies.
2. ImproperImproper Payments Payments In Connection In Connection With With The The Sale Sale Of Of Passenger Passenger Vehicles Vehicles To The SPG
Between in or aboutabout FebruaryFebruary 2001 andand MarchMarch 2005,2005, DCARDCAR andand DAIMLERDAIMLER made 2929 payments totaling approximately €928,023 to the Deutsche Bank account in Stuttgart, Germany,Gcrmany, ofof a Russian government official at the SPG (the "SPG"SPG Official") in connectionconnection with DAIMLER's salesale
of Mercedes Benz passenger carscars to the SPG.SPG.
IoIn oror aboutabout AprilApril 2003,2003, DCARDCAR andand DAIMLERDAIMLER mademade aa paymentpayment ofof €139,800 €139,800 fromfrom
DAIMLER's accowitaccowlt in GemianyGernlany toto BerwickBerwick CommercialCommercial LLC,LLC, aa corporationcorporation registeredregistered inin
Delaware, with the understanding that payment would be passed on, in whole or in part, to the SPG
Official.OffciaL.
Between in oror aboutabout SeptemberSeptember 200 2001 I and and February February 2002, 2002, DCAR DCAR and and DAIMLER DAILER made five payments tutalingtotaling approximately€3appruximately€313,050 1 3,050 fiomDAIMLER'sfium DAIMER's accowlt aCCowlt in in Germany Germany to to Kongress Food
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Ltd.,Ltd., aa corporation withwith anan addressaddress inin Dublin,Dublin, Ireland,Ireland, with with the the understanding understandig that thethe paymentspayments wouldwould be passed on, on, in in wholewhole oror inin part,par, toto thethe SPGSPG Official.OfficiaL.
BetweenBetween inin or about February 2004 and January 2005, DCAR and DAIMLER made six paymentspayments totalingtotaling approximately €306,356€306,356 fromfrom DAIMLER'sDAIMLER's account in GermanyGermany toto DelightDelight
Commercial, Ltd., a corporation with an address in the Seychelles, with the understanding that the payments would be passed on,on, inin wholewhole oror inin part,par, to the SPGSPG OffciaL.Official.
Between inin or about JanuaryJanuar 2003 and MayMay 2003, DCARDCAR and Daimler made threethee paymentspayments totaling approximately€305 approximately€305 ,400 from DAIMLER's ,400 account from in DAIMLER's Germany account in Germany to PyrrnontPyront Allance Alliance Corp., Corp., a corporation with an address in the Bahamas, with the understanding that the payments would be passed on,on, in in wholewhole oror inin part,par, toto thethe SPGSPG OfficiaL.Official.
In oror aboutabout JanuaryJanuary 2005, DCAR and DAIMLER mademade aa paymentpayment of €99,6g2t'99,6g2 tromIrom
DAIMLER's account in GermanyGermany to LorettiLoretti LLP,LLP, aa corporationcorporation with anan addressaddress inin thethe UnitedUnited
Kingdom, with the understanding that the payment would be passed on, in whole or in part, to the
SPG Official.OfficiaL.
In or about 2005, UCARDCAR and DAIMLER entered into a retroactive commission agreement with an individual introducedintroduced to to DAIMLERDAIMLER byby an employee ofofthe the SPG as someone with close ties to the RussianRussian govermnentgovernent whom whom DAIMLER DAIMLER could could use use as as an an agentthrough agentthrough which which to to makemake payments to Russian govermnentgovernent offcials officials in inexchange exchange for for assistance assistance in in securing securing business business with with the the SPG.SPG.
In addition toto thethe payments to thethe SPG Official,Official, andand thethe entitiesentities described above,above, between in oror aboutabout JulyJuly 20012001 andand NovemberNovember 2005,2005, DCARDCAR and DAIMERDAIMLER made made payments payments totalingtotaling approximately €384,619€384,6l9 to atat leastleast 1111 otherother shellshell companiescompanies thatthat diddid notnot performperform servicesservices forfor
DAIMLERDAIMLER suffcientsufficient to to justify justify the the payments, payments, with with the the understanding understanding that that these these payments payments wouldwould bebe
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passedpassed on,on, inin whole whole oror in in part, part, to to Russian Russian government governent officials officials inin exchange exchange for assistance in securingsecuring businessbusiness with the SPG.
3.3. ImproperImproper Payments Payments In Connection In Connection With With The The Sale Sale ofPasseiiger of Passenger Vehicles Vehicles ToTo TheThe RussianRussian MVD
Between in or about August 2000 and NovemberNovember 2002, DCAR and DAIMLER made 22 payments totaling approximately €785,225€785,225 fromfrom DATMLER'sDAIMLER's account in Germany to a Bank of
America account in San Diego, Californa,California, forfor SittardSittard Investments,Investments, aa CaliforniaCalifornia corporation,corporation, to secure sales ofof passengerpassenger carscars toto thethe MoscowMoscow traffictraffc police.
Similarly, betweenbetween in in or or about about January Januar 2003 andand JuneJune 2004,2004, DCARDCAR and and DAIMLER DAIMER made
13 paymentspayments totalingtotaling approximatelyapproximately €728,302 from DAIMLER's accountaccount inin GermanyGermany toto aa bankbank account in Latvia for Novitta Ltd., a Delaware corporation, in connection with passenger car sales to the MVD.
Between inin or aboutabout JanuarJanuary 20052005 andand MayMay 2005,2005, DCARDCAR andand DAIMLERDAIMLER made. made. five
payments totaling totaling approximately€402,876 approximately€402,876 from from DAIMLER'DAlLER' s account in Germany to aa bank bank account in Latvia for Tower Block Ventures,Ventues, aa U.K.U.K. corporation,corporation, forfor thethe benefitbenefit ofof a a consultant toto the MVD in connection with salessales ofof passenger carscars toto thethe MVD.MVD.
Between in or inabout or September about 2004September and December 2004 2004, DCARandand December DAIMER 2004, DCARand DAIMLER made three
payments totaling totaling approximately€235,200 approximately€235,200 fromDAlLER's account from DAIMLER's account in Germany to a banl(accountban1caccount in LatviaLatvia for SilvaradoSilvarado Ltd.,Ltd., aa corporationcorporation that provided no legitimate servicesservces forfor DAIMLERDAIMLER or
DCAR, inin connectionconnection withwith passengerpassenger carcar salessales toto thethe MVD.
Between inin or aboutabout May 2003 and August 2003,2003, DCARDeAR andand DAIMLER mademade fourfour paymentspayments totaling totaling approximately€l approximately€189 89,29 1 from DAIMLER's account ,291 fromin Germany DAIMLER's account in Germany toto a bankban account account
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inin Latvia for CapitalCapital AllianceAllance Corp.,Corp., aa FloridaFlorida corporation, inin connection with passenger car sales toto thethe MVD and to the Russian military.
4.4. ImproperImproper Payments Payments In In Connection Connection WithWith TheThe SaleSale Of Commercial VehiclesVehicles
InIn 2004,2004, DCARDCAR andand DAIMLERDAIMLER mademade three three payments payments totaling totaling approximately€58,000 approximately€58,000 from
DAIMLER's accountaccount inin GermanyGennany toto Tec1ioforex,Technoforex, a a Delaware Delaware corporation, corporation, to to securesecure thethe salesale ofof one commercial vehiclevehicle toto thethe SPGSPG forfor approximately€357,814.approximately€357,8l4.
5. ImproperImproper Payments Payments In InConnection Connection With With The The Sale Sale ofofUnimogs Unimogs
a. DorinvestDorinvest
DCAR and DAIMLER agreed toto makemake commission paymentspayments toto twotwo seniorsenior membersmembers ofof
Dorinvest (the "Dorinvest Officials"), a purchasing agent forfor the City of Moscow, both Russian government officials,officials, ofof approximately €7,343 €7,343 and and €2,447, €2,447, respectively, respectively, in order to secure the
August 2001 sale ofof a Unimog toto thethe citycity of Moscow.
In earlyearly 2002,2002, in connectionconnection with the salesale of sevenseven Unimogs toto thethe city ofof Moscow,Moscow,
DAIMLER wired a paymentpayment ofof approximatelyapproximately $7,000$7,000 toto thethe bank ban account account ofof relatives relatives ofof one of the
Dorinvest OffcialsOfficials who who were were living living in in Jerusalem, Jerusalem, IsraeL. Israel.
In or or about about November November 200 1, DCAR and200 DAILER I, DCAR also made anda payment DAIMLER from also made a payment from DAIMLER'DAIMLER's s account in GermanyGennany of approximately€34,427 toto Contrex,Contrex, aa CyprusCyprus corporation establishcdestablished forfor the benefit of ofthe the wife wife of one of of one ofthe the DorinvestDorinvest Officials.Officials.
b. MachinoimportMachinoimport
On or about January 24,2001,24,2001, a DAIMERDAIMLER employee employee made made a a payment payment ofof approximately approximately
DM15,000 from DAIMLER's from account DAIMLER's in Germany to theaccount Latvian bank in Gennanyaccount of to the Latvian bank account ofFidelity Fidelity Finance
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Corporation,Corporation, aa Delaware corporation, inin connection withwith thethe sale ofof four UnimogsUnimogs to Gormost, a departmentdeparment within the within city of the city of MoscowMoscow responsibleresponsible for for bridges bridges and and tmmels, tuels, withwith the the understandingunderstanding thatthat suchsuch paymentpayment would bebe passedpassed on,on, inin whole whole oror in in part, part, to to Russian Russian government government officials uffcials inin orderurder toto secure thisthis sale.
On or aboutabout MayMay 28,2001, 28,2001, DAlMLERDAlLER made made a apayment payment of of approximately approximately €30,072.62,€30,On.62, also fromfrom DAlLER' DAlMLER' s account in Germany s account in Germany toto FidelityFidelity FinanceFinace Corporation's Latvian Latvian bank bank account, withwith thethe understandingunderstandig that that such such paymentpayment would be passedpassed on,on, in in whole whole or or in in part, part, to tu Russian Russian government governent officials in connection with an additional salesale ofUnimogs.ofUnimogs.
c. RnssianRussian Miltary Military
On or aboutabout July 15,15, 2003, DCAR and DAIMLERDAIMER made made aa payment payment ofof approximately approximately
€5,478.09€5,418.09 fi'omÍÌom DAIMLER's account account inin Germany Germany to thethe Latvian bankbank account ofof ForfunForfu Co., Co., a a
Delaware corporation, in connectionconnection withwith the sale of one Unimog to the Russian military, with the understanding that such payment wouldwould bebe passedpassed on,on, inin wholewhole or in part, to Russian military officials.offcials.
On oror aboutabout January 31,2002, DeARDeAR and and DAIMLER DAIMLER made made aa paymentpayment ofof approximately approximately
€19,488 from DAIMLER'sfrom DAIMLER's account in Germany toaccount the Swiss bankin Germany account of to the Swiss bank account ofNorth cote Holdings, a Costa Rican corporation,corporation, inin connectionconnection withwith the sale ofof another Unimog toto thethe RussianRussian military, with the understanding that such payment wouldwould bebe passed on,on, inin whole or inin part,part, to RussianRussian military offcials.officials.
d. CityCity ofUfa ofUfa
On or aboutor about March 19,2001, March April 19,2001, April 24, 2001,2001, andand JuneJune 19,19, 2001,2001, DCARDCAR andand DAIMLERDAIMLER mademade paymentspayments totalingtotaling approximatelyapproximately DM55,030DM55,030 from DAIMLER'sDAIMLER's accountaccount inin GermanyGermany toto anan
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officialoffcial withwith thethe DeparmentDepartment of of Communal Communal EconomyEconomy andand Town Improvements forfor thethe CityCity ofUfa,ofUfa, aa RussianRussian municipal muncipal governmentgovernment official,offcial, asas well as another unidentified unidentified individual,individual, in connection withwith thethe sale of seven UnimogsUniinogs toto thethe CityCity ofUfa.ofUfa.
InIn oror aboutabout FebruaryFebruary 2001, DCARDCAR and DAIMLERDAIMLER paidpaid an additionaladditional DM9,191.34DM9,191.4 commission toto this unidentifiedundentified individual,individual, asas wellwell asas anotheranother person, in connection with the City ofUfa's purchase purchase of of an an eighth eighth Unimog.Unimog.
e. CityCity of ofN Novi ovi U U rengoi rengui
On or about March 19, 2002, DCARDCAR and and DAIMLERDAIMLER mademade aa paymentpayment ofof approximately approximately
€7,635 from DAIlVILER'sDAIlILER's account account inin Germany Germany toto aa seniorsenior municipal government officialoffcial withwith thethe
City of of No vi UrengoiUrengoi in connection in connection with the sale withof a Unimog the tosale the Cityof aof Unimog to the City of No vi Urengoi.
On or orabouLJ aboutJ uly 17,2002, uly 17,2002, DCAR and DAIMER DCAR and DAlMLERmademade a paymentpayment ofofapproximately€26,650 approximately€26,650 to the bank account of Crofton Allianz,Allian, aa Delaware Delaware corporation,corporation, inin connectionconnection with thethe sale of a second Unimog Unimog to the City to of the City of Novi Urengoi, with the understanding that such payment would be passed on, in whole oror in part, toto aa Russian governmentgovernment offciaL.official.
In or about September 2002, a DAIMLER employeeemployee mademade aa separateseparate €4,441.64€4,44l.64 payment in cash to the same Russian government officiaL.official.
B. CHINACHINA
1. BackgroundBackground Regarding Regarding DAIMLER'S DAIMLER'S Bribery Bribery In In ChinaChina
At various ties,times, DAIMLER DAIMLER operated operated a a myriad myriad of of wholly wholly andand parially-ownedpartially-owned subsidiaries subsidiaries and joint joint ventues ventures to sell itsto sellvehicles its invehicles the People's in Republic the People's of Republic ofChina ("China") andand HongHong Kong.Kong.
DaimlerChrysler China Ltd.Ltd. ("DCCL"),("DCCL"), nownow knownknown asas DaimlerDaimler North Nort EastEast AsiaAsia Ltd.,Ltd., waswas a Beijing-basedBeijing-based wholly-owned DAIMLERDAILER subsidiary subsidiary and and cost cost center center that that managed managed DAIMLER's DAIMLER's
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business relationships inin China,China, assistedassisted DAIMLER DAIMLER in in selecting selecting and and managing managing its its joint joint ventures ventus in
China, andand helped helped manage manage DAIMLER's DAIER's expatrate expatriate employees employees in in China. China.
Although DCCL did DCCL not itself did sell not any itself sell any vehicles directly into China,China, celtainceitain DCCLDCCL employeesemployees assisted with with the the sale sale of of vehicles vehicles by by various various DAIMLER DAIMLER divisions divisions in in Gemrany Germny to to government governent customers in China,China, includingincluding principally the Bureau of GeophysicalGeophysical Prospecting ("BGP"),("BGP"), a division of the ChinaChina NationalNational PetroleumPetroleum Corporation, a Chinese state-owned oil company, and
SinopecSiiiopec Corp. ("Sinopec"), a Chinese state-owned energy company.company. Both BGP and SinupecSinopec were involved in, among other things,things, explorationexploration for oil and gas.
Between 20002000 andand 2005,2005, DCCLDCCL employees employees and/or and/or DAIMLER DAlLER employees employees throughthrough DCCL made at least€4,173,944 at least€4,173,944 in improper in improper payments in the in form the of form of "commissions," delegation travel, and gifts [orfor the benefit ufof Chinese government officialsoffcials oror their designees,designees, in connectioncomrection with over
€112,357,7l9€112,357,719 inin salessales ofof commercial commercial vehicles and UnimogsUnimogs to to ChineseChinese government governent customers. customers.
These sales werewere mademade directlydirectly from from DAIMLER's DAlLER's commercial commercial vehicles vehicles and and Unimog Unimog divisions divisions inin
Germany through variousvarous intermediariesintermediaries to Chinese government customers withwith thethe assistanceassistance ofof
DCCL employees in the commercialcommercial vehicles division.
As set set forth forth below, below, to make improperto make improper payments to to Chinese Chinese government governent officials,officials, DAIMLER DAIMER and DCCL tyicallytypically inflated inflated the the sales sales price price of of vehicles vehicles soldsold toto ChineseChinese governmentgovernment customers and maintained the overpayments inin debtordebtor accounts accounts on on DAIMLER's DAlLER's books books and and records, records, including including oneone debtor account called the "special commissions" account. The "special commissions" account,account, also known as the as "819" the account "819" for account for the last last three digits digits of of the account account number, was usedused by by DAIMLER DAIMER to make improperimproper paymentspayments to to Chinese Chinese government governent offcials.officials. DCCLDCCL employees, employees, including including itsits thenthen head of sales andand marketingmarketing (the "Sales and MarketingMarketing Head"),Head"), disburseddisbursed paymentspayments from thethe 819819
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accountaccount toto andand forfor thethe benefitbenefit ofof ChineseChinese governmentgovernment officials.officials. The Sales and Marketing Head waswas inin charge ofof salessales forfor commercialcommercial vehicles vehicles and and had had the the authority authority to to cause cause the the wiring wiring of of funds fuds from aa DAIMLERDAIMLER bankbank account inin GermanyGermany to to Chinese Chinese government governent officialsoffcials oror their their designees.designees. AtAt the time,time, nono checks oror policies werewere in place toto ensureensure thethe legitimacylegitimacy oror appropriatenessappropriateness ofof suchsuch payments.
DCCL and DAIMLER also employed agents to assistassist in securingsecuring commercial vehiclesvehicles andand
Unimog businessbusiness from Chinese government customers.customers. Neither DCCL nor DAIMLER performedperformed due diligence on these agents, and there were inadequate controls in place to ensure that payments made to agentsagents werewere notnot passed passed on on to to Chinese Chinese government governent officialsofficials and their designees. The agency agreements were often were often not inin writing.writing. InIn addition,addition, DCCL DCCL and and DAIMLER DAILER lacked lacked adequateadequate oversight into thethe appropriatenessappropriateness or or purposepurose ofof payments payments from debtordebtor accounts thatthat ultimatelyultimately went to government officials in China and their designees. FinanceFinance andand controlscontrols oversight was so lacking with respect to DAIMLER'sDAIMER's sale sale of of commercial commercial vehicles vehicles in in China China that that DCCL' DCCL' s sSales Sales and and Marketing Marketing
Head was able to remove at least approximately €230,OOO€230,000 from a company debtor account withoutwithout detection, and then directed thosethose fundsfuds toto thethe oí1hore otIShore bank bank account account of of his his wife. wife.
2. UseUse Of OfAgents Agents To To Make Make Improper Improper Payments Payments For For TheThe PurposePurpose Of Securing Business FromFrom Chinese State-OwnedState-Owned OrOr Controlled Entities
Between 2001 and 2004, DCCLDCCL andand DAIMLERDAILER at at the the direction direction of of Chinese Chinese gove11l1ent government officials made improperimproper paymentspayments totalingtotaling at least €188,840 intointo U.S. bankbank accountsaccounts belongingbelonging to thirdthird parties to obtainobtain contractscontracts valuedvalued at €5,533,38l€5,533,381 forfor thethe salesale ofof commercial commercial vehiclesvehicles andand
Unimogs to ChineseChinese governmentgovernment customers. TheseThese paymentspayments werewere mademade intointo U.S.U.S. bankbank accountsaccounts even though no partpar ofof the the transactiontransaction involvedinvolved thethe U.S.,U.S., nornor werewere thethe entitiesentities thatthat nominallynominally
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controlledcontrolled thethe bank ban accountsaccounts partiesparties to to anyany of of thethe transactions. transactions. DCCL DCCL andand DAIMLER DAIMLER did not
performperform any dueany diligence due diligence to discern who to the discern recipients who of the recipients ofthethe paymentspayments were. were. Further, Furer, the the corporatecorporate entitiesentities thatUial received received the the payments payments from from DAIMLER DAIMLER for for the the benefit benefit of of the the Chinese Chinese government governent officialsofficials performedperformed nono legitimate services forfor DCCL or DAIMLERDAIMLER andand diddid nothing to earn these payments.
a. M.F.M.F. Mechanical Mechanical & Electrical, & Electrical, Inc. Inc.
On or orabout about July 27,2001, July 27,2001,DCCL and DAIMLER DCCL and DAIMLER paid M.F. Mechanical & Electrical, Inc.
("M.F. Mechanical"), approximatelyapproximately €98,300€98,300 inin connectionconnection withwith aa €1,875,€1,875, 777 contract for the sale ofUnimogs to Changqing to Changqing Petroleum, a Chinese Petroleum, state-owned aor Chinese controlled entity state-owned or controlled entity in thethe energy energy sector.
DAIMLER wired the payment from its account in Germany to M.F. Mechanical's bankbank accountaccount atat the Far East NationalNational BankBan inin LosLos Angeles,Angeles, Californa.California. TheThe payment payment waswas forfor thethe benefitbenefit of the
Changqing officialofficial whowho helpedhelped DAIMLERDAIMER securesecure thethe contract.contract. AlthoughAlthough aa consulting consulting contractcontract existed between M.F. Mechanical andand DAIMLER,DAIMLER, it it waswas signedsigned afteraftr thethe underlyingunderlying contractcontract between DCCL and Changqing was executed, and one month before a DCCL executive authorized the €9S,300€98,300 improperimproper payment.payment. DCCL and DAIMLERDAIMER made made the the payment payment with with thethe understandingunderstanding that it would bebe passedpassed on,on, inin wholewhole oror inin part, part, to to the the Changqing Chagqing offcialofficial or or his his designees.designees.
b. ShoresShores International International
On or about FebruarFebruary 28, 28, 2002,2002, DCCLDCCL andand DAIMERDAIMLER made made a apurported purported commission commission payment in the amount of€lof€IS,OOO 8,000 fromfrom itsits accountaccount in Germany to Shores Internationalhiternational ("Shores"), a Texas corporation, to anan account at Metrobank in Houston, Texas, in connection with the sale of
€1,009,497 worth of worth commercial of vehicles commercial to Sinopec. vehicles The payment to Sinopec. The payment toto Shores, thethe corporate address forfor which was aa residentialresidential apartment apartent complex complex in in Houston, Houston, waswas a purortedptrrported commission commission payment payment
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toto thethe wifewife ofof a a Chinese Chinese government governent official official at at SinopecSinopec involved in contractcontract implementation.implementation. DCCL and DAIMLER made the payment withwith thethe understandingunderstanding thatthat it would bebe passed on, in whole or in part,par, toto SinopecSinopec offcialsofficials oror theirtheir designees.designees.
c. LilyLily Energy Energy Services, Services, Inc. Inc.
On or aboutabout FebruaryFebruary 21,21, 2003,2003, DCCLDCCL andand DAIMLERDAIMLER made aa purportedpurported commissioncommission payment of approximately €15,OOO€15,000 from an account in GermanyGermany toto LilyLily EnergyEnergy Services,Services, Inc.Inc.
("Lily"), a Texas corporation, at American First National Bank in Houston, Texas, in connection with the sale ofof sixsix ActrosActros truckstrcks valuedvalued atat €492,000€492,000 to to Changqing.Changqing. LilyLily was was ownedowned byby thethe samesame
Changqing official for whose benefit the payment was made through M.F. Mechanical, referenced above. ThereThere was no written consulting agreementagreement betweenbetween DCCLDCCL or or DAIMLER DAIMER and and Lily,Lily, nor did
Lilyprovide anyany legitimatelegitimate servicesservices to DCCL or Daimler. DCCL and DAIMLER made the payment with the understanding that it would be passed on, in whole or in part, to the Changqing official or his designees.
d. KingKing Jack, Jack, Inc. Inc.
On or about October 25, 2004, DCCLDCCL andand DAIMLERDAIMER made made aa paymentpayment ofof approximately approximately
€53,540 from an accountaccount inin GermanyGermany to King Jack Inc., a California corporation, to an account at
Cathay Ban, Bank,City of City of Industry,Industr, California, California, in in connection connection with with the the June June 2004 2004 sale sale ofof 16 16 Unimogs and
12 Actros Actros to Sinopec, to Sinopec, a deal valued a dealat over€2 valued milion. atThe over€2owner of million. The owner of King Jack Jack had a U.S. address in Texas.Texas. NeitherNeither King King Jack Jack nor nor its its owner owner performed performed anyany legitimatelegitimate servicesservices forfor DCCL or
DAIMLER. DCCLDCCL and DAILERDAIMLER made made the the payment payment with with the the understanding understanding thatthat itit wouldwould bebe passed on,on, in whole or in par,part, toto Sinopec Sinopec officialsofficials oror theirtheir designees.designees.
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e.e. ChineseChinese Agent Agent AA
OnOn JuneJune 9,9, 2003,2003, aa DCCLDCCL employeeemployee wiredwired approximatelyapproximately €4,000€4,000 fromfrom DCCL'sDCCL's account in
GermanyGermany toto anan individual'sindividual's ("Chinese AgentAgent A's")A's") account at BankBan of of America America in in San San Francisco, Francisco,
California,California, in connection withwith thethe salesale ofof oneone ActrosActros truck,truck, valuedvalued atat €87,000,€87,000, toto BGP. BGP. There waswas neither a writtenwritten consultingconsulting agreementagreement between between DCCL DCCL or or DAIMLER DAIMER and and this individual, nor did hehe perform any services for DCCL or Daimler. DCCLDCCL andand DAIMLERDAIMLER made the payment with the understanding that it would be passed on,un, inin wholewhole oror inin part,part, toto BGPBGP officialsoffcials or their designees.
3. AdditionalAdditional Improper Improper Payments Payments For For The The Purpose Purpose Of Of Securing Securing Business Business From Chinese State-Owned Entities
Deer"Dccr" andand DAIMLERDAIMLER made improper paymentspayments directly directly to to Chinese Chinese government governent officialsofficials in connection withwith salessales toto BGPBGP andand Sinopec,Sinopec, DAIMLER's DAIMLER's largest largest government governent customers customers forfor itsits commercial vehiclesvehicles inin China.China. InIn total,total, DAIMLERDAILER and and DCCL DCCL made made approximately approximately €2,599,694€2,599,694 in improper payments to ChineseChinese government officialsoffcials associatedassociated with these.these. entities toto assist in obtaining sales worth approximately €71,562,882.€7l,562,882.
DCCL and DaimlerDaimler mademade the the following following improper improperpayrents payments to assistassist in in obtaining obtaining or or retaining retaing business fromfrom BGPBGP andand Sinopec:Sinopec:
(a) BetweenBetween April April 2000 2000 and andOctober October 2004, 2004, miltiple multiple payments payments totaling totaling at at least least approximately €155,905€155,905 forfor thethe purposepurose ofof entertaining entertaining executivesexecutives at bothboth entities;
(b) On Onor aboutor about July July 8, 8, 2003 2003 and and September September 17, 17, 2004, 2004, payments payments totaling totaling approximately €56,400€56,400 intointo accounts at multiple banks to anan individualindividual associated withwith an offcialofficial at at BGP BGP in in charge charge ofof operations operations inin anotheranother country;country;
(c) On Onor aboutor about December December 16, 16,2004, 2004, a apayment payment of of approximately approximately €14,800 €14,800 to to a relative ofof a Chinese governmentgovemment official associated with BGP in connection withwith thethe salesale ofof commercial commercial vehiclesvehicles toto BGP;BGP;
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(d)(d) BetweenBetween March March 2002 2002 and and Februar February 2003, 2003, payments payments totaling totaling approximately €30,000€30,000 inin commissions forfor "marketing"marketing research"research" toto thethe Stuttgart hankbank accountaccount ofof thethe son son of of an an official offcial of BGP;BGP; andand
(e)(e) On or aboutOn Aprilor about April 18,18, 2002, 2002, a a payment payment ofapproximate1y€57,000 ofapproximately€57,000 to the wifewife ofof aa ChineseChinese governmentgovernment official offcial employed atat Sinopec. In order to conceal
thethe natuenatnre of of thethe payment, payment, on or abouton orApril about April 13,13, 2001,2001, the daythe day afterafter SinopecSinopec agreedagreed to to purchase purchase commercial commercial vehicles vehicles from from DAIMLER, DAILER, DCCLDCCL employees, onon behalf behalf of ofthe the company,company, enteredentered intointo aa phonyphony consultingconsulting agreementagreement withwith thethe wifewife of thethe ChineseChinese governmentgovernment official, in exchange for whichwhich nono services werewere ever performed.performed.
Between 2000 and 2005, DCCL and DAIMLER provided the fullowingfollowing things of value, among others, toto thethe sonson ofof aa Chinese Chinese government governent official official who who mademade purchasingpurchasing decisions for BGP in order to assist inin securing business from BGP:
(a) internshipsinternships at at DAIMLERDAIMLER for forhim him and and his his girlfrend girlfriend inin 2001;
(b) lettersletters from [rom aa formerfunner DAIMLERDAIMLER employee employee to toGerman German immigration immigration officials officials to assist him and his girlfriendgirlfrend withwith theirtheir effortsefforts toto obtainobtain studentstudent visas;visas;
(c) €2,223€2,223 in expensesin expenses to toattend attend a atrck truck race race in in July July 2004 forfor him, thethe ChineseChinese governmentgovernent offcial, official, and and others; others;
(d) use useof ofa Mercedes a Mercedes passenger passenger car car over over a aperiod period of of time; time; andand
(e) employmentemployment at atDAIMLER DAIMLER from from January-Apri12005 January-Apri12005 withwith aa monthly salarysalar of€600.
4. ImproperImproper Payments Payments For ForDelegation Delegation Trips Trips For For The The Purpose Purpose Of Of Securing Securiug Business From SinopecSinopec
Between 19981998 and 2005, DCCL and Daimler also provided at least €268,568 worth of delegation trips to employees of itsits governmentgovernent customers customers in in China China for for the the purposepurpose ofof assisting assisting in securngsecuring businessbusiness from thosethose customers. AgentsAgents working asas intermediaresintermediaries betweenbetween DCCL andand
DAIMLER,DAIMLER, onon thethe oneone hand,hand, andand itsits ChineseChinese governmentgovernment customers,customers, onon thethe otherother hand,hand, typicallytypically requestedrequested thethe delegationdelegation tripstrips upup frontfront duringduring thethe contractcontract negotiationnegotiation process on behalfbehalf ofof thethe
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customercustomer involved.involved. DCCL andand DAlMLERDAILER then then estimated estimated the the costcost of of the the triptrip andand increasedincreased the purchasepurchase priceprice of the vehicles accordingly. SomeSome contracts characterized thesethese tripstrips as "factory inspectioninspection trips," even thoughthuugh thethe tripstrips werewere primarilyprimarly visits toto touristtourist locations.locations.
DCCLDCCL and DAIMLERDAIMLER mademade thethe followingfollowing paymentspayments inin connectionconnection with delegationdelegation tripstrips forfor thethe purposepurose of of assisting assisting in in securing securing businessbusiness from Sinopec:Sinopec:
(a)(a) PaymentsPayments totaling €35,648 totaling for a l4-day €35,648 delegation for trip a in14-day delegation trip in December 200 I1 forfor 1212 Sinopec offcialsofficials toto Germany,Germany, alongalong withwith giftsgifts worthworth €980€980 toto the government officials on the trip; and
(b) PaymentsPayments totaling totaling €40,257 €40,257 in in July July 2004 2004 for for a adelegation delegation triptrip forfor SinopecSinopec officials to Germany. OnOn oror aboutabout JulyJuly 15,15, 2004,2004, aa DCCLDCCL employee stated in an e-mail that the delegation members planned to travel all over Europe and would be provided pocket money.
C. VIETNAMVIETNAM
1. BackgroundBackground Regarding Regarding DAILER's DAIlVILER's Bribery Bribery in in VietnamVietnam
Mercedes Benz Vietnam Benz ("MBV") Vietnam was responsible ("MBV") for the wassale of responsible for the sale of DAIMLER vehicles into
Vietnam, including including to DAIMLER's to Vietnamese DAIMLER's governent customers. Vietnamese Between government customers. Between 2000 and 2005,
MBV was majority was majority owned (70%) and controlled by DAIMLER through its subsidiary Daimler Benz
Vietnam Investments Singapore Pte. Ltd., which DAIMLER wholly owned from June 30,30, 20032003 through 2006. AlthoughAlthough a a Vietnamese Vietnamese governmentgovernment entity, entity, SaigonSaigon Auto Auto Corp.,Corp., waswas a minority owner
(30%) ofMBV, MBV was managed primarilyprimarily by by German German DAIMLER DAIMER employccs.employecs. InIn 2004, 2004, MBVMBV had $107$107 millonmillion in in revenue revenue andand $7.6$7.6 milionmillion in in profit profit from from all all sales sales in in Vietnam. Vietnam.
As setset fortforth below, below, DAIMLER DAIMLER employees employees working working at at MBV MBV made made improperimproper paymentspayments and provided gifts giftsand other and other thingsthings of ofvalue to Vietnamese government officialsofficials inin exchange forfor business fromfrom Vietnamese governmentgovernent owned owned and and controiicd controllcd customers. customers. TheseThese improper improper payments payments werewere
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routinelyroutinely paidpaid toto governmentgovernment officials offcials through broker commissions.commissions. InIn MBV's books andand records, thesethese payments payments were were improperly improperly categorizedcategorized asas broker broker commissions,commissions, cost ofof goods sold, sold, and/or and/or gifts.gifts.
TheThc makingmakg of of improper improper payments payments was was known known about about and and encouraged at the highesthighest levelslevels ofof thethe formerformer MBVMEV management.management. For example, inin aa MayMay 2004 2004 memorandum, memorandum, MBV's MBV's then then director diector of salessales andand marketingmarketing stated that "market"market share andand profitabilityprofitability have beenbeen very disappointingdisappointing inin recentrecent months"months" and reminded everyone ofof thethe "support"support thatthat MBVMBV hashas extended to all of you inin order to improveimprove thethc salcs situation," which includedincluded price promotions,promotions, special training, and "[m]usllenient"(rnJust lenient regulationreguation onon broker commission."
The same MBV sales and marketing director wrote the following in a May 2004 email:
"As I agreed inin last managementmanagement meeting, agenciesagencies andand showrooms can use regular discount and special discount in any possible combination for:
•. CashCash Discount Discount •. BrokerBroker commission commission •. GiftsGifts
Maximum invoiced price isis List Price, if all discount (regular(regular + special)special) is used for broker commissioncommission and/orand/or gifts.gifts. ThisThis decisiondecision was was made made toto accommodateaccommodate requirements from (state-owned[state-owned enterprisesenterprises] J -- Government,Government, AdministrationAdministration custoiiiers.custolllers." "
One MBV employeeemployee encouraged MBVMBV managementmanagement and and othersothers withinwithin DAIMLER DAIMER toto eliminate improper payments to brokers and governmentgovernment officialsoffcials as early as 2003. InIn responseresponse toto thatthat employee's employee's concerns, concerns,the CFO of the CFO of thethe DAIMLERDAIMER business business unit unit under under which which MBV MBV operated,operated, whichwhich atalthe the timelime was called DC Southeast Asia,Asia, incorrectly instructedinstrcted the the employee employee that that asas longlong asas thethe improperimproper payments were accurately recordedrecorded in in DAIMLER'sDAIMER's books books and and records records (which(which they they werewere not),not), therethere waswas nono problem. MBVMBV employees employees andand managers managers continuedcontinued to to makemake andand authorizeauthorize improperimproper paymentspayments toto Vietnamese government officialsoffcials untiluntil mid-2005.mid-200S.
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2. SaigonSaigon BusBus
On or about February 5, 2004, Saigon Passenger Transport Company ("Saigon Bus"),Bus"), a goverrnnentalguvernental entity entity in in Vietnam, Vietnam, entered entered into into a a contract contract withwith MBVMBV for for the the purchase purchase of200of200 buses. buses.
The total total value value of of thethe contractcontract waswas approximatelyapproximately $14,653,000.$14,653,000. On or about December 29, 2004, and pursuant to a sham consulting agreement, MBV wired a paymentpayment of approximatelyapproximately $54,343.64 from its Deutsche Bank Bank account account in in Ho Ho Chi Chi Minh Minh City City to to the the Wells Wells Fargo Fargo Bank Ban TexasTexas N.A. N.A. bank ban
account of ofTrading & Investment & Investment Houston, a U.S.-based Houston, entity. a U.S.-based As a entity. As a result of of this deal,deal, MBV MBV earnedeared approximately €7.4€7.4 millionmilion in revenue and approximatelyapproximately €2.1 €2.l millionmilion inin profits.profits.
During the negotiationsthe negotiations of ofthis ths deal,deal, a Vietnamese goverrnnent governent official official with with the the government-govemment owned Saigon High Tech Park suggested that MBVMEV make a contribution to the high tech park as a condition of of DAIMLERDAILER andMBV andMBV winning winning the the bus bus contract. contract. TheThe offcialofficial requested requested thatMBV make an investment inin the high techtech park ofof 150% 150% ofof the the bus bus contract contract value,value, oror approximately approximately
$22,300,000, overover fivefive years.years.
Approximately one month after MBVMEV and Saigon BusBus signed aa contractcontract forfor thethe salesale of200of200 buses that alsoalso obligatedobligated MBV MEV toto investinvest inin thethe high tech park, MB V signedsigned aa secondsecond agreementagreement with a California-basedCaliforna-based companycompany to assume MBV's MBV's $22.3$22.3 million debt debt in in exchange exchange forfor aa payment from
MBVMEV to the to Californa-based the California-based company company of 1 1%% of of the investment amount, or $223,000.
After these agreements werewere signed,signed, aa VietnameseVietnamese goverrnnentgovernent official official associatedassociated withwith
Saigon Bus demandeddemanded that that MB MB V pay him a broker'sbroker's commission in in connection connection 'with 'with thethe transaction. transaction.
MBV agreed to make the improper payment to the Saigon BusBus officialofficial throughthough thethe entityentity Trading
& Investment Houston. HighHigh rankingranking MEVMBV executives executives approvedapproved thethe improperimproper payments.payments.
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InIn orderorder toto effectuateeffectuate thethe paymentpayment ofof thethe connnission,commission, representativesrepresentatives atat SaigonSaigon Bus,Bus, alongalong withwith highhigh rankingranking MBVMEV executives and other salessales employeesemployees allall agreedagreed toto createcreate aa shamsham consultingconsulting agreementagreemcnt withwith TmdingTrading && InvestmentInvestment Houston. Houston. This agreement, signed on November 20, 2004, requiredrequired MBVMBV toto paypay TradingTrading && Investment Investment Houston Houston in in two two installments installments totaling totaling $147,690. $147,690. OnOn oror aboutabout DecemberDecember 29, 2004, MBVMEV paid the first installment in the approximate amount of $54,343.
PaymentPayment ofof thethe second installmentinstalhnent waswas stopped byby DAIMLERDAIMLER in in thethe course of its internalinternal investigation.invcstigation.
3. ASEMASEM 5 Conference5 Conference
In October October 2004, Hanoi Hanoi hosted hostedthe the Asia Europe Meeting ("("ASEM ASEM 5"), a conferenceconference designeddesigned to increase connnunicationcommunication and interaction between Asia and Europe.Europe. InIn preparation forfor ASEM 5, the Vietnamese government soughtsought to obtain 78 Mercedes Benz passenger cars in order toto transporttransport officials attending the conference. MEVMBV desireddesired toto provideprovide thethe conferenceconference with MercedesMercedes Benz vehicles and, as a result, agreedagreed toto lend lend the the vehicles vehicles to to the the Vietnamese Vietnamese government governent freefree ofof charge. charge.
In exchange, exchange, the Vietnamese the Vietnamese government allowed government MBV to import these allowed 78 completely MBV to import these 78 completely assembled passenger cars into cars Vietnam into at Vietnam a tariff at a tariffrate of only 25%, when the standard tariff rate for completely assembled cars was 100%.100%. FollowingFollowing thethe conference,conference, MBVMBV sold almost all ofthe vehiclesvehicles withinwithin a fewfew months time. AsAs a a result, result, MBVMBV made made aa muchmuch higherhigher profit,profit, approximatelyapproximately €1.65 million,milion, because ofof the the lowerlower tarifftariff costs. costs.
InIn connectionconnection withwith thisthis arrangement,arrangement, MBVMBV mademade approximatelyapproximately $400,000$400,000 inin improperimproper paymentspayments to Vietnamese governmentgovernent officials, officials, all all of of which which were were improperly improperly recorded recorded inin MBV'sMBV's corporatecorporate books and records. ForFor instance,instance, onon oror aboutabout SeptemberSeptember 6,6, 2004, MBVMBV wiredwired $90,000 $90,000 fromfrom MEV'sMBV's DeutscheDeutsche BankBan account account toto accountsaccounts controlled byby aa VietnameseVietnamese government governent offceoffice
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associatedassociated with importimport licensing.licensing. Then, on or aboutabout October 13,13, 2004, MBV paid an additional
$90,000$90,000 to the to import the importlicensing offce licensing in exchange office for the in favorable exchange licensing/tariff for the favorable licensingltarifftreatment.treatment. ThisThis totaltotal of $180,000 in payments was improperly recordedrecorded inin MBV's books andand recordsrecords as expensesexpenses relatingrelating to the provision of cars to thethe ASEMASEM 55 conference,conference, includingincluding driver training and gasoline.
InIn addition,addition, MBV personnel paid a VietnameseVietnamese governmentgovernment official $220,000 for allowing MBV to provide Mercedes Benz vehicles to thethe conference.conference. An internal MBV price calculation form for the
ASEM 5 conference containscontains a a line line item item for for "Commission "Connssion and and Gifts Gifts (for(for broker)"broker)" thatthat anticipates the payment payment of of $220,000 by MBV.MBV. In order to conceal the improper payment, MBV entered into a phony consulting agreement, dateddated JulyJuly 30,30, 2004, with VietViet ThongThong LimitedLimited CompanyCompany ("Viet(''Viet
Thong"), a Vietnamese shellshell entity.entity. The agreement purportedpurorted to to provideprovide forfor VietViet Thong to conduct a study of emissions services and technology inin Vietnam.Vietnam. The contractcontract provided that MBV would pay Viet ThongThong $220,000, the exact same amount allotted for broker's commissions and giftsgifts inin
MBV's ASEMASEM 55 priceprice calculation.calculation.
A searchsearch of business records showsshows thatthat VietViet ThongThong was was a a purportedpurorted exportexport andand importimport company formed inin December 2004,2004, fivefive monthsmonths afterafter enteringentering intointo thethe purportedpurorted consultingconsulting agreement \vith MBV \vith and afterMBV MBV andmade the after aforementioned MBV made improper the aforementioned improper payments to it. Moreover, the company'scompany's function waswas listedlisted inin registrationregistration documentsdocuments as "Export/Import,""Export/Import," notnot vehiclevehicle emissions research or anythinganyting remotely remotely related related toto thatthat field.field.
The fake consiltingconsulting contract contract withwith VietViet ThongThong waswas createdcreated byby MBVMBV managementmanagement and salessales personnel toto concealconceal the the true tre natuenature ofof these these payments. During this samesame time,time, MBV'sMBV's chiefchief financial officer (the(the "MBV"MBV CFO")CFO") hadhad raisedraised questionsquestions aboutabout thethe appropriatenessappropriateness of thesethese payments.payments. OtherOther MBVMBV employees employees came came forward with a a written report, report, supposedlysupposedly from Viet Thong,Thong,
32 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 52 of 98
entitledentitled "Development "Development and and EvaluationEvaluation of Advanced ofAdvanced Catalyst Technology Catalyst Technology forfor ULEVULEV EmissionEmission LevelsLevels withwith Gasoline Fueled Vehicles," as evidence thatthat VietViet Thong was a legitimate company and hadhad performedperformed genuine selvicesseivices pUisuanttopursuant to itsits agreementagreement withwith MEV.MBV. TheThe report was actually a study ofof emissionsemissions standards for 1997 FordFord Escorts,Escorts, notnot MercedesMercedes BenzBenz vehiclesvehicles inin Vietnam. Vietnam. The reportreport was written in 1998,1998, notnot 2004,2004, andand waswas by thethe PrincipalPrincipal InvestigatorInvestigator for thethe CenterCenter for
Environmental Research andResearch Technology, andCollege Technology, of College of Engineering, University University of of California, not byby
Viet Thong. TheThe originaloriginal reportreport waswas publicly available on thethe Internet.Internet. Viet Thong letterhead had merely been "cut-and-pasted" onto the plagiarized report, listing Viet Thong as the author, and deleting references to the true authors throughout the report.
4. MinistryMinistry of ofPublic Public Security Security
Between 2003 and 2005, MBV entered intointo threethree contractscontracts with with thethe Ministry Ministr ofof PublicPublic
Security in Vietnam to provide Mercedes BenzBenz vehicles.vehicles. Pursuant to the firstfirst contract,contract, MBV sold three S-ClassS-Class 500L500L passengerpassenger cars cars for €968,490€968,490 to thethe PolicePolice Ministry. Ministr. Under the the second contract,contract,
MBV agreed toto sell aa Pullman limousinelimousine for for €386,054 €386,054 to to the the Police Police Ministry. Ministr. UnderUnder thethe thirdthird contract, MEVMBV agreed toto sell 12 E-Class passengerpassenger carscars forfor €504,000€504,000 to to thethe MinistryMinistr ofof Public Public
Security. SalesSales underunder the the first first contract,contract, whichwhich waswas consummated,consummated, generatedgenerated approximatelyapproximately €1.68 milionmillion inin revenues revenues andand €26l,000€261,000 in in profits profits forfor DAIMLER.DAIMLER. SeniorSenior management management withinwithin MBVMBV approved three separate payments toto VietnameseVietnamese government governent officials officials inin the the MinistryMinistry ofof Public Public
Security for the purposepurose of of securing secUling these these contracts. contracts. InIn particular, particular, in in or or about about 2004, 2004, MBVMBV mademade an improper payment ofof €72,000€72,OOO andand agreedagreed to make additional paymentspayments ofof approximately approximately €95.000€95,000 and €72,000€72,OOO toto VietnameseVietnamese governmentgovernment officials in thethe MinistryMinistry ofof Public Public SecuritySecurity through anan intermediaryintermediary calledcalled TeamworkTeamwork Co.,Co., Ltd.Ltd.
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D.D. TURKENISTANTURKMENISTAN
BetweenBetween 20002000 and 2006, DAIMLER sold approximately 879 vehicles to customerscustomers in
Turkmenistan,Turkmenistan, including to the Turkmenistan government, directly from DCOS, its overseas sales divisiondivision headquartered inin Stuttgart,Stuttgar, Germany, throughthough aa Vienna-based vehiclevehicle distributordistributor called IPCIPC and itsits affiliate.affiiate.
1.1. GiftsGifts to to a aHigh High Level Level Turkmen Execntive Executive GovernmentGovernment Official Official
a. 20002000 Birthday Birthday GiftGif
In February 2000, DAIMLER andand IPCIPC delivered toto a high-levelhigh-level executiveexecutive official of
Turkmenistan's governmentgovernment (the(the "Turkmen"Turkmen GovernmentGovernment Official")Official") anan armored armored MercedesMercedes BenzBenz S-S class passenger car,car, valuedvalued atat more than €300,000, forfor his birthday. NeitherNeither thethe TurkmenTurkmen
GovernmentGovernent Offcial Official nor nor the the Turkmen Turkmen government government paid paid for for thethe vehicle.vehicle. DCOSDCOS employeesemployees believed that if if DAIMLERDAILER and and IPC IPC failed failed to to provide provide this this birthday birthday gift, gift, oror failed failed toto provideprovide it on time, all ofof
DAIMLER'sDAILER's sales to the sales Turkmenistan to the government Turkmenistan in 2000 would begovernment in in 2000 would be in jeopardy. At thisthis time in
February 2000, DAIMLER was in negotiations to sell the following vehicles to the Turkmenistan government:govermnent: 33 SprinterSprinter LuxuryLuxury VIP buses; 22 armoredarored Mercedes Mercedes Benz Benz S-class S-class passenger passenger cars;cars; 34 armored Sprinter Sprinter vehicles; 4848 ActrosActros trucks;trcks; andand 8080 ActrosActros truckstrcks with tankers. AlthoughAlthough onlyonly a fraction of these vehicles were ultimately sold to the Turkmenistan government, employees within
DCOS agreed toto provideprovide thisthis birthday birthday gift gift to to the the Turkrnen Turkren Government Governent Official Official with with the the expectationexpectation thatthat they they would would receive receivelarge contracts large for contractsthe purchase offor the purchase ofvehicles byby thethe Turkmenistan Turkmenistan government governent inin thethe coming year.year.
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b.b. LongLong Term Term Commercial Commercial AgreementAgreement
InIn approximately JulyJuly 2002,2002, the then head of DCOS, with thethe assistanceassistance ofof ¡PC,IPC, beganbegan discussionsdiscussions with with thethe TurkmenTurkrnen Govemment Guvernment Official Offcial about about a a long long term ter commercial commercial agreementagreement betweenbetween DAIMLER andand thethe TurkmenistanTurkmenistan govemment.govemment. In January 2003, DAIMLER's distributor
IPCIPC purchased a golden box, had translated from thethe Turkmen language into German the TurkmenTurkmen
Govemment Official'sOffcial's personalpersonal manifesto,manifesto, andand thenthen hadhad 10,00010,000 copies printed, at a total cost of approximately $250,000.$250,000. OnOn FebruaryFebruary 6,6, 2003,2003, DAIJILERDAIlVILER andand DCOSDCOS presentedpresented the TurkmenTurkmen
Government OfficialOfficial withwith the the translatedtranslated copy copy of of his his manifesto manfesto inin thethe goldengolden box.box. TheThe 10,00010,000 additional copies were given toto thethe TurkmenTurkmen government.government. The gifts were in exchange for and in acknowledgment of of thethe TurkmenTurkmen GovemmentGovernent Official'sOfficial's longlong term term commitment commitment toto purchasepurchase
DAIMLERDAIMER vehicles vehicles for for his his government. government. TheThe translation translation and and copying copying payment payment ofof $250,000 $250,000 was improperly recorded in DAIMLER'sDAIMER's books books and and records records as as "expenses "expenses to to develop develop CommonwealthCommonwealth of
Independent States' successorsuccessor marketmarket -- Turkmenistan."Turkmenistan."
2. "N.A.""N.A." Payments Payments
On several occasions,occasions, DAIMLER employees from DCOS made and authorizedauthorized "N.A.""N.A." payments to variousvarious officialsofficials ofof thethe TurkmenistanTurkmenistan government in order to assist in securingsecuring the purchase of DAIllLERDAIlYlLER vehiclesvehicles byby Turkmen Turkmen governmentgovernment customers.customers. TransactionsTransactions involvinginvolving improper N.A. paymentspayments includeinclude thethe following:following:
(a) SeptemberSeptember 1999 1999 sale sale of of18 18Mercedes Mercedes Benz Benz S-c1ass S-class passenger passenger cars cars to to thethe Turkmen CabinetCabinet of Ministers Ministers in in a a contract contract valued valued at at €l,€1, 121 121,438, ,43 8, involving involving "N.A." paymentspayments totalingtotaling $20,000;$20,000;
(b) 20002000 sale sale of of1 10000 busesbuses fromfrom MercedesMercedes BenzBenz Turkey Turkey through through IPC IPC to to thethe TurkmenstanTurkmenistan Transportation Transportation MinistrMinistry in in a a contract contract valued valued atDM2 atDM21 i ,885,468, ,885,468, involvinginvolving "N.A." payments ofDM2,525,640;
35 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 55 of 98
(c)(c) FebruaryFebruary 2003 2003 sale sale of of 50 50 Sprinter Sprinter ambulances toto the TurkmenistanTurkmenistan MinistryMinistry ofof HealthHealth inin aa contract valuedvalued at€689,024,at€689,024, involving paymentpayment of€75,000of€75,000 labeledlabeled as "N.A."as "N.A." and the provisionand the of provision a free ambulance of a free ambulance worthworth €120,000;€120,000; and
(d)(d) MayMay 2004 2004 sale ,ale uf of 25 25 Actrus Actros trcks trucks to toan an entity entity owned owned or or controlled controlled by a TurkmenistanTurkmenistan govermnent governent offcialofficial inin a contract worthwort €1,334,8l6,€1,334,816, involving aa paymentpayment of$25,000of$25,000 labeled as "N.A."
E. NIGERIANIGERIA
1. BackgroundBackground Regarding Regarding DAIMLER's DAIMLER's Bribery Bribery in in Nigeria Nigeria
Between 1981 andand 2007,2007, DAIMLERDAIMLER sold sold vehicles vehicles into into Nigeria Nigeria through though an entity named
Anambra MotorMotor ManufacturingManufactuing CompanyCompany ("Anammco"), ("Anammco"), a jointa joint venture ventue between between DAIMLER DAILER and the Nigerian government. AnammcoAnammco received deliveriesdeliveries of of completelycompletely built built upup ("CBU")("CBU") andand completely knocked down ("CKD")("CKD") DAIMLER vehiclesvehicles fromfrom DAIMLERDAIMLER manufacturing manufactuing facilities in countries such as Brazil, the United States, Germany, Indonesia, and Korea forfor sale into the
Nigerian market. AnammcoAnammco alsoalso assembledassembled commercialcommercial vehiclesvehicles for salesale toto thethe generalgeneral public,public, private companies,companies, andand governmentgovernment agencies in Nigeria.
DAIMLER ownedowned 40%40% of AnammcoAnammco and controlledcontrolled Anammco,Anammco, inter alia,alia, throughthrough
Anammco's thenthen managingmanaging diector,director, whowho waswas aa German German expatriateexpatriate andand dualdual employeeemployee ofof both both
DAIMERDAIMLER and and Anammco Anammco (the(the "Anamco"Anammco executive"). executive"). Under Under the the operative operative Anammco Anammco corporatecorporate governnggoverning documents,documents, DAIMLER had had thethe rightright toto choosechoose the managing directordirector "with "with whom all powers are vested toto run thethe entireentire business."business." Anammco'sAnammco's seven-member seven-member board ofof directorsdirectors
includedincluded three threeDAIMLER DAIMLERemployees, including employees, the then head ofincluding the then head ofDC OS (the "DCOS executive").executive").
Anammco's solesole businessbusiness waswas thethe manufacturemanufacture andand salesale ofof DAIMLER DAIMLER vehicles.vehicles. InIn addition, addition,
DAIMLER maintainedmaintained aa representativerepresentative officeoffice inin Nigeria.Nigeria.
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DAIMLERDAILER maintained maintained at at least least four four TPAs TPAs controlled controlled by by thethe AnammcoAnammco executive andand thethe
DCOSDCOS executive. executive. In some circumstances, In some profits circumstances, from the sale of profits from the sale of DAIMLERDAIMLER vehiclesvehicles intointo NigeriaNigeria wcrcwcrc transferredtransferred from company accounts toto these TPAs, As, where where theythey werewere maintained asas ledger balances.balances. In at least twotwo instances,instances, DAIMLERDAIMLER employees, employees, including includig the Anammco executive, usedused fundsfuds from from these these accounts accounts to make improperimproper payments payments to to Nigerian Nigerian government governent officialsoffcials inin order to securesecure business. business. These paymentspayments were were authorized authorized at at the the highest highest levels levels ofof former DCOSDCOS management,managcmcnt, and were either improperly recorded inin DAIMLER's books andand records or were not recordedrecorded atat alL.all.
2. PaymentsPayments in Exchange in Exchange for forSales Sales to to the the State HouseHonse
In 1998,1998, DAIMLERDAIMLER entered intointo aa contract toto sell vehicles to the Nigerian StateState House, which was also known as the Nigerian Presidential Complex,Complex, and waswas thethe officeoffice andand residenceresidence ofof the Nigerian President (the(the "State House Contract"). Specifically,Specifically, onon OctoberOctober 5,5, 1998,1998, the AnammcoAnammco executive, on behalf on ofbehalf of DAIMLER,DAIMER, agreed agreed to to sell sell 23 23 new new Mercedes Mercedes BenzBenz passengerpassenger vehiclesvehicles to the
State House for DM15,882,302.DMI5,882,302. Additionally,Additionally, aa usedused MBMB 600600 Pullman limousinelimousine was armored and sold to thethe NigerianNigerian StateState House for $365,000. TheThe StateState HouseHouse ContractContract waswas signedsigned by a StateState
House offcialofficial onon behalf behalf of of the the Nigerian Nigerian government,government, and byby the AnammcoAnammco executive. TheseThese vehicles were intendedintended for useuse by high-level membersmembers of thethe executiveexecutive branch of thethe Nigerian governent.government.
DCOSDCOS maintained aa filefie labeledlabeled "grenzüberschreitende "grenziiberschreitende Bestechnungen," Bestechnungen," which which translates translates as
"cross borderborder briberies."briberies." ThatThat file file contained contained a a memorandummemorandum dated dated January January 21, 21, 1999,1999, fromfrom the then headhead ofof finance finance forfor DCOS,DCOS, withwith copycopy toto thethe DCOSDCOS executive,executive, amongamong others,others, whichwhich statedstated thatthat
DAIMERDAIMLER charged charged the the State State House House approximately approximately 21 21 % % over over the the wholesale wholesale price price for for thethe vehicles,vehicles,
3737 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 57 of 98
parts,parts, andand services.services. The memorandum furtherfurther stated stated thatthat aa credit shouldshould be be posted to a TP A A forfor suchsuch thingsthings as "special"special security,"securty," sparespare parts deliveries, travel payments forfor Nigerian partners, driverdriver training,training, andand bullet-proofbull"t-prouf testing.
TheThe StateState House paidpaid DAIMLERDAIMLER $359,985$359,985 forfor thethe MBMB PulhnanPulhnan onon DecemberDecember 4,4, 1998, andand
DMI5,882,317DM15,882,317 forfor thethe carscars onon DecemberDecember 14,14, 1998.1998. InIn connectionconnection with these sales to the StateState
Rouse,House, DAIMLER made €1,427,242.65 inin improper commission payments funded from TPAs associatedassuciat"d with Anammco,Anammco, withwith thethe nnderstandingunderstanding that that these these funds fuds wouldwould bebe passed on, in whole or in part, to Nigerian officials to secure the State House Contract.
3. PaymentsPayments to a to Then a Then High-Level High-Level Executive Executive Branch Branch Offcial Official of of NigeriaNigeria
In May 1999, atat thethe request request ofthe ofthe Anammco executive, DAIMLER wired DM800,OOODM800,000 from its accountsaccounts in GermanyGermany to aa numberednumbered Swiss bank account. TheThe paymentpayment requestrequest from thethe
Anammco executive referenced initials that matched those of aa then high-levelhigh-level executive branch officialoffcial of ofNigeria (the "Executive BranchBranch official"),offcial"), and thethe fundsfuds were were debited debited from from anan AnamincoAnammco
TPA A upon upon the the approval approval of of the the DCOS DCOS executive executive and and its its then then head head of of finance. fiance.
In NovemberNovember 1999,1999, DAIMLERDAIMLER approved payment of DM200,000DM200,OOO to the LondonLondon bankbank account of the Executive BranchBranch officiaL.official. This payment was requested by the Anammco executive, approved by the highest level managers and finance personnel within DCOS, and debited from an
AnammcoAnanunco TPTPA. A. The paymentpayment instructionsinstrctions from from the the AnammcoAnammco executiveexecutive containcontain thethe initials "SR,""SH," which AnammcoAnanunco employeesemployees usedused asas shortshort handhand forfor the "State House"House" deal,deal, andand relatedrelated notesnotes byby the
Anammco executiveexecutive alsoalso referenced initialsintials that that matched matched thosethose ofof the the ExecutiveExecutive BranchBranch officiaL.official.
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4.4. NovemberNovember 1999 1999 Payment Payment to toState State House BuyerBuyer
InIn November November 1999, 1999, DAIMLER DAILER approved approved a a paymentpayment ofDM50,000 toto the chiefbuyer for State
IIouseHouse whowho signed the State House Contract.Contract. TheThe paymentpayment waswas requestedrequested byby the Anammco executive,executive, approved approved by senior by senior managementmanagement and and finance finance personnel,personnel, andand debiteddebited toto anan Anammco Anammco TP A.A.
TheThe paymentpayment instructions instrctions makemake reference to to "SH.""SH."
5.5. CashCash Payments Paymeuts
DAIMLER alsoalso made a variety of cashcash paymentspayments toto thethe AnammcoAnammco executive in connection with StateState House transactions. ForFor example,example, onon JuneJnne 27,27, 1999,1999, thethe AnammcoAnammco executiveexecutive sentsent a facsimile to a DCOS employee requestingrequesting thatthat DM400,OOODM400,000 inin cash be disbursed to him against a debtor account usedused forfor thethe StateState HouseHouse transaction. transaction. The paymentpayment instructioninstrction indicatedindicated that the
AnammcoAnammcu executive wouldwould pickpick upup thethe funds fuds whenwhen he arivedarrived "on "on the the occasionoccasion ofof the advised visit of (the[the Executive Branch official]."offcial)." TheThe amount amount was was first first paidpaid from from thethe StateState House debtor account and then transferred to an Anammco TP AA before before being being withdrawn withdrawn in in cash. cash. This cashcash disbursementdisbursement was approved by the DCOS executive.executive.
On March 22,22, 1999,1999, the the Anammco Anamco executive executive requested requested that that DAIMLER DAIMLER disbursedisburse DM50,000 in cash,cash, whichwhich waswas toto bebe usedused toto makemake paymentspayments toto aa delegationdelegation of State State House officials who werewere visiting aa DAIMLERDAIMLER factoryfactory inin Sindelfingen,Sindelfingen, Germany.Germany.
On October 30,30,2000, 2000, the AnammcoAnammco executive requested that DAIMLER disburse DM40,000DM40,000 inin cash.cash. InIn connection connection with with this this request, request, DAlMLER DAlMLER employees employees preparedprepared aa paymentpayment instructioninstruction referencingreferencing "Spare"Spare PartsParts State House."House." TheThe paymentpayment waswas debited to an Anammco TPA.
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6.6. TheThe Savannah Savannah Sugar Sugar CompanyCompany Ltd.Ltd.
BetweenBetween 1996 andand 1998,1998, AnarnmcoAnammco enteredentered intointo contractscontracts worthworth $4,600,000$4,600,000 withwith SavannahSavannah
SugarSugar CompanyCompany Ltd.Ltd. ("SSCL"),("SSCL"), aa NigerianNigerian sugarsugar companycompany thatthat waswas then majority ownedowned byby thethe
NigerianNigerian government,governent, to to supply supply DAIMLER DAIMLER vehicles, vehicles, sparespare parts, and tools.tools. BetweenBetween March 1999 andand November November 2002, in connection 2002, within connectionAnammco's sale of with Anammco's sale of vehiclesvehicles toto SSCL, DAIMLER andand
AnammcoAnammco paidpaid a total of €554,396.85€554,396.85 to "consultants""consultants" which payments werewere debiteddebited toto an
AnarnmcoAnammco TPTPA. A.
On March 22,1999, the AnammcoAnammco executive requested that DAIMLER disburse $150,000 to him in cash from a cash desk, to be debited to an Anammco TPA, in connection withwith a sale to
SSCL. TheThe cashcash disbursementdisbursement waswas approvedapproved by thethe thenthen headsheads ofof salessales andand financefinance for DCOS
("DeOS("DCOS sales and finance executives").
On November 22,2000,22,2000, the AnarnmcoAnammco executive executive requested requested that that DAIMLER DAlLER wire wire aa payment of DM200,000,DM200,000, to be debiteddebited from an AnammcoAnammco TPA to anan accountaccount ofof HVA HVA International,International, a consulting firm for firm for the state-owned SSCL. TheThe payment was approved on November 23,2000,23,2000, by the DCOS sales and financefinance executives.executives. TheThe paymentpayment authorizationauthorization referenced "SSCL.""SSCL." ThereThere isis no evidenceevidence that HV AA International International performed performed services services for for Anammco Anammco or or DAIMLER DAIMER sufficientsuffcient to warrant aa paymentpayment ofof this this amount.amount.
Between 1999 and 2002, DAIMLER,DAIMER, acting acting on on requests requests fromfrom the the Anammco Anammco executive,executive, debited threethree additionaladditional paymentspayments againstagainst anan AnammcoAnammco TPTP A to thethe directordirector ofof the the state-o'n'ledstate-o\'\'lled
SSCL: (1)(1) DMl DMI 00,000 00,000 requestedrequested onon AugustAugust 11,2001;11,2001; (2) (2) €50,000 €50,000 requested requested on on MarchMarch 10,10, 2002;2002; andand (3) (3) €50,000 €50,000 requested requested on November 17, on 2002. November All three payments 17, 2002. were approved All bythree payments were approved bythen then seniorsenior
DCOSDCOS personnelpersonnel andand wiredwired to an account at WestminsterWestminster BankBan in in Derby, Derby, England,England, belongingbelonging toto thethe
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headhead ofof SSCL.SSCL. OnOn OctoberOctober 30, 2000, the Anammco executive also requestedrequested aa cashcash disbursementdisbursement of$11of$llO,OOO. 0,000. The payment The payment requestrequest indicated indicated that the that cash thewas "for cash was "for thethe remainder remainder of ofthe the $4.6 $4.6 millionmilion orderorder fromfrom SavannahSavannah Sugar."Sugar." The requestrequest waswas approvedapproved by by the the DCOS DCOS finance fiance executive.
7.7. NigerianNigerian Police Police Force
OnOn DecemberDecember 3, 1997, DAIMLERDAIMLER enteredentered intointo a contractcontract withwith the NigerianNigerian Police Force to supplysupply a a Master Master Lift Lift Heavy-Duty Heavy-Duty Recovery Recoveryvehic1evehicle for DMDM 540,753.540,753. The Nigerian Police Force waswas represented in the transactiun byby thethe PermanentPermanent Secretary,Secretary, PolicePolice AffairsAffairs Office, Offce, and the President'sPresident's office on onbehalf behalf ofthe Federal ofthe Military Federal Government Military of Government of Nigeria. On June 17,2000, thethe Anammco executive requested requested that DAIMLER that make DAIMLERa payment ofDM150,000 make to a amember payment of ofDM150,000 to a member of the Nigerian
Police Force atat his CommerzbankCommerzban account account inin Germany.Germany. TheThe payment payment request request formsforms submittedsubmitted to
DAIMLER by the Anammco executive referenced the Nigerian Police Force. Two days later, DeOSDCOS sales and finance executives authorized the payment.payment. Later,Later, onon OctoberOctober 20, 2000,2000, thethe Anammco executive requested that DAIMLER disbursedisburse DM50,000DM50,000 toto himhim inin largelarge bills bils from a cash desk in connection withwith the Nigerian PolicePolice Force'sForce's purchasepurchase ofof thethe MasterMaster Lift. Lift. TheThe DCOS DCOS financefinance executive approved thethe cashcash disbursement.disbursement.
8. WorldWorld Youth Y onth Championship/Federation Championship/Federation Internationale Internationale dede FootballFootball Association
ilIn 1999, 1999, AnammcoAnammco soldsold 54 buses toto thethe NigerianNigerian Ministry Ministr ofildustryof Industry to to provideprovide transporttransport forfor thethe WorldWorld YouthYouth ChampionshipChampionship forfor thethe FederationFederation Internationale Internationale dede FootballFootball AssociationAssociation
("FIF("FIFA"), A"), which was being held in Nigeria. TheThe FIFFIFA A busbus dealdeal was valuedvalued atat $5,340,216, plus !'83/1183 milionmillion in in Nigerian Nigerian curency currency (the (the then then equivalent equivalent of of approximately approximately $959,000).$959,000). ThereThere werewere twotwo copiescopies of ofthethe pertinent contract, contract, eacheach with with idcntical identical tcrms, terms, except except FIF FIF A was represented by different
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individualsindividuals inin thosethose twotwo documents.documents. The second contractcontract waswas dated dated February Februar 12,12, 1999,1999, and was signed byby a senior Nigerian government officialofficial with with thethe Ministry Ministr ofof Industry, Industry, and witnessed by anoLheranother MinistryMinstry ofof IndustryIndustry employee.employee. AnammcoAnammco waswas awardedawarded the the FIF FIF A A contractscontracts withoutwithout engaging in a publicin a publictender or tenderbidding or bidding process. InIn May 1999, the AnammcoAnammco executive requestedrequested thatthat
DAIMLERDAIMER pay pay DM126,000 DMI26,OOO to thethe Nigerian Nigerian government governent offcialofficial whowho signed thethe February Februar 12,1999
FIFA contract contract on behalf on ofthe behalf Ministry ofthe of Ministry of Industry.Industr. DAIERDAIMLER made made the the payment. payment. In In September September
1999, DAIMLER, DAIMLER, again at the requestagain of al the request of the Anammco executive, paid DMlDM18,000 8,000 to the Ministry of Industry employee whowho witnessedwitnessed thethe contract.contract. BothBoth payments were debiteddebited to anan Anammco
TPA.
9. All-AfricaAll-Africa GamesGames
In 2003, the 8th8th All-AfricaAll-Afrca Games ("AAG") took place inin Nigeria. OnOn MayMay 15,15, 2003, the organizing committee for the games, thethe ComiteComité d'OrganisationdOrganisation de Jeux Africains, or "COJA," a state-controlled agency in Nigeria, entered into a contract with Anammco forfor the purchase of 241
Mercedes-Benz commercial vehicles. OnOn OctoberOctober 3,3, 2003,2003, AnammcoAnammco andand COJACOJA alsoalso entered into a sponsorship agreement pursuantto which which AnammcoAnammco agreed agreed to to provideprovide $500,000$500,000 for the AAG and to service thethe vehicles. AnammcoAnammco alsoalso agreedagreed toto provideprovide aa G500 vehicle to a then senior executive branch offcial official of of Nigeria. AlthoughAlthough AnammcoAnammco suppliedsupplied the vehicles forfor the AAG, COJA did not pay Anammco asas requiredrequired byby thethe contract.contract.
Between January 2004 and JanuaryJanuary 2005, AnammcoAnammco made multiplemultiple payments from an urecordedunrecorded bankbank accountaccount maintainedmaintained byby the Anammco executive withwith reference to to "AAG,""AAG," including:
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(a)(a) PaymentsPayments totaling€30l,637 totaling€301,637 and and $350,000 $350,000 to to a a NigerianNigerian governmentgovernent official official whowho ownedowned aa transporttransport company;
(b)(b) PaymentsPayments totaling totaling €236,597 €236,597 and and $162,000 $162,000 to to the the ownerowner of of aa Nigerian busbus company;cumpany; andand
(c)(c) TwoTwo payments payments of of$30,000 $30,000 and and approximately approximately €80,645€80,645 toto aa NigerianNigerian governmentgovernment official offcial into his BankBan of of America America account account in California.
NoneNone of thethe individualsindividuals oror entitiesentities receivingreceiving paymentspayments performed any legitimatelegitimate services for
AnammcoAnammco or DAIMLER, nornor diddid AnammcoAnammco oror DAIMLER DAIMER have have anyany writtenwritten agreementsagreements with the recipients of thesethese payments.
10. SeniorSenior Nigerian Nigerian Diplomat Diplomat in in BrazilBrazil
In 2002, a thenthen seniorsenior Nigerian diplomat in Brazil ("the Nigerian diplomat") approached employees of of DC do Brasil,Brasil, DAIMLER's DAIER's wholly-owned wholly-owned subsidiary subsidiary in in Brazil, Brazil, concerning concerning thethe salesale often buses buses to the stateto the of state of Bayelsa in Nigeria. InIn OctoberOctober 2002,2002, DCDC dodo BrasilBrasil issued a pro forma invoice for thethe salesale of one bus forfor approximately $70,000, which included a sales commission for the Nigerian diplomat,diplomat, butbut no furtherfurther actionaction was takentaken at thethe time.time.
The Nigerian Nigerian diplomat diplomat renewed discussions renewed with employees discussions of with employees ofDC do BrasilBrasil inin 2004.2004. AtthatAtthat time, the the Nigerian Nigerian diplomat askeddiplomat again for asked a proposal again for the for sale a often proposal buses. Employees for the of sale often buses. Employees of DC do BrasilBrasil negotiatednegotiated withwith thethe NigerianNigerian diplomatdiplomat andand thethe partiesparties reachedreached thethe followingfollowing agreement:agreement:
DC do Brasildo Brasil would charge would the state charge of the state ofBay elsa $60,800 pcrper bus or $660,000 totaltotal ($608,000($608,000 forfor tlie11,e buses,buses, plusplus freightfreight and expenses), andand the Nigerian diplomat's commissioncommission would would bebe approximatelyapproximately
1111% % ofofthe the price forfor thethe buses, or $6,773 perper bus.bus. The dealdeal alsoalso contemplatedcontemplated thatthat AnammcoAnammco wouldwould receivereceive aa 4.3%4.3% salessales commission.commission.
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OnOn February February 28, 2005, 28, DC 2005,do Brasil DC issued do its Brasil final invoice issued to Cascadas its final Nigeria invoice to Cascadas Nigeria Enterprises,Enterprises,
Ltd.,Ltd., anan entityentity ownedowned byby thethe Nigerian Nigerian diplomatdiplomat andand hishis wife.wife. DC do Brasil employees understood,understood, however,however, thatthat the state of Baye1saBayelsa waswas stillstill thethe endend user.user. The invoice provided that DC do Brasil wouldwould sell ten buses at approximately $60,000 per bus and pay an 11 %% commissioncommission toto thethe NigerianNigerian diplomat, forfor a totaltotal purchasepurchase price of approximatelyapproximately $600,000 andand a totaltotal commissioncommission ofof approximately $60,000 to the Nigerian diplomat.
On MayMay 25,2005, DC do Brasil wired a payment of of $67,730$67,730 from from DC DC do do Brasil's Brasil's bank ban account inin BrazilBrazil to the U.S.U.S. bankbank accountofthe accountofthe Nigerian diplomatdiplomat maintained maintained at at Chevy Chevy Chase Chase BankBank in Bethesda, Maryland. ThisThis paymentpayment was authorized by the then directordirector of export sales and services for commercial vehicles at DC do Brazil.
F. COTECOTE D'IVOIRE D'IVOIRE ("IVORY ("IVORY COAST") COAST") / / WEST AI"RlCAAJ<'RlCA
1. BackgroundBackground Regarding Regarding DAIMLER's DAIMLER's Bribery Bribery in inIvory Ivory Coast Coast and and West West Africa
From at least 11992 992 toto 2007, 2007, DAIMLER DAIMLER soldsold passengerpassenger cars in thethc IvoryIvory CoastCoast andand otherother West
African countriescountries throughthrough its majority ownedowned (89.14%) and controlledcontrolled subsidiary,subsidiar, StarStar Auto S.A.S.A.
("Sta("Star Auto") Auto") and and its its regional regional business business centercenter forfor WestWest Africa,Africa, whichwhich waswas operatedoperated throughthrough StarStar
Auto. Star StarAuto made Auto diect madesales of direct sales of DAILERDAIMLER passenger passenger cars cars to to various various government government customerscustomers in West Africa, includingincluding government governent ministrics, ministries, thcthc military,military, and government agencies,agencies, including includig for useuse by diplomats and headsheads ofof state.state. AsAs ofof 2004, 2004, StarStar Auto'sAuto's annualannual salessales averagedaveraged approximately €23£23 million.milion.
DAIMLER employees, including the former head of Star Auto and the DCOSDCOS executive,executive, authorized andand madcmadc improperimproper paymentspayments toto governmentgovernment officialsofficials atat its its customerscustomers inin thethe IvoryIvory CoastCoast
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andand elsewhereelsewhere in in West West Africa Africa through through a TPAheida TPA held on on DAIMLER's DAIER's books books and and records records in in the the namename ofof Star Auto.Auto. ThisThis TPATPA waswas typicallytypically fudedfunded through through priceprice inclusionsinclusions thatthat were built into the customers'customers' purchase price and then used to,to, amongamong otherother things,things, makemake improperimproper paymentspayments toto governmentgovernent offcials.officials.
F oror example, example, when when a a sale sale was was made made through through StarStar AutoAuto oror anotheranother dealerdealer connectedconnected throughthrough
DAIMLER's regional business center, Star Auto would purchase the vehicle(s) fromfrom DAIMLER,DAIMLER, increaseincrease the purchase price paid by thethe customer, and transfer thethe reserve to the TP A.A. By doing this,this,
DAIMLER and and Star Star Auto createdcreated aa fund fud fromfrom whichwhich their their employees employees could paypay bribes. bribes. Further,Furher, by putting the theprice price inclusions inclusions into a separate into TPA a fromseparate which bribe TPA from which bribe payments were drawn, DAIMLERDAIMLER and Star Auto inaccurately recordedrecorded oror failedfailed toto recordrecord thethe improperimproper paymentspayments toto various various officialsoffcials in West AfricanAfrcan countries.countries.
There were no effective policies, procedures,procedures, oror trainingtraining atat Star Auto or forfor DAIMLERDAIMLER employees working at or with Star AutoAuto concerningconcernng compliance compliance with with the the FCPFCP A or other applicable anti-corruptionanti-corrption statutes. statutes.
2. ArmyArmy of of Ghana Ghana
In September 1997,1997, DAIMLER and Star Auto entered into a contract to sell eight trucks to the Army of Ghana. TheThe dealdeal waswas negotiatednegotiated throughthrough an agent, Global Strategic VenturesVentures Ltd.Ltd. It was understood that Star Auto wouldwoild pay Global Strategic VenturesVentues aa commissioncommission thatthat wouldwould bebe passed on,on, inin wholewhole oror inin part,part, toto GhanaianGhanaian ArmyArmy officialsofficials inin exchange exchange forfor thethe aforementionedaforementioned contract. StarStar AutoAuto paid paid Global Global Strategic Strategic VentuesVentures a a commissioncommission ofof $170,000, $170,000, which waswas wired from a DAIMLER a DAIMLER account account inin Germany to Global Strategic Ventures' accountaccount in in London London and and debiteddebited toto StarStar Auto'sAuto's TP TP AA account.account.
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3.3. SaleSale of Vehiclesof Vehicles to toa athen then Senior Senior Executive Executive Branch Branch Official Official ofof LiberiaLiberia
InIn approximatelyapproximately 1999, DAIMLER beganbegan negotiationsnegotiations to sell trucks to aa logginglogging operationoperation inin Liberia.Liberia. TheThe logginglogging rights had beenbeen soldsold byby thethe LiberianLiberian goverlllllentgoverinent toto anan IndunesianIndonesian firm.finn.
DAIMLERDAIMLER entered into entered a contract into valued a contractat approximately valued $14.5 atmilion approximately to sell $14.5 million to sell I1 00 00 sixty-ton sixty-ton trucks trcks toto thethe IndonesianIndonesian firm for itsits Liberian logginglogging project,project, even thoughthough the initial request was forfor larger,larger, eighty-ton trucks.trucks. DCOS employees hadhad sought sought to to convince convince the the goveflllllent governent ofof LiberiaLiberia and the
Indonesian finn finn thatthat thethe useuse ofof eighty-toneighty-ton trucks trcks (a product DAIMLERDAIMER diddid not offeroffer but its competitors did) would destroy Liberia'sLiberia's roadsroads and bridges,bridges, andand thatthat DAIMLER'sDAIMLER's sixty-tonsixty-ton trucktrck was therefore a better option.
Ultimately, DAIMLERDAIMLER won won the the contractcontract to to provide provide trucks trcks toto thethe IndonesianIndonesian firm for the logging project. ToTo assistassist inin securngsecuring thethe business,business, DAIMLER'sDAIMLER's locallocal dealerdealer inin Liberia,Liberia, onon
DAIMLER's behalf, gave a then senior executive branch officialoffcial ofof Liberia Liberia aa giftgift ofof an an armoredarmored
Mercedes passengerpassenger car car worth wort approximatelyapproximately £267,000.£267,000. DAIMERDAIMLER and and Star Star Auto Auto employeesemployees disguised thethe gift by paying the local dealer a higherhigher commission on the transaction and then using the overpayment overpayment to cover the to cost cover of the cost of the armoredarored car. car.
G. LATVIALATVIA
EvoBus GmbH ("EvoBus") was a wholly-owned subsidiary of Daimler AG and part of a
DAIMLER business unit called Daimler Buses. TheThe businessbusiness unitunit soldsold busesbuses allallover over thethe world,world, includingincluding inin LatinLatin America, America, Europe,Europe, Mexico, Africa, Asia,Asia, Australia,Australia, andand North America. EvoBusEvoBus sold to governentgoveflllllent customers customers in in many many of of the the countriescountries inin which which it it did did business. business. EvoBusEvoBus used used aa general distributordistributor toto assistassist withwith salessales in thethe BalticBaltic statesstates (the(the "Baltic"Baltic Distributor").Distributor").
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OnOn or orabout about August August11, 2000, the II, Baltic 2000, Distributor's the Baltic then general Distributor's then general managermanager (the(the "General"General
Manager")Manager") alerted alertedEvoBus to anEvoBus upcoming tender to an from upcoming the city of tender from the city of Riga,Riga, Latvia,Latvia, forfor thethe purchasepurchase ofof aa large numbernumber ofof buses.buses. Pursuant to to thethe termstenns of of thethe tender,tender, the the Riga Riga City City Council Council Traffic Traffc
DepartmentDeparent intended intended to to purchase purchase thethe busesbuses in multiplemnltiple tranchestranches over several years years time. time. InIn a facsimilefacsimile dated on or about August 11,II, 2000 toto a thenthen EvoBusEvoBus sales manager,manager, the General ManagerManager noted that a competitor of EvoBus had agreed to pay "under table" money to members ofof thethe RigaRiga
City CouncilCouncil in order toto obtainobtain thethe contractcuntract forfor the the bus bus sales. sales. EvoBus EvoBus understood understood thisthis communication communication to meanmean that thatit too itwould too have would to pay bribeshave to to members pay ofbribes to members of the Riga City Council in order toto secure a contractcontract to sell to itssell buses. its Onbuses. or about OnMarch or27,2001, about EvoBus March was awarded 27,2001, at least par EvoBus of was awarded at least part of the tender and enteredentered intointo twotwo agreementsagreements with TalavaTalava andand Imanta,Imanta, both city ofof RigaRiga municipalmunicipal enterprises forfor publicpublic transportation, for the deliverydelivery of79 buses. buses. OverOver the the next approximately 55 Yi\12 years, EvoBus delivered a total of 117117 busesbuses to thethe citycity ofof Riga, with thethe lastlast tranchetranche of 28 busesbnses delivered in late summer oror fall of 2006. TheThe totaltotal valuevalue of of the the contractscontracts forfor thethe sale of these buses was approximately €30,000,000.
In or about JuneJune 2001,200 I, the Baltic Distributor entered intointo contracts with Talava and Imanta for the delivery of spare parts. OnOn or or about about AugustAugust 31,31, 2001,200 I, thethe GeneralGeneral ManagerManager sentsent an email to the then then Head Head of of Sales MB Buses ofEvoBus advising himhim that he, the General Manager, would have to pay "undertable""undertable"money money in in connectionconnection with thisthis contract.contract. EvoBusEvoBus understoodunderstood thisthis communicationcommunication toto mean thatthat thethe GeneralGeneral ManagerManager wouldwould have toto pay bribesbribes toto membersmembers of the the RigaRiga CityCity Council toto securesecure thethe sparespare parts contract.
EvoBus paidpaid thesethese bribesbribes toto membersmembers ofof the the RigaRiga CityCity Council,Council, atat leastleast inin part,part, by inflating thethe purchasepurchase priceprice ofof the the busesbuses andand kickingkicking backback thethe priceprice increasesincreases toto individualindividual membersmembers ofof thethe
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CityCity Council Council in in the the fonn form of of"connssions." "commissions." InIn order order to make thesethese "commission" "connssion" payments payments andand to disguisedisguise theirtheir truetre nature nature andand purpose,purose, EvoBus EvoBus entered entered intointo shamsham consulting contracts with, among others,others, twotwu U.S.-basedU.S.-based entities:entities: OldenburghOldenburgh Financial Corporation ("Oldenburgh"), incorporated inin Delaware, andand United PetrolPetrol Group LLP ("UPG"), incorporatedincorporated inin Oregon.Oregon. EvoBusEvoBus made improperimproper payments payments through Oldenburgh through to Latvian Oldenburgh governent officials to Latvian who were govermnentmembers of officials who were members of thethe political party party in control in controlof of thethe Riga Riga City CityCouncil Council at the time atof the time of thethe deliverydelivery oftheofthe first tranche ofof
1818 busesbuses on un or or about about July July 25,2002. 25,2002. EvoBusEvoBus mademade improperimproper payments payments through UPG andand another
corporation to Latvian to Latvian government governmentoffcials who were membersofficials of a differentwho were members ofa different political party party that was in control control of the of Riga the City Riga Council City at the Council time of the at delivery the time of of the delivery ofthethe remaining tranches totaling 99 buses between between approximately approximately April April 2003 and December 2006.
In.In. total, total, EvoBusEvoBus paidpaid approximately approximately €1,800,000 €1,800,000 in in "commission" "commission" paymentspayments to to third thid parties with the understadingunderstanding that that such such improper improper paymentspayments wouldwould bebe passedpassed on, inin wholewhole oror in part, to
Latvian govermnentgovernent offcials officials to to influence influence thethe awardaward ofof contracts toto EvoBus,EvoBus, including includig a total of
€2l6,115€216,115 toto Oldenburghand a total of€I,03,5159of€1,03,5l59 toto UPG. AllAll ofthesepaymentsofthesepayments were were inaccuratelyinaccurately accounted for inin thethe booksbooks and and records records of of EvoHus EvoHus and and DAIMLER. DAILER.
H. AUSTRIAAUSTRIA and and HUNGARYHUNGARY
On or about May 23, 2005, EvoBus HungarianHungaran Kft.Kft. ("EvoBus("EvoBus Hungary")Hungary") agreedagreed toto sellsell 3232 used buses toto Volanbusz, aa state-ownedstate-owned regionalregional publicpublic transporttransport companycompany inin Budapest,Budapest, Hungary.Hungary.
EvoBus HungaryHungar acquired acquired 1717 ofof the the busesbuses fromfrom EvoBusEvoBus AustriaAustria GmbHGmbH ("EvoBus("EvoBus Austria") for approximately €1,678,170£1,678,170 andand resold themthem to VolanbuszVolanbusz for approximately €1,745,000.€1,745,000. In connection with the transaction, EvoBus AustriaAustria agreedagreed toto paypay aa "commission""commission" of€333,370of€333,370 to aa
U.S.-basedU.S.-based corporationcorporation calledcalled USCON Ltd. ("USCON") withwith thethe understandingunderstanding thatthat thethe paymentpayment
4848 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 68 of 98
wouldwould bebe passedpassed on,on, inin whole whole or or in in part, par, toto HungarianHungarian government governent officials.offcials. TheThe payment payment was inaccuratelyinaccurately accounted for in the books and records of EvoBus and DAIMLER.
USCONUSCON was originallyoriginally incorporatedincorporated in DelawareDelaware butbut itsits corporatecorporate statusstatus hadhad beenbeen dissolveddissolved inin 2003, twotwo yearsyears priorprior toto thethe commissioncommission payment.payment. In or aboutabout OctoberOctober 2006,2006, duringduring thethe SECSEC andand
DOJ investigation of DAIMLER, thethe then CEO of EvoBus Austria attempted toto concealconceal thethe true nature of the payment to USCONUSCOl\ by creating a phony consulting agreement and backdating it to
April 2005, a datedate prior toto thcthe transfertransfer ofof thethe busesbuses fromfrom EvoBusEvoBus AustriaAustria toto EvoBusEvoBus Hungary.Hungary.
USCON providedprovided nono legitimate legitimate services servces to to EvoBus EvoBus or or to to DAIMLER. DAILER.
I. TURKYTURKEY / / MBMB TURK
Inil 1967,1967, DAIMLERDAIMLER founded MBMB Turk,Turk, itsits subsidiary subsidiar inin Turkéy,Turkey, as a jointjoint ventureventue between
DAIMLER and several several Turkish Turkish companies. companies.Since 1984, MB Turk Since 1984, MB Turk has also served as DAIMLER's general distributor inin Turkey.Turkey. DAIMLERDAIMER owned owned a a majority majority stake stake inin MB MB TurkTurk andand controlledcontrolled it.it.
DAIMLER's majormajor businessbusiness partnerspartners inin TurkeyTurkey andand inin associationassociation withwith MBMB TurkTurk werewere aa groupgroup ofof companies owned by one individual, which companies together ownown 7.04%7.04% ofMBofMB Turk.
MB Turk InanufacLuresrnanu[acLures and and sells sells busesbuses toto variousvarious customers in Turkey and, until January
2005, soldsold throughoutthroughout easterneastern Europe, the MiddleMiddle East, andand westernwestern Asia,Asia, includingincluding toto variousvarious governentgovernment agencies. agencies. il Inaddition, addition, MB MB Turk Turk has has a arepresentative representative officeoffice in in Anara Ankara that that assists assists inin thethe sale of of DAIMLER vehicles inin Turkey.Turkey.
In thethe fallfall ofof 2006,2006, DAIMLER'sDAIMLER's CorporateCorporate Audit departmentdepartent discovered discovered three three binders binders located inin a safe at MB Turk's offcesoffices inin Istanbul. Istanbul. TheThe labels labels on on the the binders binders referenced referenced "N.A." "N.A."
These bindersbinders andand otherother evidenceevidence show that MB TurkTurk mademade approximatelyapproximately €6.05€6.05 millionmilion inin paymentspayments to third-partiesthd-parties in in connection connection with with vehicle vehicle export export transactions transactions thatthat involvedinvolved thethe salesale of
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vehiclesvehicles to non-Turkish government customers in North Korea, Latvia, Bulgaria, Libya, Romania,Romania,
Russia,Russia, Saudi Arabia, Yemen, and other countriescountries (the(the "MB"MB Turk ExportExport Transactions") inin deals withwith revenuesrevenues ofapproximately€95 ofapproximately€95 million.milion. Ofthe€6.05Ofthe€6.05 million million paid paid tuto third-pariesthird-parties in connection withwith thethe MB Turk ExportExport Transactions,Transactions, at leastleast €3.88€3.88 millionmillion werewere improperimproper paymentspayments andand gifts,gifts, ofof which €3.3€3.3 millionmilion were described andand recordedrecorded in in MB MB Turk's Turk's records records as as "N.A." "N.A." The€3.88 The€3.88 millionmilion inin improperimproper paymentspayments and and gifts gifts were were paid paid to to foreign foreign government governent officialsoffcials or to thirdthird partiesparies with thethe understanding thatthat thethe paymentspayments andand giftsgifts wouldwuuld bebe passedpassed on,on, inin wholewhole oror in part, to foreign government offcials officials to assist in to securg assist the salein securingof the sale of DAIMLERDAIMER vehicles vehicles to governmentgovernent customers. customers.
1. TheThe MB MBTurk Turk Export Export Transactions Transactions
a. SaleSale of ofBuses Buses to to North KoreaKorea
In AprilApril 1999 1999 and September and September 2000, MB Turk entered 2000, into MB two contractsTurk entered for the sale into of two contracts for the sale ofbusesbuses to MangyongMangyong TradingTrading Corporation, Corporation, an an instrumentality instruentality of of the the North Nort KoreanKorean government. InIn connection with the April 1999 contract,contract, MBMB TurkTurk mademade anan improperimproper paymentpayment of€7,937, of€7,937, or 2% ofof the contract contract value, to toan executivean executive ofMangyong ofMangyong Trading Corporation, Trading who was also Corporation, a diector of who was also a director of the state-owned bank involvedinvolved inin thethe deaL.deal. This individualinilividual was aa North KoreanKorean governmentgovernment offciaL.official.
In addition,adilition, in connectionconnection with the September 2000 contract, MBMB TurkTurk paidpaid DM15,765,DMI5,765, aa 4.5%4.5% commission, to aa bankbank accountaccount in Hamburg,Hamburg, Germany, forfor the benefit ofof Mangyong Mangyong TradingTrading
Corporation.
b. SaleSale of ofBuses Buses to to LatviaLatva
In November 19981998 and April 2000, MB Turk sold 40 busesbuses inin twotwo transactionstransactions of20of20 buses each to the Riga City Council,Council, a a Latvian Latvan municipalmuncipal governmentalgovernental entity, entity, for for use use by by Riga's Riga's public public transportationtransportation companies.companies. TheThe salesale waswas effectedeffected thoughthrough thethe generalgeneral distributordistributor inin LatviaLatvia forfor
50 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 70 of 98
EvoBus.EvoBus. ThisThis salesale waswas separateseparate fromfrom the salesale ofof 117117 busesbuses toto thethe citycity ofof Riga Riga describeddescribed above.
DocumentsDocuments inin the "N.A.""N,A." binders described above indicate that in connection withwith this sale, MB
TmkTUlk made made two improper two paymentsimproper totaling paymenls €383,485, of lolaling €383,485, of whichwhich €115,869€l 15,869 waswas wiredwired toto thethe generalgeneral distributordistributor in Latvia andand the remainingremaining €267,6l6€267,6l6 was wired toto anan MB TUlkTmk accountaccount in Germany.
These paymentspayments were describeddescribed inMBinMB TmkTurk internal documentsdocuments as commissioncommission paymentspayments oror "N.A.""N.A."
2. DomesticDomestic Sales Sales Inside Inside TurkeyTurkey
a. SaleSale of ofVehicles Vehicles to to E.S.H.O. E.S.H.O. T.
In September 1997, MB TmkTurk sold 130 buses toto E.S.H.O.T., the public transport agency for the municipality ofIzmir inin Turkey,Tmkey, in a contractcontract valuedvalued atat €26,785,303.€26,785,303. PmsuantPursuant to Turkish tendertender rulesrues andand the the contract,contract, MBMB TurkTmk donated nine buses to thethe municipality.municipality. InIn addition to this donation, however,huwever, MB TmkTurk paid DM10,OOODM10,000 in cash in an envelope toto an individualidentified simplysimply as
"Mrs. X," which paymentpayment was recorded in the binders as "N.A."
b. SaleSale of Busesof Buses to toMinistry Ministry of ofthe the Interior Interior / / Turkish PolicePolice
In July 1998,1998, MB TUlkTmk soldsold 14 buses to the TurkishTurkish PolicePolice throughthrough the Ministry of the
Interior. InIn order order to to avoidavoid aa latelate penalty penalty duedue toto thethe delayeddelayed deliverydelivery ofof thethe buses, MB TurkTmk paid
DM2,840 to its locallocal dealerdealer with the understanding that the dealer would pay the money, in whole or in part, to an individual identified as "Mr. x." MB MB TUlkTmk classifiedclassified the payment as "N.A."
J. INDONESIAINDONESIA
1. BackgroundBackground Regarding Regarding DAIMLER's DAIMLER's Bribery Bribery in in Indonesia Indonesia
DAIMERDAIMLER sold sold vehicles vehicles into into Indonesia Indonesia directly directly and and through through a a series series of of majoritymajority owned (90-(90-
95%) andand controlledcontrolled affiliates. affiliates. DAIMLER's DAIER's direct direct and and affliate affiliate sales sales in inIndonesia Indonesia between between 1998 1998 and and
JuneJune 2006 totaled approximately $960$960 million.milion. ApproximatelyApproximately 11 % % oftheseofthese sales, or $9.6 millionmilion
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worth, were were made to made govemment to entities government in Indonesia. entities Most of in Indonesia. Most of DAIMLER'sDAIMER's salessales toto governmentgovernent entities in Indonesia were made through DAIMLER'sDAIMLER's locallocal affiliates.affliates. DAIMLER'sDAIMLER's largestlargest govenlluentgoveniiuent customer inin IndonesiaIndonesia between between 1998 1998 and and June June 2006 2006 was was Perum Peru Damri,Damri, a state-uwnedstale-owned bus company, company, which purchased which approximately purchased $8.36 millionapproximately worth of $8.36 million worth of buses from DAIMLER's
Indonesian affiliatesaffiiates duringduring thisthis period.period.
DAIMLER's local local affiiates affiliates provided provided gifts, gifts, travel and entertainmententertainment to to government governent officials offcials associated with PerumPerun DamlÌDanlfi inin orderorder to secure business. DAIMLER'sDAIMLER's locallocal affiiatesaffiliates also also made made several large cash payments to tax officialsofficials in IndonesiaIndonesia for the purposepurpose of reducing their tax obligations. For example, For example,in 2004, one of in 2004, one of DAIMLER'sDAIMER's local local affiiates affiliates made made three three cash cash payments payments totaling $120,000 to an Indonesian taxtax officialoffcial inin connectionconnection with an Indonesian audit of anotheranother ofof
DAIMLER's local affliates local for affiliates the 2002 tax foryear. the These 2002 tax year. These payments were made personallypersonally to the tax official overseeing overseeing the audit the of one audit of of one ofDAIMLER's IndonesianIndonesian affliates,affiliates, and and were were made made daysdays beforebefore that official's official's final final assessment assessment of ofDAIMLER' s staxes taxes duedue and owingowing was scheduledscheduled to to be be announced. arounced.
Ultimately, DAIMLER'sDAILER's local local affliate affiliate recorded recorded its its tax tax liability liability in in Indonesia Indonesia for for 2002 2002 as as IDR6.342IDR6.342 billionbilion rather rather than than IDR5. IDR5.19 19 billion,bilion, becausebecause itit includedincluded the cash payments toto thethe taxtax officialoffcial in the total amount. DAIMLER'sDAIMLER's local local affliates affiliates also also made made $84,000 $84,000 worth worth of of cashcash payments payments to to taxtax officials
in Indonesia Indonesia in connection in connection with a 2003 tax with year aaudit 2003 of tax year audit of another of of DAIMLER's local affiliates.affiiates. AllAll of the payments were made in cash, in round number amounts, and in local currency. As with the payments associated associated with the 2002 with tax year, the the2002 actual tax tax year, obligations the wereactual paid taxby obligations were paid by wire transter (not cash) and supportedsupported byby receipts.receipts. By contrast, the payments toto the taxtax officialsofficials werewere paidpaid inin cash cash andand had nono accompanyingaccompanying documentation. InIn fact,fact, accountsaccounts payablepayable vouchersvouchers evidencingevidencing the cashcash
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paymentspayments were missing were from missing the fies fromof the files ofDAIMLER' DAIER' s employees s employees in inIndonesia. Indonesia. As As a aresult result of of makingmaking thesethese payments,payments, DAIMLER receivedreceived a reductionreduction inin overdue taxes.
2.2. 20012001 Sale Sale of of Buses Buses totu PerumPerum DamriDamri
InIn AugustAugust 200200 I, 1, DAIMLER's DAIMLER's locallocal affiliateaffiliate gavegave a a senior senior official offcial atat Perum Penn Damri a "special"special discount" worth $11,962$11,962 toward the purchase of an AA classclass Mercedes-BenzMercedes-Benz passengerpassenger carcar intendedintended forfor the the offcial's official's daughter. daughter. The discount wasThe worth discount 55% of was worth 55% of thethe vehicle'svehicle's sales price. DAIMLERDAIMLER affiliates sold no otherother A classclass vehiclesvehicles in Indonesia during this period with a similar discount amount. DAIMER'sDAIMLER's local local affliate affiliate provided provided this this discount discount to to assist assist in in securing securing a a September September 2001 200 I contract valuedvalued at at $1.5 $1.5 million milion between between Perum Penn DamriDamri and and DAIMLER's DAILER's locallocal affliateaffiliate forfor thethe purchase of 43 buses.
3. GiftsGifts to to Perum Perum Damri Damri Offcials Officials
DAIMLER employees inin Indonesia routinely providedprovided giftsgifts and other things of value to government officialsoffcials andand theirtheir relativesrelatives associatedassociated with the salesale ofof vehiclesvehicles toto PerumPerom Damri.Damri.
Between 1998 and 1998 and 2005, DAIMLER's locallocal affiliatesaffiliates spentspent approximatelyapproximately $41,000$41,000 onon suchsuch gifts,gifts, including golfgolf clubs, clubs, wedding gifts for the children of aa seniorsenior officialoffcial atat PeromPerum Damri, golf outings for Penn Perom Damri offcials, Damri and officials, gifts that wereand raffed gifts off that were raffled off to low-level employees on thethe occasionoccasion of
PerumPerom Damri' ss anniversary.anversary. DAIMER's DAIMLER's majority majority owned owned and and controlled controlled affliates affiliates had had no no policies policies or proceduresprocedures regardingregardig doing business with with governmentgovernent customerscustomers or thethe provision of gifts,gifts, entertainententertainment and and other other expensesexpenses toto governmentgovernent offcials,officials, and and otlered otIered no no training training concerning concerning compliance withwith thethe FCPAFCPA oror otherother applicableapplicable anti-corruptionanti-corruption statutes.statutes.
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K.K. CROATIACROATIA
1.1. BackgroundBackground Regarding Regarding DAIMLER's DAIMLER's Bribery Bribery in in CroatiaCroatia
DaimlerDaimler Export and Trade FinanceFinance GmbHGmbH ("ETF"),("ETF"), aa GermanGermau corporation,corporation, was a wholly owned,owned, German-based subsidiary ofof DaimlerDaimler FinancialFinancial ServicesServices AGAG ("DFS"),("DFS"), whichwhich was itself a wholly owned owned subsidiary subsidiary of of DAIMLER. ETF formerly waswas knownknown as as "debis "debis International International Trading Tradig
GmbH" ("dIT"("dIT" oror "debis")."debis"). ETFETF specializedspecialized inin the structuingstructuring andand arangiugarranging ofof customized customized financingfinancing solutions for exports by DAIMLER andand externalexternal customers toto countriescountries without a local
DFS company. InIn addition addition to to thesethese financingfinancing services, ETFETF participatedparticipated in business venturesventues outside of DAIMLER'sDAIER's core core businesses businesses of ofthe the manufactue manufacture and and sale sale of of passenger passenger cars cars and and commercial commercial vehicles.
As set forthforth below, below, ETF ETF mademade improper payments payments directly directly to CroatianCroatian governmentgovernent officials officials and to tothird third parties parties with the with understandig the understanding that the payments would bebe passed on,on, inin whole or in part, to Croatian government officials,offcials, to assist inin securingsecurng thethe salesale ofof 21 00 firefire trucks trcks (the(the "Fire"Fire TrucksTrucks
Contracts") toto thethe governmentgovernent of of Croatia. Croatia.
2. ImproperImproper Payments Payments In InConnection Connection With With The The Fire Fire Trucks Trucks ContractContract
In 2002, the CroatianCroatian governmentgovernent initially initially appropriated appropriated approximatelyapproximately €75€75 millionmilion soso that the Croatian MinistryMinistr ofthe ofthe Interior Interior ("MOl")("MOl") couldcould purchase fire trucks.trcks. The The MOl MOl was was a a department and agency of of thethe CroatianCroatian government, governent, and and was was responsible responsible for,for, amongamong otherother things, publicpublic safety,safety, includingincluding the purchase the purchase of offire trucks. trucks. The 2002The public 2002 tender, public which tender,was initially which was initially published, voided, and then ultimatelyultimately awarded in 2003, was actuallyactually valued at approximatelyapproximately €85€85 million,milion, andand provided for the purchase ofof 210210 firefire truckstrcks byby the the MOlMOl from from aa consortiumconsortium ledled byby ETFETF toto bebe delivered inin !ranchestranches betweenbetween 20032003 andand 2009.2009.
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ETFETF understood understood that improper that improper paymentspayments to to Croatian Croatian government governent officialsofficials wou1d would be requiredrequired inin orderorder toto securesecure thethe FireFire Trucks Contract.Contract.
a.a. ImproperImproper Payments Payments to to aa CroatianCroatian Government-Owned Government-Owned Company Company
AtAt the request ofof thethe CroatianCroatian government governent priorprior toto thethe awardaward ofof the the publicpublic tender,tender, ETF includedincluded 1M1M Metal Metal ("IMM")("IMM") asas partpart ofof thethe consortium ofof companies biddingbidding onon thethe Fire Truck
Contract.Contract. IMMIMM waswas aa Croatian Croatian government government controlledcontrolled andand partiallypartially ownedowned formerformer weaponsweapons manufacturer,manufactuer, and an instrumentalityinstrumentality of of the the Croatian Croatian government. guvernent.
On or about MayMay 3, 2002, ETFETF (then(then knownknown as "debis") signed aa contractcontract with with IMMIMM whereby 1MMIMM agreed, among other things, to support ETF' s negotiationsnegotiations with prospectiveprospective Croatian clients -- at the time,time, onlyonly thethe Croatian Croatian government governent - - andand ETF's ETF's preparation preparation forfor tendertender participation.
In oror about about September September 2002, 2002, IMM IM made made a a payment payment ofof approximately DM200,000 to Croatian government officialsoffcials whichwhich paymentpayment anan internalinternal ETFETF e-maile-mail referred to as "nA."
On or aboutabout NovemberNovember 18,2002, ETF made two paymentspayments totalingtotaling approximatelyapproximately €250,000 from ETF'ETF' s s account in Germany to 1MM'IMM' s s two two primary primary owners owners as as aa "success"success bonus" for having been been awarded the contract by the Croatian MOL
On or about May 23,2003,23,2003, ETF, DAIMLER, IMM, IM, and and others others signed signed a a new new consortium consortium agreement following thethe cancellationcancellation ofthe ofthe priorprior tender tender due due to to the the Croatian Croatian government's governent's lacklack ofof funds toto supportsupport thethe project.
In total,total, betweenbetween 20022002 andand JanuaryJanuary 2008,2008, BTl'bTl" mademade approximatelyapproximately €3.02 milionmillion inin paymentspayments to 1MMIMM and/or its principals inin connectionconnection withwith the the contractcontract to to sell sell fire fire trucks trcks toto thethe
CroatianCroatian MOl withwith thethe understandingunderstanding thatthat allall or a portionportion ofof thethe fundsfunds werewere paidpaid toto IMM's IMM's employees,employees, themselves themselves foreign govemment foreign officials, government and that another officials, portion of and that another portion ofthethe funds were paid
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toto CroatianCroatian governmentgovernent officials officials outside outside IMM IMM in in exchange exchange for for assistance assistance inin securing the FireFire TrucksTrucks
ContractContract forfor the ETF -led-led consortium.consortium.
b.b. ImproperImproper Payments Payments to toU.S.-based U.S.-based ShellShell CompaniesCompanies
InIn additionaddition toto thethe improperimproper paymentspayments mademade throughthrough IMM,IMM, ETFETF mademade improperimproper paymentspayments to:to:
(1)(1) Biotop Group, Inc. ("Biotop"),("Biotop"), a DelawareDelaware corporation;corporation; and (2)(2) MarketingMarketing Research and
ConsultantsConsultants LLC C'MRC"),("MRC"), a Wyoming corporation.
On or aboutabout JulyJuly 30,30, 2003,2003, ETFETF enteredentered intointo aa shamsham consultingconsulting contractcontract withwith BiotopBiotop in orderorder toto conceal thethe naturenatue of improper improper paymentspayments ETF made toto Biotop, andand with thethe understanding that these fundsfuds would would bebe passedpassed on, in whole oror inin part,part, to to Croatian Croatian government governent offcialsofficials toto assistassist in securingsecurg the the Fire Fire Trucks Trucks ContractContract with thethe Croatian MOL
On or about DecemberDecember 4,2003,4,2003, ETF mademade aa paymentpayment ofapproximately€57,500ofapproximately€57,500 to Biotop pursuant to the July 30, 20032003 contractcontract withwith the understandingunderstanding thatthat thethe funds fuds wouldwould be be passed passed on, in whole or in part,par, to to CroatianCroatian government government officials officials inin connectionconnection withwith thethe FireFire TrucksTrucks Contract.Contract.
On or about March 4, 2004, a company named MRC was incorporated in Wyoming.Wyoming.
On or about March 10,10, 2004, six daysdays after MRC' s incorporation, ETFETF executedexecuted a written consulting contractcontract with MRC in order to conceal the naturenatue of of improper improper paymentspayments beingbeing mademade to
MRC, withwith thethe understandingunderstanding thatthat thethe payments to MRC would be passedpassed on,on, inin wholewhole oror inin part,part, toto CroatianCroatian government officials.offcials.
On oror aboutabout JulyJuly 19,19, 2006,2006, bTl'!:iTl' executed executed a acredit credit note note authorizing authorizing thethe payment payment ofof approximately €174,765 from ETF's accountaccount inin GermanyGermany pursuantpursuant toto thethe MarchMarch 10,200410,2004 MRC MRC contract,contract, with the understandingunderstandig that that thethe fudsfunds would would be be passed passed on, on, in in whole whole oror in par,part, to to CroatianCroatian governmentgovernment offcialsofficials in in connection connection with with the the FireFire Trucks Trucks Contract. Contract.
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OnOn or aboutabout July 31,31, 2006,2006, ETFETF executedexecuted aa creditcredit notenote authorizingauthorizing the payment ofof approximatelyapproximately €217€2l7 ,030.62 from ETF' s accountaccount inin GermanyGermany pursuanttopursuantto thethe March 10,10, 2004 MRC contract,contract, with the understanding that the funds would be passedpassed on, in wholewhule or inin part,part, toto CroatianCroatian governmentgovernent officials officials in in connection connection with with the the provision provision of of frre fire truckstrucks toto thethe Croatian MOLMOL
ETF entered into contractscontracts with BiotopBiotop and MRCMRC reflectingreflecting theirtheir placesplaces ofof incorporationincorporation in
Delaware and Wyoming, respectively. ETFETF received invoices from Biotop and MRC reflectingreflecting their corporate addresses addresses in Delaware in and Delaware Wyoming, respectively. and Wyoming, ETF drafted respectively.and approved credit ETF drafted and approved credit notes to Biotop and MRC reflecting theirtheir corporate addresses in Delaware andand Wyoming,Wyoming, respectively.
In total, between 2002 and JanuaryJanuary 2008,2008, ETFETF mademade approximatelyapproximately €l€l ,673,349,673,349 inin improperimproper payments to Biotop and MRCMRC inin connectionconnection with with the the contract contract to to sell sell fire fire trucks trcks to the Croatian MOl with the understanding that thosethose paymentspayments wouldwould bebe passed on, in whole or in part, to Croatian governmentgovernent offcials. officials. Neither Neither Biotop Biotop nor nor MRC MRC performed performed legitimate legitimate servces services for for ETFETF sufficientsufficient to warrantwarant payments payments inin thesethese amounts.amounts.
L. IRAQIRAQ / / OILOIL FORFOR FOODFOOD
1. BackgroundBackground Regarding Regardiug the theU.J\. U.l\. Oil Oil For For .Food.Food ProgramProgram
On or aboutabout August 6, 1990,1990, days after Iraq'sIraq's invasion of Kuwait,Kuwait, thethe UnitedUnited NationsNations
("U.N.") adoptedadopted SecuritySecurity Council Resolution 661, which prohibited U.N. member-states, includingincluding
Germany, from transacting businessbusiness withwith Iraq,Iraq, exceptexcept forfor thethe purchase andand salesale of humanitarianhumanitaran supplies. ResolutionResolution 661 661 prohibitedprohibited virtually virtoally allall directdirect financialfinancial transactionstransactions withwith thethe governmentgovernment of Iraq. As Asa result, a result, DAILER soldDAIMLER no vehicles to sold the Govemment no vehicles of to the Government of Iraq between approximately
1991 and 1998.1998.
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OnOn AprilApril 15,IS, 1995, the U.N. adopted Security Council Resolution 986, whichwhich served asas aa limitedlimited exception toto thethe IraqIraq sanctions regimeregime inin thatthat itit allowed IraqIraq toto sell its oiL.oiL However,However,
ResolutionResolution 986986 requiredrequied that the proceeds from oiloil salessales be be used used by by the the Iraqi Iraqi government governent to purchasepurchase humanitarianhumanitarian supplies,supplies, including including butbut notnot limitedlimited toto food for the IraqiIraqi people.people. Hence, thisths program became knownknown asas thethe Oil for Food Program ("OFF program"). PaymentsPayments made to thethe IraqiIraqi government which were notnot approvedapproved byby thethe U.N.U.N. andand whichwhich werewere outsideoutside the the strict strict contours contours ofthe ofthe
OFF program were prohibited.prohibited.
The rules of the OFFOFF program required that the proceeds from allall sales of Iraqi oil be deposited into ainto U.N.-controlled a U.N.-controlled escrow account at escrowthe New York account branch of at the New York branch of Banque Nationale de
Paris ("BNP-Paribas"). ("BNP-Paribas"). That escrow accountThat fudedescrow the purchase account of funded the purchase ofhumanitarian goods by by the Iraqi
government, which could which include could the purchase include of the purchase ofvehic1es.Undervehicles. Under thethe rulesrules oftheotthe OFF program, a supplier of of humanitarian goods,goods, such such as as DAIMLER, DAIMER, contracted withwith a a ministry ministr or otherother departmentdeparment of the IraqiIraqi govermnentgovernent toto sellsell goods toto thethe government.governent. OnceOnce that that contractcontract was finalized,fialized, thethe contract was submitted toto aa U.N.U.N. Committee Committee ("the("the 661661 Committee"),Committe"), which which reviewedreviewed thethe contracts to ensureensure thatthat theirtheir termsterms compliedcomplied with all U.N., OFF, and Iraqi sanction regulations.regulations. TheThe 661661
Committee accepted thethe contracts, rejectedrejected themthem oror asked thethe supplier to provide additionaladditional information upon whichwhich thethe 661 Committee couldcould makemake aa decision.decision.
If aa contractcontract was approvedapproved by thethe 661 Committee, a letterletter of creditcredit waswas issuedissued byby BNP-BNP
Paribas to the supplier's bankbank statingstating that the supplier would bebe paid byby thethe OFFOFF program for thethe relevant goods once certain conditions were met,met, including deliverydelivery ofof thethe goodsgoods to IraqIraq andand inspectioninspection of of thethe goods goods by by a U.N.U.N. contractor. contractor. Once those Onceconditions those were deemed conditions by were deemed by thethe U.N. toto havehave beenbeen met,met, thethe U.N.U.N. wouldwould directdirect BNP-ParibasBNP-Paribas toto releaserelease paymentpayment toto thethe supplier.supplier.
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OnOn or about December 10, 1996, thethe fIrstfirst Iraqi oil exports under the OFF program began.
TheThe OFF OFF program program continued from continued in or about fromDecember in 1996 or until about the DecemberUnited States invasion 1996 of until the United States invasion ofIraq Iraq onon or or about about MarchMarch 19, 19, 2003. Beginning inin approximatelyapproximately AugustAugust 2000, IraqiIraqi govermnent governent offcialsoffIcials beganbegan to demandto demand that suppliers that of suppliers ofhumanitarian humanitarian goods pay a kickback,kickback, usually valuedvalued at 10% of the contract price,price, toto thethe IraqiIraqi governmentgovernment in in orderorder to to be be awarded awarded a acontract contract by by the the govermnent. governent. TheseThese kickbacks violated U.N. OFF program regulations and sanctions which prohibited paymentspayments to the
IraqiIraqi gove11l1entgovel111llent which were not expressly approved byby thethe U.N.U.N. andand whichwhich werewere notnot contemplatedcontemplated by the the guidelines guidelines of of the OFF program.
Often, these kickbacks werewere tennedtermed "after"after salessales serviceservice fees"fees" ("ASSFs"),("ASSFs"), butbut did not represent any actual service beingbeing perfonnedperformed byby thethe supplier.supplier. These ASSFs were usually included in the inflatedinllated cuntractcontract price submitted by the supplier to the U.N. without the U.N. knowing that the contract containedcontained an an extra extra 10% 10% which which would would be be kicked kicked back back to theto the Iraqi Iraqi govermnent. governent. Including Includig the 10% in the contract priceprice allowedallowed thethe suppliersupplier to avoid paying the 10% outout ofof itsits profits;profits; instead,instead, the suppliers caused caused the the U.N., U.N., unknowingly, unowingly, toto fundfud thethe kickbackskickbacks toto thethe Iraqi Iraqi govermnent. governent.
Some suppliers labeled the ASSFs as such, thereby leading the U.N. to believe that actual after-sales services werewere beingbeing providedprovided byby the the supplier.supplier. Other supplierssuppliers disguiseddisgused the ASSFs by inserting fictitiousfIctitious lineline itemsitems intointo the contracts forfor goodsgoods oror services thatthat were not being provided.
StilStill other other suppliers suppliers simplysimply inflated inflated theirtheir contractcontract pricesprices byby 10%10% toto accountaccount forfor thethe paymentspayments theythey would make, or cause toto bebe made,made, to to the the Iraqi Iraqi govermnent. governent.
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2.2. DAIMLER'sDAIMLER's Oil Oil For For Food Food Contracts Contracts
InIn response toto thethe OFFOFF program,program, inin 19981998 DAIMLERDAIMLER tooktook stepssteps toto revitalizerevitalize itsits salessales inin Iraq.Iraq.
EmployeesEmployees from DCOS, DAIMLER's overseas salessales division,division, mademade multiplemultiple tripstrips to IraqIraq in 1998,1998,
19991999 andand 20002000 inin orderorder toto participateparticipate in in the the OFF OFF program. program. DAIMLERDAIMLER employees learnedlearned thatthat IraqiIraqi governmentgovernent offcials officials wanted wanted to to purchase purchase DAIMER DAIMLER vehicles, vehicles, but but that that there there was was politicalpolitical pressure fromfrom the Iraqi governmentgovernent not not to to buy buy German German vehicles,vehicles, particularly DAIMLERDAIMLER vehicles, vehicles, becausebecause of Germany's and the company'scompany's close affiiationaffiliation withwith thethe UnitedUnited States.States. InIn 1998, 1998, DAIMLER DAIMLER employees also learnedleared that that DAIMLER DAIMLER had had beenbeen blacklistedblacklisted by the Iraqi government asas aa resultresult ofof claims filed by DAIMLER against thethe IraqiIraqi government government beforebefore thethe U.N. U.N. Compensation Compensation CommissionCommission
("UNCC") for damages for incured damages during incurredthe first Gulf during the first Gulf War. Iraqi officialsofficials told told DAIMLER DAIMER employees that they could not do business with DAIMLER soso longlong asas thethe UNCCUNCC claimsclaims werewere pending. pending. As a result ofofthese these discussions and inin orderorder toto sellsell vehiclesvehicles to to the the Iraqi Iraqi government, government, DAIMLER DAIMER agreed to withdraw its UNCC claims, which totaledtotaled approximately DM38.4DM38.4 million.milion.
On November November 5, 2000, DAILER 5, 2000, entered DAIMLER into a contract entered into a contract with the Iraqi government whereinwherein
DAIMLER agreed to to withdraw its UNCC its claims UNCC and the claims Iraqi governent and the agreed Iraqi to givegovernment agreed to give DAIMERDAIMLER preferential treatmenttreatment andand toto purchase vehicles valued atat double the amount waived by DA TMLER TMER when it withdrew its claims, i.e.i. e. DM77 DM77 million. milion. Thereafter,Thereafter, DAIMLERDAIMER began began to to participateparticipate inin thethe
OFF program. The direct OFFOFF salessales between between DAIMLER DAILER and the IraqiIraqi governmentgovernent were were executedexecuted byby DCOSDeOS andand Global Service and Parts,Pars, DAIMLER'sDAIMLER's international international sparespare partsparts salessales deparment.department.
DAIMLERDAIMLER typically learned typically of learned ofOFF business business in Iraq eitherin Iraq by contactingeither hy miistries contacting or by ministries or bymonitoring monitoring aa U.N.U.N. websitewebsite uponupon whichwhich IraqiIraqi governmentgovernment entitiesentities listedlisted productsproducts thatthat theythey neededneeded andand wishedwished toto purchasepurchase pursuant pursuant toto thethe OFF program. DAIMLER'sDAIMLER's representative representative in in Baghdad Baghdad typically typically picked picked
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upup tender packagespackages fromfrom variousvarous IraqiIraqi ministries and mailed them to DCOS or the Global Service andand PartsParts department.department.
DCOSDCOS or the Global Service and Parts department preparedprepared offersoffers forfor thethe salesale ofof their vehiclesvehicles and/or and/or spare parts spare and sent parts them andto their sent representative them to in their representative in Baghdad,Baghdad, whowho thenthen presentedpresented
DAIMLER's bid to thethe IraqiIraqi government. governent. All All ofthese ofthese direct direct sales sales between between DAIMLER DAIMLER and and the the IraqiIraqi government were prepared, negotiated and finalizedfinalized by employees atat DAIMLER'sDAIMLER's headquarters in
Germany. DAIMLER DAIMLERnegotiated its OFF negotiated contracts directly its withOFF the contractsgovernment of directly with the government of IraqIraq and thenthen entered into thethe contracts.contracts. AfterAfter thethe contractscontracts werewere signed,signed, theythey werewere sentsent to thethe U.N.U.N. forfor approval.approvaL.
DAIMLER also also sold sold vehicles vehicles to intermediaries who thenthen soldsold the the vehicles vehicles to to the the Iraqi Iraqi government. governent.
In somesome cases,cases, DAIMLERDAIMLER knewknew thatthat the end useruser waswas thethe IraqiIraqi government;government; in otherother cases,cases,
DAIMLERDAIMER onlyonly learedlearned after after the the fact fact that that the the intermediary intermediary eventually eventually soldsold thethe vehiclesvehicles to government entities in Iraq.
DAIMLER, or its intermediaries, or its intermediaries, agreed to pay a 10% agreed commission to to pay the governmenta 10% commissionof to the government ofIraq in connection with sales of its vehiclesvehicles under thethe OFF program.program. In cases where DAIMLER entered into contracts toto sellsell vehicles toto the Iraqi government under the OFF program but the contracts were never executed (either because theythey failedfailed to to receive receive U.N. U.N. approval approval or or the the Iraqi Iraqi government governent decided not toto make the purchase),purchase), DAIMLER offered to make payments worth 10% of the contract value to thethe governentgovernment of of Iraq. Iraq. DAIMLER DAIMLER entered entered into into side side agreements agreements or or side side letters letters withwith itsits IraqiIraqi governentgovernment customers customersin which DAIMLER in expressly which DAIMLER expressly promised to kick back back 10%10% of the anticipated
contract value value to the Iraqito the government. Iraqi government.One such letter from Onethe then such head letterof from the then head ofDC OS's sales sales effortsefforts in IraqIraq toto thethe attentionattention ofof thethe purchasingpurchasing managermanager forfor the IraqiIraqi MinistryMinistr ofof Oil Oil stated:stated:
"DaimlerChrsler"DaimlerChrysler AGAG undertaesundertakes toto pay pay to to the the Oil Oil Products Products Distribution Distribution CompanyCompany a sum of
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DMI3,589.50DM13,589.50 equivalentequivalent toto 10%10% ofthe ofthe totaltotal amountamount ofDM135,895 ofDM135,895 ...... UponUpon the establishment ofof thethe Letter of Credit."
An intermediaryintermediary entered entered into into another contract forfor thethe supply supply of75 of75 truckstrcks with aa sixteen-ton payload and spare and parts spare to the parts Ministr to of the Ministry of Trade in Iraq.in Iraq. The contract, The whichcontract, was for which€6,95 was for €6,95 1,320,1,320, included an unsigned side letter stating that "(tJhe"[t]he contract amount including (631950 Euro) (six hundred thirty one thousandthousand ninenine hundredhundred fiftyfift Euro) Euro) oror equivalent equivalent in in D.M. D.M. toto covercover the afterafter sales service which should bebe paid toto Iraqi MaritimeMaritime CompanyCompany forfor eacheach shipmentshipment before before the the arrival arrval ofof
goods to Um-Qaserto Um-Qaser Port." Similarly, Port." another Similarly, DAIMLER another DAIMLER intermediary entered into a sideside agreementagreement with the Iraqi Oil Products Distribution Company inin connection with thethe sale of 20 engines in a contract valuedvalued atat moremore than €27 million,milion, statingstating thatthat DAIMLERDAIMLER promisedpromised to paypay €27,647.5l€27,647.51
"corresponding toto after-salesafter-sales servicesservces related toto the contractcontract signedsigned betweenbetween DaimlerChrysler DaimlerChrsler AG and Oil Products Distribution Company."
In connection with four of its OFF contracts,contracts, two of which were performed and two of which were never performed,performed, DAIMLERDAILER inflated inflated the the price price of of its its vehiclesvehicles andand spare partspars byby 10%10% so that the inflated amountamount could could be be kicked kicked back back to to the the Iraqi Iraqi government. governent. TheThe following chartchar listslists thethe direct performed transactions in which DAIMLER made or agreed to make kickback payments in exchange for obtainingobtainig business business under under the the OFFOFF program:program:
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ale of 1 MB Sprinter to ~c(mOlmicconomic & Finance overnment ofIraq on or €€ 12,30212,302 830815830815 19-Dcc-0219-Dcc~02 epartment, MinistryMinistry of Oil, bout Oct. 2000 - June €€ 76,43076,430 (actual)(actual) povenlID"ntovemment ofIraqof Iraq 002 (alleged payment of 6,950 ale of i 7 MD Actros to conomic & Finance (-€(-€ 346,743) povernmentofJraqovernment of Iraq onon or 930572 Unknown epartment, Ministry or Oil, € 2,038,300 (actual) bout Apr. 2001-2001 - Nov. (actual) overnment of Iraq 003
Ultimately, DAIMLER DAIMLER conducted most of conducted most of its Iraqi business under thethe OFF program through third-partiesthird-paries because therethere waswas politicalpolitical pressure pressure from from the the Iraqi Iraqi government governent not to buy
German vehicles.vehicles. Under thethe third-partythird-par agreements, agreements, DAIMLERDAIMLER sold trucks,trucks, truck trck chassis,chassis, and spare partsparts toto companiescompanies in in the the Middle Middle East East and and other other countries. countres. DAIMLER'sDAIMLER's contractcontract partnersparters typically modified the vehicles and resold them to Iraqi ministries, paying the standard 10% kickback. hiIn total, total, DAIMLERDAIMLER enteredentered into twelve third-parythird-party contractscontracts inin whichwhich its contract partners made an estimated $5 millionmilion inin ASSFASSF payments.payments.
The DAIMLERDAILER executives executives who who negotiated negotiated the the thid-partythird-party contracts contracts understoodunderstood that
DAIMLER's contract partnersparters would would pay pay ilegalillegal kickbacks kickbacks to to Iraqi Iraqi ministries.ministries. AtAt this this time, time, forfor example, DAIMLER had copies of contract files containing resale agreements between its contract partnersparers and and the the Iraqi Iraqi ministr ministry end-purchasers. end-purchasers. TheThe contract contract fiesfiles included included the the secretsecret side agreements to pay ASSF kickbacks. OneOne internalinternal DAIMLERDAIMLER emailemail messagemessage acknowledgedacknowledged thethe sideside lettersletters usingusing thethe GermanGerman abbreviationabbreviation K.D. forfor "Kundendienst,""Kundendienst," oror after-salesafter-sales servicesservices payment.
63 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 83 of 98
V.V. DAIMLER'SDAIMLER'S LACK LACK OF OF ANAN ADEQUATE ANTI-BRIBERYANTI-BRIBERY COMPLIANCECOMPLIANCE PROGRAMPROGRAM
PriorPrior to 2005, DAIMLER's anti-bribery compliance program was inadequate, despite the factfact thatthat thethe company hadhad beenbeen anan issuerissuer since 1993 andand filedfiled periodic reportsreports withwith the SEC, and thatthat thethe company had more than 270,000 employees and 60 affiliates and businessbusiness units thatthat sold vehicles to to governments governents andand governent-relatedgovernment-related entities entities in many countriescountrics in in which which DAIMLER DAILER operated, including includig high risk countriescountries for for corruption. corrption. Specifically,Specifically, DAIMLER's compliance compliance effort before 2005 had the following characteristics:
(a) A decentralizedA decentralized compliance compliance program program with with no no head head of of compliance;
(b) FinancialFinancial controlling controlling and and legal legal personnel personnel who who had had only only dotted dotted central central reporting lines and who reported directly toto thethe sales organization within their country or business unit;
(c) An Anunderstaffed understaffed and and decentralized decentralized internal internal auditaudit department. deparent. PriorPrior to to 2006, DAIMLERDAILER had had approximately approximately 240 240 employees employees working working inin thethe internalinternal audit function. TheseThese employeesemployees werewere locatedlocated inin 2727 locallocal departments across the world, and most reported to local managementmanagement insteadinstead of centralcentral internalinternal audit.audit. Thus, local management,managcmcnt, who werewcre focused on sales performance, were able to heavily influence thethe typestyes of of issues issues examined examined by by internal internal auditaudit employees,employees, asas well as the remedial steps, if any, recommended by them;
(d) Inadequate,Inadequate, decentralized, decentralized, and and inconsistent inconsistent integrity integrity codes codes and and policies policies forfor the prevention ofof violations of thethe FCPFCP A oror other anti-corruptionanti-corrption statutes,statutes, includingincluding anti-corrptionanti-corruption representations, representations, warranties,waranties, oror otherother language inin contracts withwith affiliates, dealers, agentsagents oror otherother thirdthird parties;paries;
(e) InadequateInadequate gudelines guidelines and and controls controls concerning concerning the the disbursement disbursement of of cash cash from cash desks, which allowed DAIMLER employees to take out tens of thousands of dollars in cash at any given time,time, inin foreignforeign currencies,curencies, withoutwithout justification or high-level signsign offs;offs;
(f) InadequateInadequate controls controls over over more thanthan 200200 TPAs;TPAs;
64 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 84 of 98
(g)(g) InadequateInadequate controls over controlsthe opening andover maintaing the openingof and maintaining of bank accounts.accounts. ForFor instance,instace, beforebefore 2006, DAIMLER and and itsits whollywholly owned owned or or controlledcontrolled subsidiariessubsidiaries had moremore thanthan 625625 openopen bank ban accounts,accounts, oror 9.59.5 perper entityentity onon average;average;
(h) InadequateInadequate controls controls over over the the selection, selection, use, andand makingmaking of paymentspayments toto agentsagents andand intermediaries;intermediaries;
(i) InadequateInadequate training training ofofDAlLER DAIMLER employees employees on onFCPA FCPA or other or other anti-bribery anti-bribery compliance; and
(j) DecentralizedDecentralized hotlines hodines for for reporting reporting violations violations of of the the FCPFCP A A or or other other anti-anti corruptioncorrption statutes statutes oror seekingseeking guidanceguidance on doing business with foreign govermnentgovernent customers. customers.
65 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 85 of 98
DAIMLER
Thomas Schulz
Corporate Secretary
March 21, 2010
Resolution of the BoardBoard of ManagementManagement ofof DaimlerDaimler AGAG
Under consideration of
(i) the thediscussion discussion of ofthe the conditions conditions of of a a SettlementSettlement withwith thethe US SecuritiesSecurities andand Exchange CommissionCommission (the "SEC") andand thethe US Department ofof JusticeJustice (the(the "DoJ")"DoJ") regulating thethe end ofof invcstigationo of possible violations of thethe anti-corruptionanti.corruption and accounting provisions contained in the USUS Foreign Corrupt Practices Act (the "FCPA") (the(the "Settlement")"Settlement") on January 13, 2009;
(ii) thethe authorization authorization ofof the BoardBoard ofof ManagementManagement by by the the SupervisorySupervisory Board,Board, represented byby Dr.Dr. BischoffBischoff and Mr. Walter,Walter, to to enter enter intointo thethe proposed SECSEC / DoJDoJ settlements asas presented to thethe BoMBoM inin January 2009 and June 20092009 and the final agreement by the BoMBoM in July 2009; andand
(iii) thethe discussion discussion ofof the revised conditionsconditions ofof a aSettlement Settlement with with the the US US Department Department of Justice (the "DoJ") on February 2, 2010;
the Board of Management of Daimler AG tooktook thethe followingfollowing resolution onon FebruaryFebruary 2, 2010:
Subject to the Supervisory Board's agreement to enter into aa SettlementSettlement withwith thethe DoJ DoJ under thethe revised conditions and thethe confirmation by the SupervisorySupervisory Board toto enter into thethe Settlement withwith thethe SECSEC as already approved:
Daimler AGAG 0-70546 Stuttgart Stuttgart Phone +'19-(0)711-17-11383+.019-(0)711-17-11383 Fax +49-(0)711-17-41392+49-(0)711-17-41392 [email protected]. ho [email protected] Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 86 of 98
I. SettementSettlement with with thethe DolDol 1. DaimlerDaimler AG, AG, withwith registered registered seatseat inin StuttgartStuttgart (local (local courtcourt ofof Stuttgart,Stuttgart, HRBHRB 19360)19360) ("Daimler" or the "Company")"Company")
(i) acknowledges the the two-count two-count information information charging charging DaimlerDaimler withwith conspiracyconspiracy toto commit an offense against the United States, namely, to violate the books-and-books-and records provisions of thethe FCPAFCPA (Count One); andand violatingviolating thethe books and records provisions of thethe FCPA,FCPA, 1515 U.S.C.U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff(a), and 1818 U.S.C.U.S.C. § 2 (Count(Count Two);Two);
(ii)Iii) waiveswaives indictmentindictment on such charges andand entersenters intointo aa DeferredDeferred ProsecutionProsecution Agreement with the DoJ;DoJ; and
[iii)(iii) agrees to accept aa monetarymonetary penaltypenalty againstagainst DaimlerDaimler and its direct and indirectindirect subsidiaries andand affiliatesaffiliates ofof $93,600,000,$93,600,000, and toto pay $93,600,000$93,600,000 to the United States TreasuryTreasury withwith respectrespect toto the conduct described in the information; and
2. TheThe General General Counsel Counsel of of Daimler, Daimler, Dr. Dr. GeroGero Herrmann,Herrmann, or or the the counselscounsels of of Daimler,Daimler, Dr. Thomas AltenbachAltenbach andand Dr.Dr. WolfgangWolfgang Herb,Herb, oror theirtheir delegate, are hereby authorized, empowered and directed, on behalf of the Company, to execute the Deferred Prosecution AgreementAgreement substantiallysubstantially in such form as reviewed by this Board of Management with such changes as the General Counsel of Daimler, Dr.Dr. Gero Herrmann, oror the counsels of Daimler,Daimler, Dr.Dr. Thomas Altenbach and Dr.Dr. Wolfgang Herb, oror their delegate, maymay approve;approve;
3. TheThe General General Counsel Counsel of of Daimler, Daimler, Dr. Dr. GeroGero Herrmann,Herrmann, or or the the counselscounsels of of Daimler,Daimler, Dr. Thomas AltenbachAltenbach andand Dr. WolfgangWolfgang Herb, oror theirtheir delegate, are hereby authorized, empoweredempowered andand directeddirected to take any and all actions as maymay be necessary oror appropriateappropriate andand toto approve thethe forms, terms or provisions of any agreement or other documents as maymay be necessarynecessary oror appropriate, to carrycarry out and effectuate the purpose and intent of the foregoing resolutions;
4. TheThe General General Counsel Counsel of of Daimler, Daimler, Dr. Dr. GeroGero Herrmann,Herrmann, or or the the counselscounsels of of Daimler,Daimler, Dr. Thomas AltenbachAltenbach andand Dr.Dr. WolfgangWolfgang Herb,Herb, oror theirtheir delegate, are in particular, without limitation, authorizedauthorized toto in thethe Company's name andand onon thethe Company's Company's behalf deliver and accept the Deferred Prosecution Agreement for the PrincipalPrincipal andand appear in court for that purpose; and
5. AllAll ofof the actions ofof thethe General General CounselCounsel of Daimler,Daimler, Dr.Dr. Gero Gero Herrmann,Herrmann, oror the counsels of Daimler, Dr. Thomas Altenbach and Dr. Wolfgang Herb, which actions would have been authorizedauthorized byby thethe foregoingforegoing resolutions except that such actions were taken prior to the adoptionadoption ofof suchsuch resolutions,resolutions, areare herebyhereby severally ratified, confirmed, approved and adopted as actions onon behalfbehalf of the Company.Company.
2
Daimler AGAG D -70546-70546 Stuttgart Phone +4S-{O)711-17-41380+4Ç-(O)711-17-41380 Fax +49-(O}711-17-41390+49-(0)711-17-41390 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 87 of 98
II. SettlementSettlement with thethe SECSEC
Dr. Gero Herrmann, thethe General Counsel ofof Daimler AG, oror thethe counsels of Daimler,Daimler, Dr. Thomas AltenbachAltenbach andand Dr. Wolfgang Herb,Herb, or theirtheir delegate, be and hereby are authorized toto act on behalf of Daimler, and in their sole discretion, to negotiate,negotiate, approve, execute, and deliver to the SECSEC thethe presented "Offer"Offer of Settlement" (consisting of, among others, thethe DaimlerDaimler ConsentConsent andand thethe FinalFinal Judgment,Judgment, including a permanent injunctioninjunction against future violations and a civil disgorgementdisgorgement of $91,400,000) inin connection withwith thethe investigationinvestigation conductedconducted byby thethe SEC; SEC; in this connection, whereby Messrs. Herrmann, Altenbach and Herb be and hereby are particularly, withoutwithout limitation, authorized to:
•. taketake any any and and all all actions as theythey maymay deem necessary necessary and and advisable advisable in in thisthis context, including executing the DaimlerDaimler Consent andand deliveringdelivering itit toto thethe SEC, SEC, and executing anyany otherother documentation asas maymay bebe requiredrequired byby thethe SECSEC in order to carry out the foregoing;
•. in thein the Company's Company's name name and and on on the the Company's Company's behafbehaf deliver deliver thethe consentconsent forfor thethe court settled action for the CompanyCompany and appear in court for thatthat purpose; and
•. make,make, on onbehalf behalf of of Daimler, Daimler, any any and and all all writtenwritten or verbal declarationsdeclarations necessarynecessary in this context.
The correctness of the above mentioned resolution is hereby confirmed.
Daimler AGAG ~~t; ~~(¡ppa. Thomas Schulz
3
Daimler AGAG D -- 70546 Stuttgart Phone +49-(0)71 H7...LH7.. 13801380 Fax +49-(0)711-17-41290 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 88 of 98
R
Hauptsekretariat
9. Februar 20102010
An dredie Mitglieder des Aufsichtsrats derder DaimlerDaimler AGAG
Beschlussfassung cIesdes AufsichtsratsAufsichtsrats zumzum AbsctilussAbschluss cIerder EinigungEinigung mitmit cIerder U.S. BorsenaufsichtBörsenaufsicht SEC undund mitmit demdem U.S. justizministeriumjustizministerium DojDo)
Sehr geehrte FrauFrau Baldauf,
Sehl'Sehl geehrte Herren,
Bezug nehmendnehmend aufauf dasdas Schreiben vom 4. Februar 2010 möchtenmochten wirwir Ihnen das Ergebnis derderschriftlichen schriftlichen BeschlussfassungBeschlussfassung mitteilen.mitteilen.
Aile AufsichtsratsmltgliederAufsichtsratsmitglieder waren waren mit demdem vorgeschlagenenvorgeschlagenen schriftlichenschriftlichen Verfahren einverstanden. DerDer BeschlussangelegenheitBeschlussangelegenheit gemaB gemäß dem obenoben genannten Schreiben wurde einstimmig zugestimmt.
Mit freundliohenfreundlichen GrüßenGrOBen
'It P. Höss-Löw
DaimjerAGl),wnlo:;rAG 705,j6705·j6 Stultgai(Stultgal(
SI.¡iJße¡¡¡¡n:;chdft;Sl.lf)Benl!n:;chdft: M(~içcc¡i.l"str:îlleM(~!0Ccl\.1"str:ille i:::¡ 1:=1:' $t1ttgart$t11ttgart-U"T1ti;~flrkrelm -Unti;:'firkrelm Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 89 of 98
DAI
OfficeOffice ofof thethe CorporateCorporate Secretary
FebruaryFebruary 9,9, 20102010
To thethe Members of the Supervisory Board of Daimler AGAG
Written Resolution ofof thethe Supervisory BoardBoard forfor thethe SettlementSettlement Agreements with the U.S.U.S. Security andand ExchangeExchange CommissionCommission SEC andand thetlie U.S. DepartmentDepartment of JusticeJustice DoJDoJ
Dear Ms. Baldauf, Dear Sirs,
We wouldwould likelike toto inform you of the outcome of the writtenwritten votevote dispatcheddispatched with letter dated February 4,4,2010 2010 toto the the MembersMembers of of the the Supervisory Supervisory Board.Board.
All Supervisory Board Members approvedapproved thethe suggestedsuggested writtenwritten voting procedure. The resolution waswas adopted unanimouslyunanimously asas outlinedoutlined in thethe aboveabove mentionedmentioned letter.
Yours sincerely,
1/1111 :1:1 ~ P.P. Höss-LöwIHiss-Low
D¡¡jmleiDajmim AG AG .!(\b.~ó.I(\b·~c StiittgillStlltl.\:lill tt
$lifX,!Sj~{j(,t üddi(;)'S:addlm~s: r;!f!r',:fjth:'~$t¡'¡l$8er;!f!r":f.:d ATTACHMENTATTACHMENT C CORPORATECORPORATE COMPLIANCE PROGRAM InIn orderorder toto address deficiencies in its internalinternal controls, policies and procedures regardingregarding compliancecompliance withwith thethe Foreign Foreign Corrupt Corrpt PracticesPractices Act ("FCPA"), 15 U.S.C. §§ 78dd-l, et seq., and other applicableapplicable anti-corruption anti-corrption laws, DaimlerDaimler AGAG ("Daimler") agrees to to conduct, conduct, in in a amanner marer consistent with this Agreement, a review of its existing internal controls, policies and procedures. Where necessarynecessary and and appropriate, appropriate, Daimler Daimler further fuer agrees agrees to to adopt adopt new new or or to modify existing internal controls, policies andand procedures inin order to ensure that it maintains:maintains: (a) a system ofof internalinternal accounting controlscontrols designeddesigned toto ensure that Daimler makes and keeps fair andand accurateaccurate books,books, records and accounts;accounts; andand (b)(b) aa rigorous rigorous anti-corruption anti-corrption compliancecompliance code,code, standards and proceduresprocedures designed to detect to detectand deter andviolations deter of violations of the FCPFCPA A andand otherother applicable applicable anti anti-corrption -corruption laws.laws. At a minimum, this should include, but ought not be limited to, the following elements: 1. A clearlyA clearly articulated articulated corporate corporate policy policy against against violationsviolations ofof the the FCPA FCPA and other applicable anti-corruptionanti-corrption laws. 2. A systemA system of financial of financial and and accounting accounting procedures, procedures, including including a asystem system of of internal internal accounting controls, designed to ensure the maintenance of fair and accurate books, records and accounts. 3. PromulgationPromulgation of compliance ofcompliance standards standards and and procedures procedures designed designed to to reduce reduce the the prospectprospect of violations of of the FCPA,FCPA, other other applicableapplicable anti-corruptionanti-corrption lawslaws andand Daimler'sDaimler's compliancecompliance code.code. These standardsstandards andand procedures shouldshould applyapply toto allall directorsdirectors and employees and, whcrcwherc nccessary and appropriate, appropriate, outside partiesoutside acting parties on behalf acting of on behalfof Daimler inin foreign jurisdictions, includingincluding agents,agents, consultants, representatives, distributors, teamingteaming partnerspartners and and joint joint venture ventue partnersparners (collectively(collectively referredreferred toto asas "agents"agents andand businessbusiness partners").partners"). Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 91 of 98 4. The assignentThe ofassignment responsibility toof oneresponsibility or more senior corporate to one officials or more of senior corporate officials of Daimler forfor thethe implementationimplementation and oversight oversight ofof compliancecompliance withwith policies,policies, standardsstandards andand proceduresprocedures regarding thethe FCPAFCPA and and other other applicable applicable anti-corruption anti-corrption laws.laws. Such corporatecorporate official(s)offcial(s) shall have thethe authority authority to report to reportmatters directly matters to Daimler's directly Board to of Daimler's Board of Management and SupervisorySupervisory Board. 5. MechanismsMechanisms designed designed to ensureto ensure that that the the policies, policies, standards standards and and proceduresprocedures of Daimler regarding regarding the FCP A theand other FCP applicable A and anti-corrptionother applicable anti-corruption laws areare effectivelyeffectively communicated communcated to all directors,directors, employeesemployees and,and, wherewhere necessarynecessary andand appropriate,appropriate, agents and business partners.partners. These mechanisms shall include: (A)(A) periodicperiodic trainingtraining forfor all such directors, employees, agents and business parters;partners; andand (B) (B) arualarmual certifications certifications byby allall suchsuch directors,directors, employees, employees, agentsagents andand businessbusiness partners,parters, certifyngcertifying compliance with with the the trainingtraining requirements.requirements. 6. An effectiveAn system effective for reporting system suspected forreporting criminal conduct suspected and/or violations criminal of conduct and/or violations of the compliance policies, standards and procedures regarding the FCPFCP AA and other applicableapplicable anti-anti corruptioncorrption laws laws for for directors,directors, employees,employees, agentsagents andand businessbusiness partners.parners. 7. AppropriateAppropriate disciplinary disciplinary procedures to address, to address, among other among other things, violations violations of of the FCP A,A, otherother applicable applicable anti-corruption anti-corrption laws laws or or Daimler's Daimler's compliance compliance code code by by directors, directors, employees,employees, agents andand businessbusiness partners. parers. 8. AppropriateAppropriate due diligencedue diligence requirements requirements pertaining pertaining to tothe the retention retention andand oversightoversight of agents and business partners. 9. Standard Standardprovisions in provisionsagreements, contracts, in agreements, and contracts, and renewals thereofwith allall agents and business partnersparners which areare designed toto preventprevent violationsviolations of the FCPA andand other applicable anti-anti corrptioncorruption laws, laws, whichwhich provisionsprovisions may,may, dependingdepending upon thethe circumstances,circumstances, include:include: (A)(A) anti-anti corrptioncorruption representationsrepresentations andand undertakingsundertakgs relatingrelating to compliancecompliance with the FCPFCP A A andand otherother 2 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 92 of 98 applicable anti-corrption anti-corruption laws; (B) rights laws; to conduct (B) auditsrights of to conduct audits ofthethe books books and records and recordsof of thethe agent or business business parter partner toto ensure compliance with the foregoing; and (C) rights toto terminateterminate an agent oror business partner as a resultresult of any violationviolation ofof anti-corruptionanti-corruption laws,laws, andand regulationsregulations or representationsrepresentations andand undertakings undertakigs relatedrelated toto suchsuch matters.matters. 10. PeriodicPeriodic testing of testing of the integrityintegrty code,code, andand policiespolicies andand proceduresprocedures designed to evaluate their effectiveness effectiveness in detecting in detectingand reducing violations and reducing of violations of the anti-corruptionanti-corrption lawslaws andand Daimler'sDaimler's internal controls system and integrity code. 2 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 93 of 98 ATTACHMENTATTACHMENT D INDEPENDENTINDEPENDENT CORPORATECORPORATE MONITORMONITOR I.1. DaimlerDaimler AG AG ("Daimler" ("Daimler" or or the the "Company") "Company") agrees agrees to to engageengage anan independent corporate monitormonitor (the (the"Monitor") "Monitor") for a period offor a period of threethree (3)(3) years.years. TheThe Monitor's primaryprimary responsibilityresponsibility isis toto assess and monitormonitor thethe Company'sCompany's compliancecompliance withwith thethe termsterms ofthis ofthis AgreementAgrement so so asas toto specifically address and reducereduce thethe riskrisk ofof anyany recurrencerecurence ofof the the Company'sCompany's misconduct,misconduct, includingincluding evaluatingevaluating thethe Company's corporate compliance programprogram withwith respectrespect to to thethe ForeignForeign Corrupt Corrpt PracticesPractices ActAct ("Fep("FCP A"),A"), 1515 U.SU.S .C. .C. § § § §78dd-l, 78dd-l, et et seq., seq., and and other other relevant relevant anti-corruption anti-corrption laws. The Monitor shall have, at a minimum, the following qualifications: a. demonstrateddemonstrated expertise expertise with with respect respect to to the the FCP FCP A, A, includingincluding experienceexperience counseling on FCPA issues; b. expeIlenceexpenence designing designing and/or and/or reviewing reviewing corporate corporate compliance compliance policies, policies, procedures and internal controls,controls, includingincluding FCPA-specific policies, procedures and controls; c. the theability ability to toaccess access and and deploy deploy resources resources as as necessary necessary to to dischargedischarge thethe Monitor's dutiesduties asas describeddescribed inin thethe Agreement;Agreement; andand d. sufficientsufficient independence independence from from Daimler Daimler to toensure ensure effective effective and imparialimpartial performance of of the Monitor's dutiesduties asas describeddescribed in in the the Agreement. Agreement. 2. In consultationIn consultation with with the the Deparment,Department, Daimler Daimler hashas proposedproposed andand thethe Department Deparent hashas approved Louis J. Freeh to serve as the Monitor. TheThe Monitor'sMonitor'S term term shall shall be be three three (3) (3) yearsyears fromfrom thethe date date on which on thewhich guilty thepleas guiltyin the matters pleas of in the matters of United States v. DaimlerChryslerDaimlerChrsler AutomotiveAutomotive Russia SAOSAO andand United StatesStates v.v. DaimlerDaimler Export andand TradeTrade FinanceFinance GmbHGmbH areare entered, subject to extension oror earlyearly termination asas described in Paragraph 3 of the Agreement. TheThe Monitor's duties duties and authority, authority, and the andobligations the obligationsof of DaimlerDaimler withwith respectrespect to thethe Monitor andand thethe Department,Department, areare Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 94 of 98 set forth fort below.below. 3. Daimler agreesDaimler that it agrees wil that it will not employ or be affiliated withwith the MonitorMonitor for a periodperiod of not less than one year from the date the Monitor's workwork hashas ended.ended. 4. The MonitorThe willMonitor review and will evaluate review the effectiveness and evaluate of the effectiveness of Daimler's internal controls, record-keeping, and existing or new financial reporting policies and procedures as they relate to Daimler's compliancecompliance with the books and records, internalinteral accounting accounting controlscontrols andand anti-briberyanti-bribery provisions of of the FCPA, andand otherother applicableapplicable anti-corruptionanti-corrption laws laws ("the("the Policies and Procedures"). This review and evaluation shall include an assessment of the Policies and Procedures as actually implemented. TheThe retentionretention agreementagreement between between Daimler Daimler and and the the MonitorMonitor willwil referencereference this Agreement and includeinclude thisthis Agreement Agreement as as an an attachment attaclient so so the Monitor is fullyfully apprisedofhis apprisedofhis duties and responsibilities. 5. DaimlerDaimler shall shall cooperate cooperate fìilly flJ!ly with with the the .\onitor .\i!onitor and and the the Monitor Monitor shall shall have have the the authority to take such reasonablereasonable steps as,as, inin hishis view,view, maymay be be necessary necessar to be fully informed about the compliance compliance program of program of Daimler within within the scope the of scope of his responsibilities under this Agreement. To that end, Daimler shall provide the Monitor with access to all information, documents, records, facilities and/or employees thatthat fall within the scopescope of responsibilities of the Monitor under this Agreement. Any suchsuch disclosuredisclosure by by Daimler Daimler to to the the Monitor Monitor concerning concerng corrptcorrupt payments, payments, relatedrelated books and recordsand records and related and internal related controls internal shall controls shall not relieve DaimlerDaimler ofof its its obligation obligation truthfullytrthfully to disclose such matters toto thethe Department.Deparment. 6. The partiesThe parties agree agree that that the the Monitor Monitor is is an an independent independent third-part, third-party, not anan employeeemployee or agent of of Daimler or or the Department,Deparent, and and that that no no attomey-clientrelationship attomey-c1ientrelationship shall shall be be formed formed betweenbetween Daimler andand thethe Monitor.Monitor. 2 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 95 of 98 7. DaimlerDaimler agrees agrees that: that: a. TheThe Monitor Monitor shall shall assess assess whether whether Daimler's Daimler's existing existing policies policies and and procedures procedures are reasonably designeddesigned toto detectdetect andand preventprevent violations ofof the FCPA and other applicable anti- corruption laws.laws. b. TheThe Monitor Monitor shall shall evaluate evaluate Daimler's Daimler's compliance compliance with with thisthis Agreement.Agreement. c. TheThe Monitor Monitor shall shall oversee oversee Daimler's Daimler's implementation implementation of of and and adherence adherence to to allall existing, modified or new policies andand proceduresprocedures relatingrelating toto FCPFCP A compliance, including the minimum policiespolicies andand proceduresprocedures set set forthfort inin AttachmentAttachment C. d. The MonitorThe Monitor shall shall ensure ensure that that the the Policies Policies and and Procedures Procedures are are appropriatelyappropriately designed to accomplish their goals. e. DurngDuring the thethree three (3) (3)year year term, term, the the Monitor Monitor shall shall conduct conduct anan initial reviewreview and prepare an initial report, followed by two follow-up reviews and reports as described below: (i) WithWith respectto respectto each each ofthe ofthe three three (3) (3) reviews, reviews, after after intial initial consultations with Daimler and the Department, the Monitor shall prepare a written work plan for each review, which shallshall bebe submittedsubmitted in in advance advance to to Daimler Daimler and and the the Department Deparent forfor comment.comment. ilill order order toto conduct an effective initial review and to understand fully any existing deficiencies in controls and the PoliciesPolicies andand ProceduresProcedures relatedrelated toto thethe FCPFCP A and otherother applicableapplicable anti-corruptionanti-corruption laws, the Monitor's initialinitial workwork planplan shallshall includeinclude suchsuch stepssteps asas areare reasonably reasonably necessarynecessary toto developdevelop anan understanding ofthe facts ofthe and circumstances facts and surrounding circumstances any surrounding any violations thatthat may have occurred,occured, but the parties do not intend that thethe Monitor willwil conductconduct hishis ownown inquiryinquiry intointo thosethose historical events.events. Any disputes between Daimler and the Monitor with respect to the work plan shall be decided by the DepartmentDeparment inin itsits solesale discretion.discretion. 3 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 96 of 98 (ii) In Inconnection connection with with the the initial initial review, review, the the MonitorMonitor shall shall issue issue a writtenwritten report within one hundred twenty (120) calendar days of thethe date on which the guilty pleas in the matters of of United States v. DaimlerChryslerDaimlerChrysler Automotive Russia SAO and United States v.v. DaimlerDaimler Export and Trade Finance GmbH are entered, setting forth the Monitor's assessmentassessment and, if appropriate and necessary,necessar, making recommendationsrecommendations reasonablyreasonably designed toto improveimprove the Policies and Procedures of Daimler for ensuring compliance with the FCPA and otherother applicableapplicable anti-anti corruptioncorrption laws. laws. TheThe Monitor Monitor shall shall provide provide the the report report to to thethe Board Board ofof Directors Directors ofof DaimlerDaimler and contemporaneously transmit copies to Mark F. Mendelsohn (or hishis successor), Deputy Chief, Fraud Section, Criminal Criminal Division, Division, U.S. DeparentofJustice, U.S. DepartmentofJustice, 1400 New York 1400 New York Ave., N.W., N.W., Bond Bond Building, FourthFourh Floor, Floor, Washington,Washington, DCDC 20005.20005. TheThe Monitor Monitor may may extend extend thethe timetime periodperiod for issuance of the report withwith priorprior writtenwritten approvalapproval of of the the Department. Deparent. (iii) WithnWithin one-hundred one-hundred twenty twenty (120) (120) calendar calendar days days after after receiving receiving the Monitor's report,report, DaimlerDaimler shallshall adoptadopt thethe recommendationsrecommendations set forthforth inin thethe report;report; provided,provided, however, that within sixty (60) calendarcalendar days afterafter receiving the report, Daimler shall advise the Monitor and the DepartmentDepartment inin writingwriting ofof any any recommendations recommendations thatthat DaimlerDaimler considersconsiders unduly burdensome, impractical, impractical, costly costly or otherwise otherwise inadvisable. inadvisable. With respect Withto any respect to any recommendation that Daimler considers unduly burdensome, impractical, costly or otherwise inadvisable, Daimler need not adoptadopt thatthat recommendation;recommendation; instead,instead, DaimlerDaimler maymay propose inin writingwriting anan alternativealternative policy,policy, procedure or system or systemdesigned to designedachieve the same to objectiveachieve or the same objective or purpose. As to Asany to any recommendation on which Daimler and the Monitor ultimately dodo not agrcc,agree, thethc viewsvicws of Daimler and the Monitor shall promptly be brought toto thethe attentionattention of of the the Department. Department. The The Department Deparent may may consider consider thethe Monitor's recommendationrecommendation andand thethe Company'sCompany's reasons reasons forfor not not adopting adopting the the recommendation recommendation in in 4 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 97 of 98 detenniningdetermng whether whether Daimler Daimler has has fully fully complied complied with with its its obligations obligations under under this this Agreement.Agreement. (iv) TheThe Monitor Monitor shall shall undertake undertake two follow-up reviewsreviews to to further fuer monitormonitor and assess whether thethe Policies and Procedures of Daimler are reasonably designed to detect and prevent violations of the FCPFCPA A and and other other applicable applicable anti-corruption anti-corrption laws. (v) Within sixtyWithin (60) calendarsixty days(60) of calendar days of initiating each follow-up review, the Monitor Monitor shall: shall:(A) complete (A) the complete review; (B) thecerify review; (B) certify whether the anti-briberyanti-bribery compliancecompliance programprogram of Daimler, including the Policies and Procedures, is appropriately designed and implemented to ensure compliance withwith thethe FCPAFCPA andand otherother applicableapplicable anti-corruption anti-corrption laws;laws; andand (C) report on the Monitor's findingsfindigs in in the the same same fashion fashion as as with with respect respect to to thethe initialinitial review.review. (vi) TheThe first first follow-up follow-up review review and and report report shall shall bebe completedcompleted by one yearyear after the initial review. TheThe secondsecond follow-upfollow-up reviewreview andandreportshall report shall bebe completedcompleted byby one year after the completion completion of of the first follow-up review. (vii) TheThe Monitor Monitor may may extend extend thethe timetime periodperiod forfor submissionsubmission of thethe follow-up reports reports with prior with written prior approval written of approval of the Department. 8. In undertangIn undertaking the assessmentsthe assessments and andreviews reviews described described above, above, the the MonitorMonitor shall shall formulate conclusions based on, among otherothcr things:things: (a) inspectioninspection ofof relevantrelevant documents,documents, includingincluding the Policies and Procedures relatingrelating to to Daimler's Daimler's anti-corruptionanti-corrption compliancecompliance program; (b)(b) onsiteonsite observation of ofDaimler's systems systems andand procedures, includingincluding itsits internal controls, record-keeping andand internal auditaudit procedures; (c) meetings with, and interviewsinterviews of, relevant employees, directors and othcrother pcrsonspersons at mutuallymutually convenient times and places; andand (d) analyses, stumesstudies andand testing of Daimler's anti-corrptionanti-corruption compliancecompliance program.program. 9. Should theShould Monitor, theduring Monitor, the course of during the course ofhis engagement, discover credible evidence 5 Case 1:10-cr-00063-RJL Document 3-1 Filed 03/24/10 Page 98 of 98 thatthat questionablequestionable oror corruptcorrpt paymentspayments or questionable oror corruptcorrpt transfers transfers ofof property property oror interestsinterests maymay havehave beenbeen offered, promised,promised, paid or authorized by any DaimlerDaimler entity or person,person, or anyany entityentity oror person working directly or indirectly for Daimler, or that related false books and records have beenbeen maintained, the Monitor shall promptly report such conductconduct toto Daimler'sDaimler's General Counsel, its Board of of Management, and its outside counsel for furtherfurther investigation,investigation, unlessunless the MonitorMonitor believes,believes, inin thethe exercise exercise of his or herher discretion,discretion, that suchsuch disclosuredisclosure should hebe made directly to the Department. IfIf the the MonitorMonitor refersrefers thethe mattermatter onlyonly toto Daimler'sDaimler's GeneralGeneral Counsel,Counsel, its Board of Management, and its outside and itscounsel, outside Daimler counsel, shall promptly Daimler shall promptly report the same toto thethe DepartmentDepartmcnt andand contemporaneously notifynotify thethe MonitorMonitor thatthat suchsuch report report has has been been made. made. IfIf Daimler fails to make disclosure to the to Department the Department within ten (10) withincalendar daysten of (10) calendar days of the Monitor's Monitor's report ofreport of such conduct to Daimler, the Monitor shallshall independently disclose his findings to the Department at the address listed in Paragraph 7(7( ee)(ii) )(ii) above. above. Further,Furher, inin thethe event that Daimler, or any entitycntity oror personperson workingworking directly or indirectly for Daimler, refuses to provide information necessary forfor thethe performanceperformance ofof the Monitor's responsibilities,responsibilities, the Monitor shall promptly disclose thatthat fact fact to to the the Department. Departent. Daimler shall notnot take take anyany action toto retaliate againstagainst the Monitor for any such disclosures or for any other reason. TheThe Monitor Monitor maymay reportreport othcrother crimialcriminal or or regulatory regulatory violations violations discovereddiscovered in the course ofof performingperformg his his duties, duties, inin thethe samesame mannermarer as as described described above.above. 10. At leastAt annually, least andannually, more frequently and if more appropriate, frequently representatives if appropriate, of representatives ofDaimler and thethe DepartmentDepartment wilwill meet meet together together to to discussdiscuss thethe monitorshipmonitorship andand anyany suggestions,suggestions, commentscomments or improvcmcntsimprovements DaimlerDaimler maymay wishwish toto discussdiscuss withwith oror proposepropose toto thethe Department.Department. 6