Feds probe alleged DCX bribes

[coolcaddy]

Feds probe alleged DCX bribes
SEC investigates claims automaker used funds to influence foreign government leaders.

By Jeff Plungis / Detroit News Washington Bureau

WASHINGTON - DaimlerChrysler AG disclosed Thursday it is facing a Securities and Exchange Commission investigation over allegations that it maintained secret bank accounts used to bribe foreign government officials.

In a lawsuit filed last month in U.S. District Court for Eastern Michigan, former Chrysler auditor David Bazzetta alleges that he learned of the bank accounts during a July 2001 meeting in Stuttgart, Germany, where DaimlerChrysler is headquartered. Company officials were aware that the accounts violated U.S. securities laws but continued to maintain them, the lawsuit states.

When Bazzetta protested the use of the bank accounts to his boss, Chuck Struve, vice president of corporate audits, he was told, "issues that arise in Corporate Audit must remain in Corporate Audit," the lawsuit states.

Bazzetta says he reported the problems to James Donlon, then DaimlerChrysler's senior vice president and controller, who had previously helped him obtain his job.

Struve became upset, wrote a bad employee evaluation for Bazzetta and blocked a promotion, the lawsuit alleges. Bazzetta was fired in January 2004, two weeks after Donlon retired.

"This is first and foremost an issue of retaliation," said Sue Ellen Eisenberg, a Bloomfield Hills attorney representing Bazzetta. "What happened was very vindictive. My client was blindsided. He was a terrific employee and was recognized as such. He was known as a workaholic's workaholic."

Eisenberg said Bazzetta can document and corroborate the allegations in the complaint. Members of the SEC's investigative staff flew to Michigan about two months ago and interviewed him at length. "I can tell you they are taking it very seriously," Eisenberg said.

In a conference call Thursday to discuss DaimlerChrysler's earnings, Chief Financial Officer Manfred Gentz acknowledged that the SEC probe began in August but refused to elaborate on the charges.

"I'm not able to give you any indication of how it is going because it is early," Gentz said.

In a statement, the company said it is cooperating with the SEC in the investigation and could not comment further.

"DaimlerChrysler believes there is no merit to the lawsuit or the earlier claim by the self-described 'whistleblower' that he was improperly terminated," the company stated.

The company also believes as stated earlier the terminated employee is 'not happy to have left the company,'" the statement said.

Besides facing penalties under the Foreign Corrupt Practices Act, which forbids bribery, DaimlerChrysler could be sanctioned for violating the new Sarbanes-Oxley corporate reform law passed in the wake of the Enron and WorldCom accounting scandals.

The existence of secret bank accounts could violate securities laws that require complete corporate accounting of financial information provided to shareholders.

The Sarbanes-Oxley law also contains provisions to protect whistleblowers from retribution for exposing information about fraud against shareholders.

Theodore Bolema, a business professor at Central Michigan University, said the Sarbanes-Oxley law makes executives who knowingly defraud investors subject to criminal penalties.

But beyond that, Bolema said, DaimlerChrysler could face future shareholder lawsuits if the SEC investigation or the whistleblower lawsuit leads to a drop in share price.

"That could be worse than the complaint," Bolema said.

DaimlerChrysler also acknowledged it is providing information to the SEC on how it complies with the Sarbanes-Oxley law as a result of another whistleblower complaint that alleges problems with how the company reports information to its internal audit committee.

John Heine, a spokesman with the Securities Exchange Commission in Washington, said the agency does not comment on pending investigations.

The disclosure of the DaimlerChrysler SEC investigation follows a report last week that the SEC is looking at whether General Motors Corp., Ford Motor Co. and Delphi Corp. used correct assumptions to calculate liabilities for pensions and health-care benefits for retirees.

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[coolcaddy]

DCX response:

DCX says it's facing SEC investigation based on anti-bribery law

BERLIN _ DaimlerChrysler AG said Thursday it had been notified that it was under investigation by the U.S. Securities and Exchange Commission over alleged violations of a federal anti-bribery statute after a fired employee complained to labor officials.

The automaker made the disclosure in its third-quarter earnings statement, without naming the employee or putting a euro (dollar) figure on the company's possible exposure.

"The investigation follows the filing of a whistleblower complaint with the U.S. Department of Labor under the Sarbanes-Oxley Act by a former DaimlerChrysler employee whose employment was terminated earlier this year," the company said in the earnings statement.

Chief financial officer Manfred Gentz mentioned the investigation in a conference call Thursday but provided no details. He said the allegations were "without merit" from the company's point of view.

Gentz and the earnings statement said the SEC investigation was based on the 1977 Foreign and Corrupt Practices Act, which bars U.S. companies from bribing foreign officials and requires compliance controls.

The Securities and Exchange Commission is the chief U.S. watchdog agency for securities markets.

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[tgagneguam]

I wonder if "GM - take notes" applies to this story, too. But that's just me being my usual cynical self...

[mrfunji]

From the story is seems like DCX has a 'secret' bank account to inflate earnings. Who exactly were they bribing? Did I miss something?

[barcodedorganic]

not to inflate earnings...but daimler was seeking out to build a factory in northern iraq before the war...so...two and two together heres a big fat check mr saddam hussein we'll build fine german automobiles and even donate a few...

the german arm of DaimlerChrysler is seriously fubared

[ByTheLake]

Bribes? Nah ... the auto industry prefers to call them "incentives".