Daimler Admits Bribing Ghana Military

Ghana's military establishment has been named in a longstanding U.S. probe into allegations of bribery and other corrupt practices by Daimler in several countries around the world. The bribes, in cash and kind, were part of the German automobile manufacturer's bid to secure lucrative contracts in these countries.

In a plea bargaining deal sealed by a U.S. Circuit Court Judge in Washington on March 24, Daimler confessed to paying bribes and kick-backs amounting to several millions of U.S. dollars to public officials and their agents in about 22 countries between 1998 and 2008 to further its business interest in these countries.

The deal, described as a deferred prosecution agreement, stated in its background to Daimler's bribery conduct that, between 1998 and January 2008, Daimler made hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries - including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam, Liberia and Ghana - to assist in securing lucrative government contracts for the supply of Daimler vehicles valued at hundreds of millions of dollars.

Daimler is reported to have in some cases, wired these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies in order to transmit the bribe. In at least one instance, a U.S. shell company was said to have been incorporated for the sole purpose of entering into a sham consulting agreement with Daimler in order to conceal improper payments routed through the shell company to foreign government officials.

Certain improper payments are said to have continued even as late as January 2008. In all cases, Daimler was reported to have improperly recorded these payments in its corporate books and records, including: (1) an inadequate compliance structure; (2) a highly decentralized system of selling vehicles through a myriad of foreign sales forces, subsidiaries, and affiliates, with no central oversight; (3) a corporate culture that tolerated and/or encouraged bribery; and (4) the involvement of certain key executives, such as the then head of its overseas sales division, the then head of internal audit, and the then CEOs of several subsidiaries and affiliates.

In total, the corrupt transactions with a territorial connection to the United States resulted in over $550,000,000 in pretax profits for Daimler. Even at the time of the merger between Chrysler Corporation and Daimler-Benz in 1998, Daimler was said to have maintained over 200 internal "third-party accounts" ("TPAs").

TPAs were maintained as receivable ledger accounts in Daimler's books and were controlled by third parties outside the company or by Daimler's own subsidiaries and affiliates. Daimler is said to have used these accounts, among other things, to facilitate the making of improper payments and the provision of gifts to foreign government officials. Funds were credited to these accounts through price inclusions, discounts, rebates, and other mechanisms. These payments were improperly accounted for, and were not subject to normal auditing or other financial controls. Moreover, certain accounts remained "off the books" of those DAIMLER affiliates on whose behalf Daimler maintained the accounts.

In the specific case of Ghana, Daimler and Silver Star Auto are said to have entered into a contract to sell eight trucks to the Ghana Armed Forces in September 1997. The deal was negotiated through an agent, Global Strategic Ventures Ltd. It was understood that Silver Star Auto would pay Global Strategic Ventures a commission that would be passed on, in whole or in part, to Ghanaian Army officials in exchange for the aforementioned contract. Silver Star Auto paid Global Strategic Ventures a commission of $170,000, which was wired from a Daimler account in Germany to Global Strategic Ventures' account in London and debited to Silver Star Auto's TPA account.

Public Agenda's efforts at unveiling the faces behind Global Strategic Ventures was fraught with challenges mainly arising out of software migration works at the Registrar General's Dept.

The matter is of particular interest to governments of most of the host countries where these frauds were perpetrated because in almost all the instances, it involved high level military and/or security establishment officials.

Daimler however, has gotten off the hook lightly, because it has co-operated with U.S. investigation officials and is said to have taken necessary steps to forestall such occurrences in the future.

Prosecutors have however, recommended that the judge imposed a $93.6 million fine on the basis of the guilty plea of two Daimler subsidiaries. Daimler will also pay a $91.4 million fine to settle investigation costs incurred by the U.S. Securities and Exchange Commission.

These fines are generally said to be far less than the $800 million the German industrial giant, Siemens paid in 2008 to settle a U.S. investigation into its bribery of officials to secure contracts in Argentina, Bangladesh, Iraq and Venezuela.

Prosecutors argued in a sentencing memo that: "The Department (of Justice) considers Daimler's cooperation in this investigation to have been excellent," citing the fact that, "Daimler conducted a worldwide internal investigation, involving dozens of countries and every major market in which the company does business;" and that, "Daimler regularly presented its findings to prosecutors, fired 45 employees implicated in the bribery and reformed its practices." In a swift response to the outcome of the U.S. investigations, Nigeria's Economic and Financial Crimes Commission (EFCC) has began investigations into the role of Nigerian officials in the alleged bribes paid by Daimler AG. At the heart of the Nigerian probe is $15 million of alleged bribes involving Daimler and Anammco, a Nigerian company that assembles Mercedes trucks and buses.

Anammco was set up in the 1970s as a joint venture between Daimler, the Nigerian government and local investors.

Daimler sold its stake in 2007 in line with its policy not to invest in companies that are partly government-owned.

Four officials and representatives of Daimler and Anammco in Nigeria have so far been interrogated, and steps are currently being taken to obtain the certified true copy of the US judgment.

DAIMLER is owned by individual and institutional investors in the U.S., Europe, and elsewhere. More than one billion shares of Daimler were in circulation as of December 31, 2007. For the purposes of the United States securities laws, Daimler became an "issuer" in 1993, and Daimler's common stock has been traded on the New York Stock Exchange, the Pacific Exchange, the Chicago Stock Exchange, and the Philadelphia Stock Exchange.

As a result of Daimler's filing of periodic reports with the Securities and Exchange Commission ("SEC") pursuant to Title 15, United States Code, Section 18m, and Daimler's use of U.S. bank accounts and U.S. companies in transacting certain businesses with foreign governments and officials, the company is subject to the Foreign Corrupt Practices Act ("FCPA").

Author: Steve Manteaw, from Washington D.C.