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U.S. v. Daimler AG

 
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Daimler - Daimler AG
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DOJ Criminal
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April 1, 2010
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U.S. v. Daimler AG
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U.S. v. Daimler AG, No. 10-cr-63 (D.D.C. 2010)
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With a combined fine of $185 million, the Daimler case is one of the largest FCPA dispositions ever. Daimler's conduct is particularly notable for the wide range of countries involved as well as the numerous different means and methods for making corrupt payments. The disposition is also significant because the Daimler parent company only admitted to violating and conspiring to violate the books and records provisions of the FCPA, while certain subsidiaries pled guilty to anti-bribery violations.
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China, Cote d'Ivoire, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Latvia, Nigeria, Russia, Serbia, Thailand, Turkey, Turkmenistan, Uzbekistan, Viet Nam
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1998; 1999; 2000; 2001; 2002; 2003; 2004; 2005; 2006; 2007; 2008
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Government officials responsible for the purchase of vehicles in more than 22 countries.
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Between 1998 and 2008, Daimler AG (“Daimler”) and its subsidiaries made hundreds of improper payments worth tens of millions of dollars to foreign officials to obtain vehicle contracts in at least 22 countries.  The alleged improper payments include: 
• “Third-party accounts,” maintained as receivable ledger accounts on Daimler’s books but controlled by third parties outside the company or by Daimler subsidiaries.  Prior to 2002, these accounts enabled cash disbursements from a “cash desk” located at a Daimler facility in Stuttgart, Germany.  Daimler employees took the cash and transported it to other countries to pay bribes to foreign officials.  Daimler used these accounts to make improper payments by other methods too.
• Daimler subsidiary DaimlerChrysler Automotive Russia SAO (“DCAR”) made payments to Russian government officials by over-invoicing the customer and then paying the excess amount back to the government officials.  Daimler and DCAR also made payments to third parties in connection with the sale of commercial vehicles to Russian government customers with the understanding that the payments would be passed on to Russian government officials.   
• Employees of DaimlerChrysler China Ltd. (“DCCL”) and Daimler made improper payments in the form of commissions, delegation travel, and gifts for the benefit of Chinese government officials in connection with the sale of vehicles to Chinese government customers.  Daimler and DCCL inflated the sales price of vehicles sold to Chinese government customers, then maintained a special account to track these overpayments and disburse them to and for the benefit of Chinese officials. Daimler and DCCL also made payments to shell entities and third party agents who passed the payments on to Chinese officials or used them to buy the officials gifts or trips.
• Daimler Export and Trade Finance GmbH (“DETF”) paid bribes to Croatian government officials, both directly and via U.S.-based shell companies, to secure the sale of fire trucks to the Croatian government. 
• Daimler paid kickbacks to the former Iraqi government to obtain contracts for the sale of vehicles to the government of Iraq under the oil-for-food program.  Like other companies that have been prosecuted in oil-for-food cases, Daimler agreed to pay a 10% commission to the Iraqi government by inflating contract prices by 10%.  The payments were characterized as “after sales services fees,” but no services were performed.  Most of Daimler’s oil-for-food contracts involved third-party intermediaries, but Daimler understood its partners would pay the illegal kickbacks to Iraqi ministries. On March 22, 2010, Daimler and its Chinese subsidiary, DCCL, entered into deferred prosecution agreements with the DOJ.  Daimler admitted to violating the books and records provisions of the FCPA and conspiracy to violate the books and records provisions of the FCPA.  DCCL admitted to violating the anti-bribery provisions of the FCPA and conspiracy to violate the anti-bribery provisions of the FCPA.  On the same day, Daimler’s Russian subsidiary, DCAR, and Daimler’s finance subsidiary, DETF, each pleaded guilty to violating the anti-bribery provisions of the FCPA and conspiracy to violate the anti-bribery provisions of the FCPA.
Under the terms of its agreement with the DOJ, Daimler must hire an independent monitor for three years to oversee the implementation of a robust compliance program.  If Daimler complies fully with its agreement for a period of two years and seven days, the DOJ agrees not to bring any other charges based on this underlying conduct or other conduct that Daimler disclosed to the DOJ.
Daimler and its subsidiaries must pay a $93.6 million fine to the DOJ.  Separately, to settle civil charges brought by the SEC, Daimler agreed to pay $91.4 million in disgorgement.
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Books and records (Issuer), Conspiracy - Books & Records
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Deferred-prosecution Agreement
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This sanction consisted of: $93,600,000 penalty for Daimler and its subsidiaries.
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93,600,000
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0
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Total Offense Level: 38 (Base Offense of 12 plus Specific Offense Characteristic of 2 for multiple bribes plus Specific Offense Characteristic of 24 for a benefit received greater than $50 million with a U.S. nexus). Total Culpability Score: 8 (Base Culpability Score of 5 plus 5 because the organization has more than 5,000 people and tolerance of the offense was pervasive among substantial authority personnel minus 2 for cooperation and acceptance of responsibility).
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Issuer
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Foreign
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Contract Procurement/Retention
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1,900,000
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Cash, Gifts, Travel, Wire/check
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Direct, Sales Agent/Consultant, Subsidiary Company
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56,000,000
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United States
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No