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Friday, April 2, 2010

Chrysler Whistle-Blower's Tip Brings U.S. Charges of Global Bribery by Daimler

The Detroit Free Press

WASHINGTON – Nine years ago, Chrysler auditor David Bazzetta was shocked to hear from DaimlerChrysler executives in Germany that the company regularly bribed foreign governments for business – even though they knew it violated U.S. law.

That whistle Bazzetta blew will finally be answered next week, when Daimler appears in a U.S. federal court in Washington on charges it spent hundreds of millions of dollars on payoffs to officials in 22 countries between 1998 and 2008. Several outlets reported that the company will pay $185 million to settle the charges, but the company and the U.S. Department of Justice declined comment.

So too did Bazzetta, 54, of Macomb Township, whose 2004 lawsuit first revealed the secret accounting system Daimler ran to pay off officials from Greece to North Korea, and included kickbacks to Saddam Hussein’s government under the United Nations’ “oil-for-food” program.

According to his lawsuit, Bazzetta, an 18-year veteran of Chrysler, warned about the payments to his boss. When he told Bazzetta to keep quiet, Bazzetta went over his head. When nothing was done, he was transferred, and eventually fired in January 2004, two weeks after his corporate protector retired.

At the time, DaimlerChrysler was trying to recover the aura that surrounded its creation, washed away by Chrysler’s struggles and anger in the United States that the “merger of equals” had given way to a German takeover of Chrysler.

The Justice Department said today that all told, Daimler’s bribes generated at least $50 million in pretax profits.

At the time of its 1997 purchase of Chrysler, Daimler had 200 accounts used for bribes around the world. By 2004, it had winnowed such accounts to 40, but the Justice complaint says the company only eliminated the practice after the launch of probes by U.S. officials.

The kickbacks weren’t just handed over in cash. Daimler paid for tourist trips for Chinese officials, and gave the son of a Chinese government official an internship, a four-month job and help getting him and his girlfriend German student visas.

The company also gave an armored Mercedes sedan worth 267,000 euros to a Liberian government official in 1999, and sent another worth 300,000 euros to a high-ranking official in the Turkmenistan government in 2003, likely late president-for-life Saparmurat Niyazov.

Daimler’s distributor also tried to get in Niyazov’s personal graces by spending $250,000 on translating 10,000 copies of his personal manifesto from Turkmen into German, delivered to Niyazov in a golden box. Daimler eventually sold 879 vehicles in the country from 2000 to 2008.

Bazzetta’s lawsuit sparked a probe in 2004 by U.S. Securities and Exchange Commission officials. The payments fell under the U.S. Foreign Corrupt Practices Act since DaimlerChrysler’s shares were traded in the United States, and several bribes were routed through U.S. bank accounts.

Daimler responded to Bazzetta’s suit in 2004 saying he had been fired because he falsified internal financial information and directed subordinates to do the same. It said Bazzetta's whistleblower claims had no merit because corporate officials were addressing the practice.

The automaker settled the suit out of court in 2005, but later admitted in 2006 that its own investigation had found “improper payments” in Africa, Asia and Eastern Europe, and that several employees had been dismissed.

The government and Daimler are set to appear before a federal judge April 1.