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Regime Change Due Diligence?

Today’s post is from a reader with government experience who wished to remain anonymous.


“I have read with interest this blog’s prior post (here) relating to the recent political turmoil in Egypt, and the possible implications of those events from the standpoint of the FCPA and other anti-corruption laws and regulations around the world. Also of interest was this blog raising the question whether the next generation enforcement device by anti-corruption officials looking at these regime changes might include the “country sweep” as a corollary to the “industry sweep” that has been used in past corruption exercises. These considerations are brought further under the klieg light when considering the evolving state of affairs in the Middle East and the possible additional regime changes that may take place after certain leaders have been in power for decades and have amassed reported family fortunes that would make the most ardent of capitalists sit up and take notice.

Reading posts on this blog and others (see here for a similar recent post on the FCPA Blog), as well as observing general media reports on the amounts that these leaders have supposedly put in their bank accounts, makes one wonder of the level of criminality that must have occurred. It shouldn’t take one with an overly cynical view to surmise that we must be talking of thousands of crimes by hundreds or more actors.

Surely, there will be investigations galore by new regimes to try to discredit the vanquished and reclaim national funds. It will be easier to determine who were the beneficiaries or recipients of all the funds to the extent tracing is possible. But given the sums that are being bandied about, there will be a far larger number of sources from which such funds may have originated that ultimately found their way to the autocrats and their legion. And it will be interesting to see where the investigations and questioning leads in terms of where all that money has come from. One can only hope that people with important titles on their business cards sitting in governmental agencies around the world are also sitting up and paying attention and are planning to use those titles and the power that goes along with them to further the goals of the laws they have sworn to uphold. It goes far beyond simply freezing assets. It will be a massive undertaking. Where it leads could raise delicate issue for businesses. Perhaps also national security and statecraft.

All this also makes one test their empathy skills by playing the “What-Would-You-Do” game. That game goes something like this: imagine you were standing in the high priced wing-tips of a Chief Risk/Compliance Officer or a General Counsel of any public company that has been doing business in that part of the world. What should you be thinking just about now? Surely you have seen the news reports and heard the stories. Do you just shake your head on the speed with which change occurs? Or would you feel compelled (either because you believe it’s the right thing to do, or, more basically, because you would never want to be in a position of being criticized later for at least never having raised it) to walk down the hall to the CEO’s office or the board room for that matter, and say: “we really should be thinking about running an audit or review or bringing in people to run an audit of everything we’ve been doing in [Insert Country or Countries of Choice] just so we understand what we’ve got in terms of any issues. We should be refreshing and testing our protocols.” Board members should be thinking along these lines too. They should be asking these kinds of questions if their own management teams aren’t raising them. You can bet your shareholders’ bottom dollar that plaintiffs’ counsel are or will be thinking like this and pursuing claims, and D&O insurance providers will be concerned about it too. It may be a long way off, and telescoping is never easy, but it will be surprising if the fallout zone in the aftermath doesn’t include some of this laundry.”

Egypt – A Country Sweep?

As has been widely reported, various countries have frozen (or have been asked to freeze) the assets of former President Hosni Mubarak and other former top officials. See here for Samuel Rubenfeld’s roundup at Wall Street Journal Corruption Currents.

Were any of the billions or millions of Mubarak’s assets, or those of other former top officials, obtained because of Foreign Corrupt Practices Act violations?

That is the question posed by a reader who notes that corruption investigations generally follow regime change.

During Mubarak’s regime, several FCPA enforcement actions alleged conduct involving (in whole or in part) Egypt such as Lockheed, Metcalf & Eddy, Textron, United Industrial Corporation, York, and Daimler.

It is one thing to allege conduct implicating low-ranking “foreign officials” or employees of state-owned or state-controlled entities.

It is quite another to investigate conduct involving top officials of a government generally viewed as an ally in a volatile area of the world. Such barriers would seem to be removed with Mubarak’s ouster and an investigation may now even be viewed as a way to further U.S. relations with a new Egyptian government.

The reader asks, will Mubarak’s removal result in FCPA floodgates being opened in Egypt?

The past few years have witnessed certain “industry sweeps.” Will a “country sweep” be next?

When the Dust Settles

Documents used to resolve a typical FCPA enforcement action (whether a non-prosecution or deferred prosecution agreement, plea, or settled civil complaint) are often peppered with vague generalities.

This is not surprising given that there is little serious threat of defense challenges and/or judicial scrutiny.

One element that is often vaguely described is the “foreign official” recipient of the alleged bribe. (This is in contrast to what the U.K. SFO has been doing in some of its recent enforcement actions when it “names names” – see here and here).

For instance, in the recent Daimler action (see here), certain of the “foreign officials” are described simply as follows:

“Nigerian government officials,” “high-level members of the executive branch of the Nigerian government,” “high-level executive branch official of Nigeria,” and “a member of the Nigerian police force” and

“senior official of a [Egypt] government owned factory.”

Given the ease in which information now flows and the world-wide interest in corruption and bribery, FCPA enforcement actions are read around the world.

Not only by foreign government officials and law enforcement agencies, but also by foreign media, foreign-based non-governmental organizations, and just plain old people.

It is thus not surprising that when the dust settles on the U.S. FCPA enforcement action, many are left wondering … who are those “foreign officials”?

For the foreign government involved, it is potentially embarrassing to have “one of your own” (assuming that all “foreign officials” in FCPA enforcement actions are properly deemed as such) become the focus of a bribery investigation in the U.S. without doing something about it “at home.”

Thus, with increasing frequency, one sees stories such as this recent Reuters report which details how the Nigeria Economic and Financial Crimes Commission has begun to probe the alleged bribe payments to the Nigerian “foreign officials” mentioned above.

What about that “senior official of a [Egypt] government owned factory”?

I’ve been told that this issue has become sort of a guessing game in Egypt and that Egyptian authorities have launched an investigation (see here)

Whether such foreign government investigations are bona fide or merely politically expediate cover is a valid question.

However, the take-away point is that just because the U.S. Foreign Corrupt Practices Act enforcement action is over, does not necessarily mean that all the dust has settled. Often, other persons, for entirely different reasons, remain interested.

Q & A With Martin Weinstein

Martin Weinstein (here) is a “dean” of the FCPA bar. Much of my early understanding of the FCPA came as a direct result of working with Martin on FCPA investigations and enforcement actions. I also have Martin to thank for several of the stamps in my passport.

Below is a Q & A exchange with Martin in which he talks about the FCPA’s early years, the current state of enforcement, and suggestions for change.


Q: As a 1984 law school graduate did you have any exposure to the FCPA? Describe your first exposure to the FCPA?

A: When I was in law school, I never heard of the Foreign Corrupt Practices Act and didn’t even know that it existed until around 1991. I was an Assistant U.S. Attorney, and a witness I was interviewing mentioned to me that she thought that some payments had been made to an Egyptian government official. I remember turning to the investigating agent who was with me and saying, “isn’t there a statute somewhere that prohibits this?” That was my first exposure to the Foreign Corrupt Practices Act.

Q: You were lead DOJ counsel in the Lockheed case in the mid-1990’s. Generally describe this matter, how it was resolved, and whether resolution of this case, if brought in 2010, would look any different?

A: I was the lead counsel in the Lockheed case that was resolved in the mid-1990’s, specifically January 1995. It was, by all accounts, the first really serious corporate case brought in the then 20 year history of the Foreign Corrupt Practices Act. In that case, the company actually was indicted, and the allegations involved payments to a member of the Egyptian Parliament to obtain a contract through which the Egyptian Air Force would buy three C130 aircraft from Lockheed. There were two individuals also charged. The cases against all three defendants (the company and the two individuals) were resolved before trial, in the company’s case, literally days before the jury was to be selected.

The company agreed to plead guilty to a conspiracy to violate the Foreign Corrupt Practices Act. It agreed to pay a combination of civil and criminal damages in the amount of $24.8 million, which was twice the profit of the contract they had with the Egyptian military to sell the C130 aircraft.

One of the individuals pled guilty to a lesser charge, and the other individual, a marketing manager named Suleiman Nassar, actually fled to Syria. That was one of the most interesting parts of the case for me because I visited Damascus on several occasions and negotiated directly with the government. Nassar was imprisoned in Syria on these charges, but was ultimately released and returned to the U.S. to plead guilty to violating the FCPA and became, I believe, the first person to go to jail under the FCPA.

Q: Did FCPA enforcement, during the last decade, morph into something other than what Congress intended the FCPA to address when passed in 1977?

A: The last decade of FCPA enforcement has seen extraordinary evolution, and I think you have to say that when Congress passed the law in 1977, they did not envision the wide reach of enforcement today and the types of things that the government gets involved in, such as transactions, joint ventures, and successor liability. I do think that the DOJ and the SEC have stayed generally true to the vision of the FCPA, which focuses on things of value, primarily money, going to foreign government officials in exchange for business.

Q: What is your biggest challenge as an FCPA practitioner? How has your FCPA practice changed over the past decade?

A: The challenges as an FCPA practitioner have mainly involved keeping up with the pace of the enforcement agencies in recent years. Whereas cases used to involve U.S. companies and their businesses in a few countries, the typical case now involves enforcement actions by multiple sovereigns involving the same company at the same time, and that makes the practice more challenging and more fascinating.

Q: What are your clients’ biggest challenges / frustrations with the FCPA or FCPA enforcement? Have these challenges / frustrations changed over the past decade?

A: I think that companies’ main frustration is that even with an outstanding compliance program and 99% of the employees maintaining strict adherence to the laws, you can still have violations which expose the entire company to extraordinarily serious penalties. I think the government has, at times, lost track of the main motivations for this statute and has become focused on the amounts of penalties, the imposition of compliance monitors, and exercising government control over what are basically private businesses. The vast majority of companies are absolutely committed to following the spirit and the letter of the FCPA, but when a company gets into trouble, the whole enterprise can be put at risk because of the conduct of a few people, and that doesn’t seem right. I worry that the government has come to see private industry through “dirty” glasses: the punishments don’t seem to fit the crimes.

Q: The FCPA was passed in 1977, amended in 1988 and also amended in 1998. Given this approximate ten year cycle, is the FCPA in need of further amendment? If so, what would the “Weinstein” amendment look like?

A: I think the Weinstein amendment would focus on the very significant issue of who is a foreign official and what constitutes a state-controlled instrumentality. There is so little guidance in this area that an amendment to the law providing clarity to companies wishing to comply is really essential. For example, after the U.K. government takeovers of certain British banks and U.S. intervention in the auto industry, did all these private businesses become state-controlled instrumentalities rendering all their employees government officials? Companies should not have to guess who is and who is not a government official.

Q: Arguably the two most egregious bribery schemes in recent years involved Siemens and BAE. In both instances, the companies were not charged with FCPA antibribery violations. What message does this send?

A: Siemens and BAE were not charged with antibribery violations largely for two different reasons. In the Siemens case and a number of other cases, charging a company with antibribery violations renders it susceptible to significant suspension and debarment risks. If the government can find suitable alternatives to antibribery charges and still tell the full story of the conduct to the public, it is really a much more just solution not to expose the company to extreme suspension and debarment risks. In BAE, I think the issue was much more one of jurisdiction, and I think the government is going to find this issue repeatedly if it continues to seek to prosecute foreign companies that have relatively little contact with U.S. interstate commerce.

Q: How can law and business schools best expose future lawyers and business leaders to the FCPA? What advice do you have for law students interesting in a future FCPA practice?

A: The FCPA has been a fantastic area in which to practice and to watch evolve. For students who are interested in the field, I think the most important thing is to learn as much as you can about U.S. criminal law and U.S. securities law and their interplay with various anticorruption laws around the world. It has become a very complicated field and I think it is safe to say the stakes for companies and individuals have never been higher.

Dissecting Daimler

April Fool’s Day is a day traditionally full of practical jokes and pranks.

Thus, it is only fitting that on April 1st U.S. District Court Richard Leon will hold a hearing on the Daimler FCPA enforcement action during which he is expected to approve a DOJ – Daimler brokered deferred prosecution agreement and other various aspects of the settlement discussed below.

If so, one pillar which contributes to the “facade of FCPA enforcement” (more on that in a future post) – bribery, yet no bribery – will have a new poster-child in addition to the Siemens and BAE bribery, yet no bribery FCPA enforcement actions (see here for prior Siemens posts and here for prior BAE posts).

At least, Siemens and BAE pleaded guilty to something – even if that something was not an FCPA antibribery charge.

The Daimler enforcement action appears to take the “facade” one step further in that Daimler will not have to plead guilty to anything … zero … zilch.

Rather, Daimler will agree to a deferred prosecution agreement despite clear evidence (per the DOJ’s own allegations as set forth below) of FCPA antibribery violations.

One can legitimately ask, what did Innospec Inc. and Control Components, Inc. (two companies that recently pleaded guilty to FCPA antibribery violations) do that Daimler also didn’t do?

Sure, two insignificant entities in Daimler’s massive corporate hierarchy, Daimler Export and Trade Finance GmbH (“ETF”) and DaimlerChrysler Automotive Russia SAO (“DCAR”), are expected to plead guilty to FCPA antibribery charges. EFT is a finance arm far down on Daimler’s corporate hierarchy and DCAR sells spare parts for Daimler in Russia.

In other words, it sure looks and feels like two junior, indirect subsidiaries are being offered up as “sacrificial corporate lambs” to take the fall for the more significant, powerful parent.

The end result is that the DOJ can boast it secured two FCPA antibribery pleas while allowing Daimler to say that it never violated the FCPA’s antibribery provisions, thus allowing Daimler to escape debarment in Europe – a factor clearly at issue in this enforcement action as highlighted below.

Yet another instance of bribery, yet no bribery is not the only reason why the Daimler enforcement action contributes to the facade of FCPA enforcement.

In addition, wrapped into allegations which clearly establish all the elements of an FCPA antibribery violation, are numerous dubious and untested theories of FCPA liability.

Most notably, the entire criminal information against DaimlerChrysler China Ltd. (“DCCL”) is premised, as so many recent FCPA enforcement actions are, on employees of alleged Chinese state-owned entities (companies doing business all over the world and companies with publicly traded stock) being “foreign officials” under the FCPA. As in other FCPA enforcement actions, the allegations as to these entities are bare-bones, uninformative, and replete with legal conclusions as to why these entities are “instrumentalities” of a foreign government.

Because these dubious and untested theories of FCPA liability are embedded into the much larger bribery, yet no bribery charges against Daimler which are being resolved through a deferred prosecution agreement, these dubious and untested theories will once again escape judicial scrutiny.

Because of the general lack of substantive FCPA case law, the entire Daimler enforcement action (including theories of liability premised on the dubious and untested legal theories) will once again be viewed as de facto FCPA case law.

The Daimler bribery, yet no bribery enforcement action is wide in scope and allegations of improper conduct go all the way up to senior levels of the company. The “things of value” are numerous, the “foreign officials” include bona fide government officials (as well as the dubious “foreign officials” referenced above) and the amount of business allegedly obtained or retained through bribery and corruption is in the hundreds of millions.

The countries in which the payments were allegedly made are numerous (in fact, the label function at the bottom of this post only allows so many characters and I was unable to separately label each country in which the alleged improper payments occurred).

The alleged improper payments involved dozens and dozens of third parties, including several located in the U.S., which were allegedly utilized by Daimler and its affiliates to bribe foreign officials. Given Daimler’s use of numerous U.S. based entities, it will be interesting to see if any of these U.S. entities and/or entity employees will be prosecuted for their role in the respective bribery schemes.

The Daimler bribery, yet no bribery case involves involves ineffective internal controls, lack of effective third-party due diligence, and intentional misrecording of bribe payments on Daimler’s books and records (and those of its affiliates).

Yet in another interesting twist, Daimler also escapes criminal charges for knowingly failing to implement effective internal controls, even though the DOJ’s own allegations would seem to support such a charge. (Even Siemens plead guilty to both criminal books and records and internal controls charges).

This a long post.

However, the more that is known about the Daimler FCPA enforcement action and the more that is understood about the facade of FCPA enforcement, the greater the chance the facade of FCPA enforcement will be exposed and addressed.

It all starts with the person standing between the DOJ and Daimler and that is Judge Richard Leon and he would be doing a great public service by rejecting the proposed settlement and injecting the “rule of law” into the current facade of FCPA enforcement.

This post details the Daimler criminal information, the Daimler deferred prosecution agreement, the three separate criminal informations against Daimler subsidiaries, and the DOJ omnibus sentencing memorandum.

The Daimler AG Bribery, Yet No Bribery Allegations

According to the criminal information (see here) filed against Daimler AG (and the Statement of Facts in the below described deferred prosecution agreement), the company “engaged in a long-standing practice of paying bribes to ‘foreign officials’ as that term is defined in the FCPA … through a variety of mechanisms, including the use of corporate accounts [such as cash desks], offshore bank accounts, deceptive pricing arrangements, and third-party intermediaries.”

In summary fashion, the information charges 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, and others – to assist in securing contracts with government customers for the purchase of Daimler vehicles valued at hundreds of millions of dollars.”

According to the information, “in some cases, Daimler 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.” The information alleges that “in at least one instance, a U.S. shell company was incorporated for the specific 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.” According to the information “certain improper payments even continued as late as January 2008.” The information charges that “in all cases, Daimler improperly recorded these payments in its corporate books and records.”

Despite being a German company, the information charges that “as a result of Daimler’s filing of periodic reports with the SEC, and Daimler’s use of U.S. bank accounts and U.S. companies in transacting certain business with foreign governments and officials, the company is subject to the FCPA.”

According to the information, “Daimler’s longstanding violations of the FCPA resulted from a variety of factors, 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 (“DCOS”), the then head of internal audit, and the then CEO’s of several subsidiaries and affiliates.”

According to the information, “in total, the corrupt transactions with a territorial connection to the United States resulted in over $50,000,000 in pre-tax profits for Daimler.”

The information alleges improper conduct at the highest levels of the country. For instance, in 1999 during a Daimler “Board of Management meeting, Daimler’s then head of internal audit proposed that the company adopt an integrity code that included anti-bribery provisions …” However, the information charges that “participants in the meeting discussed that adopting such policies (and stopping the practice of making ‘useful payments’) would result in Daimler losing business in certain countries.” Even though the company did adopt “an integrity code with anti-bribery provisions” at the meeting, the information charges that Daimler, among other things, “failed to make sufficient efforts to enforce the code, train employees on compliance with the FCPA or other applicable anti-bribery statutes” or “otherwise attempt to ensure that the company was not continuing to make improper payments in order to obtain or retain government business overseas.”

Elsewhere, the information charges that “in or about 2000 or 2001” “Daimler’s internal audit department was aware that Daimler employees had made and could make bribe payments” and that the department drafted a document identifying 14 separate improper payment mechanisms. According to the information, the same document noted that “payment of ‘useful expenditures’ through these methods was subject to criminal prosecution in countries such as the United States.” However, the document also noted the “level of difficulty” law enforcement authories would have in “proving corruption carried out through the various methods.”

The Daimler information, as to conduct in Russia, China, and Croatia, contains the same substantive allegations as set forth in the separate criminal informations against DCAR, ETF, and DCCL (described more fully below).


As to Vietnam, the information charges that “Daimler employees working at Mercedes Benz Vietnam (“MBV”) made improper payments and provided gifts and other things of value to Vietnamese government officials in exchange for business from Vietnamese government owned and controlled customers.” According to the information, “these improper payments were routinely paid to government officials through broker commissions” and the payments were “improperly categorized as broker commissions, cost of goods sold, and/or gifts” in MBV’s books and records.

The information states that between “2000 and 2005, MBV 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, 2003 through 2006.” The information further states that “although a Vietnamese government entity, Saigon Auto Corp., was a minority owner (30%) of MBV” and that “MBV was managed primarily by German Daimler employees.”

According to the information, the “foreign official” recipients of the improper payments included employees of Saigon Passenger Transport Company (“Saigon Bus”) (see here), an alleged “instrumentality” of the Vietnamese government and “Vietnamese government officials in the Ministry of Public Security.”

The information alleges that “MBV agreed to make the improper payments to the Saigon Bus official through” an account of Trading & Investment Houston, a U.S. based entity. The information also alleges that during negotiations of the Saigon Bus deal, “a Vietnamese government official with the government-owned Saigon High Tech Park suggested that MBV make a contribution [approximately $22 million over a five yeard period] to the high tech park as a condition of Daimler and MBV winning the business contract.”

The information also alleges that in connection with the 2004 Asia Europe Meeting (“ASEM 5”), “Vietnamese government officials sought to obtain 78 Mercedes Benz passenger cars in order to transport officials attending the conference.” According to the information, MBV “agreed to lend the vehicles to the Vietnamese government free of charge” and that in exchange “the Vietnamese government allowed MBV to import these 78 completely assembled passenger cars into Vietnam at a tariff rate of only 25%, when the standard tariff rate for completely assembled vehicles was 100%.” According to the information, following the conference, when MBV sold the vehicles, it was thus able to make a “much higher profit, approximately €1.65 million, because of the lower tariff costs.”

According to the information, “the making of [these] improper payments was known about and encouraged at the highest levels of the former MBV management.”


As to Turkmenistan, the information alleges that Daimler, and its Vienna based distributor (IPC) delivered to high-level Turkmen government officials various gifts, including “an armored Mercedes Benz S-class passenger car, valued at more than €300,000 for his birthday.” According to the information, “neither the Turkmen Government Official nor the Turkmen government paid for the vehicle” but that Daimler affiliate employees “agreed to provide this birthday gift to the Turkmen Government Official with the expectation that [Daimler] would receive large contracts for the purchase of vehicles by the Turkmenistan government in the coming year.”


As to Nigeria, the information focuses on the conduct of Anambra Motor Manufacturing Company (“Anammco”), “a joint venture between Daimler and the Nigerian government” that Daimler utilized to sell vehicles into Nigeria. According to the information, “Daimler owned 40% of Anammco and controlled Anammco, inter alia, through Anammco’s then managing director, who was a German expatriate and dual employee of both Daimler and Anammco.”

According to the information, “Daimler entered into a contract to sell vehicles to the Nigerian State House, which was also known as the Nigerian Presidential Complex, and was the office and residence of the Nigerian President (the ‘State House Contract’) and that pursuant to this contract, Daimler charged “the State House approximately 21% over the wholesale price for the vehicles, parts, and services.” According to the information, “in connection with these sales to the State House, Daimler made €1,427,242 in improper commission payments … with the understanding that these funds would be passed on, in whole or in part, to Nigerian officials to secure the State House Contract.”

The information also charges that Daimler made improper payments to high-level executive branch officials in Nigeria in connection with the State House Contract; that Anammco entered into contracts worth $4.6 million with Savannah Sugar Company Ltd. (an alleged instrumentality of the Nigerian government) to supply Daimler vehicles, spare parts, and tools on which approximately €554,396 in “consultant” payments were made; and that “Daimler entered into a contract with the Nigerian Police Force” in which Anammco requested that Daimler make payment to a member of the Nigerian Police Force in his German bank account.

The information also alleges that Daimler made various payments to Nigerian government officials in connection with selling “54 buses to the Nigerian Ministry of Industry” to provide transport for the World Youth Championship games held in Nigeria. The informatin further alleges that Anammco agreed to provide $500,000 in support of the “All-Africa Games” and that Anammco supplied numerous vehicles for the games, but that the Nigeria organizing committee for the games did not pay for the vehicles.

Finally, the information charges that Daimler’s wholly-owned subsidiary in Brazil utilized the services of an entity owned by a senior Nigerian diplomat in Brazil and his wife to help facilitate the sale of buses to a Nigerian state and that approximately $60,000 in commission payments were paid to the Nigerian diplomat.

Ivory Coast / West Africa

As to the Ivory Coast and West Africa, the information states that “from at least 1992 to 2007, Daimler sold passenger cars in the Ivory Coast and other West African countries through its majority owned (89%) and controlled subsidiary, Star Auto S.A. (“Star Auto”)” and that Star Auto made direct sales of Daimler passenger cars to various government customers in West Africa, including government ministries, the military, and government agencies, including for use by diplomats and heads of state.” In connection with these sales, Daimler employees “authorized and made improper payments to government officials at its customers in the Ivory Coast and elsewhere in West Afria…”

Among other conduct, the information alleges that commission payments were made to an entity that would pass on, in whole or in part, the payments to Ghanaian Army officials in connection with a contract to sell trucks to the Army of Ghana, and that Daimler, to assist in securing a contract to provide trucks to an Indonesian firm operating a logging project in Liberia, “gave a then senior executive branch official of Liberia a gift of an armored Mercedes passenger car worth approximately €267,000.”


As to Latvia, the information charges that EvoBus GmbH (“EvoBus”), a wholly-owned subsidiary of Daimler and part of a Daimler business unit called Daimler Buses, paid approximately €1,800,000 in ‘commision’ payments to third parties with the understanding that such improper payments would be passed on, in whole or in part, to Latvian government officials to influnce the award of contracts to EvoBus.” According to the information, the contracts were awarded by the Riga City Council Traffic Department and EvoBus paid bribes to members of the Riga City Council. To make these “commission payments and to disguise their true nature and purpose” the information charges that “EvoBus entered into sham consulting contracts with, among others, two U.S. based entities: Oldenburgh Financial Corporation, incorporated in Delaware, and United Petrol Group LLP, incorporated in Oregon.”

Austria / Hungary

As to Austria and Hungary, the information charges that, to help facilitate the sale of 32 used buses to a state-owned regional public transport company in Hungary, EvoBus Austria GmbH agreed to pay a “commission of €333,370 to a U.S. based corporation called USCON Ltd. with the understanding that the payment would be passed on, in whole or in part, to Hungarian government officials.”


As to Turkey, the information charges that Daimler’s Corporate Audit Department “discovered three binders located in a safe at MB Turk’s [a Daimler subsidiary in Turkey] offices in Istabul” that, along with other evidence, demonstrated that “MB Turk made approximately €6.05 million in payments to third parties in connection with vehicle export transactions that involved the sale of vehicles to non-Turkish government customers in North Korea, Latvia, Bulgaria, Libya, Romania, Russia, Saudi Arabia, Yemen, and other countries in deals with revenues of approximately €95 million.” According to the information, at least €3.88 million of the €6.05 million comprised of “improper payments and gifts […] paid to foreign government officials or to third parties with the understanding that the payments and gifts would be passed on, in whole or in part, to foreign government officials to assist in securing the sale of Daimler vehicles to government customers.”


As to Indonesia, the information charges that “Daimler’s local affiliates provides gifts, travel and entertainment to government officials associated with Perum Damri in order to secure business.” According to the information, Perum Damri (see here) is a “state-owned bus company” and an “instrumenality of the Indonesian government” thus making its employees “foreign officials” under the FCPA. The information alleges that between 1998 and 2005, “Daimler’s local affiliates spent approximately $41,000 on such gifts, including golf clubs, wedding gifts for the children of a senior offical at Perum Damri, golf outings for Perum Damri officials, and gifts that were raffled off to low-level employees on the occasion of Perum Damri’s anniversary. According to the information, Perum Damri purchased approximately $8.36 million worth of buses from Daimler’s Indonesian affiliates. The information also alleges that “Daimler’s local affiliates also made several large cash payments to tax officials in Indonesia for the purpose of reducing their tax obligations.”


As to Iraq, the information charges, what has become, standard Iraqi Oil for Food Program allegations in that Daimler “agreed to pay a 10% commission to the government of Iraq in connection with sales of its vehicles under the [Oil for Food Program].” Yet in a twist, the information states certain sales between “Daimler and the Iraqi government were prepared, negotiated and finalized by employees at Daimler’s headquarters in Germany” and that “Daimler negotiated its [Oil for Food Contracts] directly with the government of Iraq.” (In many of the prior Oil for Food cases, the Iraqi government contracts were prepared, negotiated, and finalized primarily by third-party agents retained by the offending company). When third party agents were used by Daimler to make sales to the Iraqi government, the information charges that Daimler executives “understood that Daimler’s contract partners would pay illegal kickbacks to Iraqi ministries.”

After this laundry list of bribes in several differnt countries, the information then alleges that “prior to 2005, Daimler’s anti-bribery compliance program was inadequate.” Among other things, the information alleges that Daimler had “inadequate guidelines and controls concerning the disbursement of cash from cash desks;” inadequate controls over other corporate accounts; “inadequate controls over the opening and maintaining of bank accounts;” “inadequate controls over the selection, use, and making of payments to agents and intermediaries;” and “inadequate training of Daimler employees on FCPA or other anti-bribery compliance.”

Against this backdrop, one might assume that Daimler was charged with FCPA antibribery violations – which generally prohibit the payment of money or anything of value, to a foreign official, in order to obtain or retain business.

However, in this current facade era of FCPA enforcement, nothing can be taken for granted and the Daimler enforcement action is yet another instance of bribery, yet no bribery, as Daimler was merely charged with two counts: (i) conspiracy to violate the FCPA’s books and records provisions; and (ii) knowingly falsifying books, records, and accounts – a criminal charge under 78m(b)(5).

Even more troubling, Daimler will not even by pleading guilty to these charges, because the charges are being resolved through a deferred prosecution agreement (“DPA”).

Daimler AG’s Deferred Prosecution Agreement

The DPA (see here) is a fairly standard FCPA DPA in that in return for the DOJ deferring prosecution of the criminal charges against Daimler, Daimler “admits, accepts, and acknowledges that is is responsible for the acts of its employees, subsidiaries, and agents” as set forth above. As is common, Daimler also agrees to a host of compliance undertakings, including hiring an independent monitor for a three year period (an issue discussed in this prior post).

The term of the DPA is an unusual two years and seven months after the guilty pleas of ETF and DCAR (most FCPA NPAs or DPAs are for whole year terms). Also unusual is that the DPA states that if the DOJ finds “in its sole discretion, that there exists a change in circustances sufficient to eliminate the need for the corporate compliance monitor … and that other provisions of [the DPA] have been satisfied, the Term of the Agreement may be terminated early.”

Like other NPAs and DPAs, the Daimler DPA essentially muzzles Daimler, its directors, its employees, and agents, from making “any public statement … contradicting the acceptance of responsibility by Daimler” for the facts set forth in the charging documents. In this way, DOJ is able to insulate itself from criticism from the only other party besides DOJ (i.e. Daimler) that actually knows the precise facts and issues relevant to the charged conduct. Specifically, if Daimler wants to issue a press release relevant to this case, it must first get DOJ’s approval.

The DPA also states: “with respect to Daimler’s present reliability and responsibility as a government contractor, the Department agrees to cooperate with Daimler, in a form and manner to be agreed, in bringing facts relating to the nature of the conduct underlying this Agreement and to Daimler’s cooperation and remediation to the attention of governmental and other debarment authorities, including Multinational Development Banks, as requested.”

Thus, as in the BAE and Siemens bribery, yet no bribery enforcement actions, debarment seems to have been a key factor in selecting the actual charges against Daimler – a fact confirmed by the DOJ’s sentencing memorandum described below.

Daimler Export and Trade Finance GmbH and the Croatian Firetrucks

DOJ also filed a two count criminal information against Daimler Export and Trade Finance GmbH (“ETF”) which is described as wholly-owned subsidiary of Daimler Financial Services AG (“DFS”), which in turn is described as a wholly-owned subsidiary of Daimler AG. According to the information, “ETF specialized in the structuring and arranging of customized financing solutions for exports by Daimler and external customers to countries without a local DFS company.” “In addition,” the information charges that “ETF participated in business ventures outside of Daimler’s core businesses of the manufacture and sale of passenger cars and vehicles.”

The charged conduct involves selling fire trucks to the Croatian Ministry of the Interior (“MOI”) as well as the conduct of IM Metal (“IMM”) an alleged “Croatian government controlled and partially owned former weapons manufacturer.” The information charges that “IMM was an ‘instrumentality’ of the Croatian government, and executives employed by IMM, or their designess were ‘foreign officials’ as those terms are used in the FCPA …” The charged conduct also involves Biotop Group, Inc. (“Biotop”), a Delaware corporation and Marketing Research and Consultants LLC (“MRC”), a Wyoming corporation.

Count one of the information charges conspiracy and alleges that “from in or about 2002, through in or about January 2008” ETF, and others were engaged in a conspiracy to “make improper payments to Croatian government officials to induce them to cause the Croatian government agencies and instrumentalities to purchase Daimler vehicles.”

Among other things, the information charges that:

prior to be awarded a €85 million fire truck contract, “ETF understood that improper payments to Croatian government officials would be required in order to secure the Fire Truck Contract from the Croatian MOI;”

“ETF made improper payments directly to Croatian government officials and to third parties with the understanding that the payments would be passed on, in whole or in part, to Croatian government officials to assist in the Fire Truck Contract;”

“between 2002 and January 2008, ETF made approximately €3.02 million in payments to IMM and/or its principles in connection with the contract to sell fire trucks to the Croatian MOI with the understanding that all or a portion of the funds were paid to IMM’s employees, themselves foreign government officials, and that another portion of the funds were paid to Croatian government officials outside IMM in exchange for assistance in securing for the ETF-led consortium the Fire Truck Contract;” and

“in total, between 2002 and January 2008, ETF made approximately €1,673,349 in improper payments to Biotop and MRC in connection with the Fire Truck Contract with the understanding that those payments would be passed on, in whole or in part, to Croatian government officials” and that “neither Biotop nor MRC performed legitimate services for ETF sufficient to warrant payments in those amounts.”

The information alleges that “ETF entered into a sham consulting contract with Biotop in order to conceal the nature of improper payments ETF made to Biotop, and with the understanding that these funds would be passed on, in whole or in part, to Croatian government officials to assist in securing the Fire Trucks Contract with the Croatian MOI.” As to MRC, the information alleges that “six days after MRC’s incorporation, ETF executed a written consulting contract with MRC in order to conceal the nature of improper payments being made to MRC, with the understanding that the payments to MRC would be passed on, in whole or in part, to Croatian government officials.”

Count two of the information charges an FCPA antibribery violation. Because ETF is a foreign entity, the applicable section of the statute is 78dd-3 which requries a U.S. nexus. The information charges “ETF entered into sham consulting contracts with shell companies incorporated in Delaware and Wyoming for the purpose of making improper payments to Croatian government officials, and made payments to those companies’ accounts outside the United States with the understanding that such payments would be passed on, in whole or in part, to Croatian government officials.”

Because the information charges that ETF’s payments to Biotop and MRC were to the companies’ accounts “outside the United States” it appears that the sole U.S. nexus DOJ is using to charge ETF with an FCPA antibribery is the act of entering into a contract with a U.S. company.

DaimlerChrysler China Ltd. and the Chinese “Foreign Officials”

DOJ also filed a two count criminal information against DaimlerChrysler China Ltd. (“DCCL”), a “Beijing-based, wholly-owned Daimler subsidiary and cost center that managed Daimler’s business relationships in [China], assisted Daimler in selecting and managing joint ventures in China, and helped manage Daimler’s expatriate employees in China.” According to the information, “although DCCL did not itself sell any vehicles directly into China, certain DCCL employees assisted with the sale of vehicles by various Daimler divisions in Germany to government customers in China.”

The charged conduct focuses solely on three Chinese state-owned entities the DOJ alleges are “instrumentalities” of the Chinese government.

First, the DOJ alleges that “The Bureau of Geophysical Prospecting (“BGP”) was a division of the China National Petroleum Corporation (“CNPC”), a Chinese state-owned oil company” and that “among other things, BGP was involved in searching for oil in various regions of China” and that “BGP was an ‘instrumentality’ of the Chinese government, and individuals employed by BGP were ‘foreign officials'” under the FCPA. According to its website (see here), BGP is a limited liability company and it has “forty overseas branches and offices have been established in Asia, America, Africa and the Middle East” (see here). According to its website (here), CNPC ” is China’s largest oil and gas producer and supplier, as well as one of the world’s major oilfield service providers and a globally reputed contractor in engineering construction” and it has “a presence in almost 70 countries.” CNPC’s corporate hierachy (here) looks similar to other commercial enterprises and one of CNPC’s largest holdings is PetroChina, an entity with shares traded on the New York Stock Exchange as well as other exchanges (see here).

Second, the DOJ alleges that “Sinopec Corp. (“Sinopec”) was a Chinese state-owned energy company involved in, among other things, exploration and production of petroleum and natural gas, as well as the refining and sale of petroleum products” and that “Sinopec was an ‘instrumenality’ of the Chinese government, and individuals employed by Sinopec were ‘foreign officials'” under the FCPA. According to its website (here) Sinopec is “a listed company on domestic and international stock exchanges” and it has shares traded in Shanghai, Hong Kong, New York and London.

Third, the DOJ alleges that “Changqing Petroleum Exploration Bureau (“Changqing”) was a Chinese state-owned oil and natural gas extracting company” and that “Changqing was an ‘instrumentality’ of the Chinese government and individuals employed by Changqing were ‘foreign official'” under the FCPA. Changqing is an entity within CNPC’s extensive organization.

According to the information, “between 2000 and 2005, DCCL employees and/or Daimler employees through DCCL made at least €4,173,944 in improper payments in the form of ‘commissions,’ delegation travel, and gifts for the benefit of Chinese government officials and their designees, in connection with over €112,357,719 in sales” of vehicles to Chinese government customers. The information alleges that “these sales to Chinese government customers were made directly from Daimler’s [divisions] in Germany through various intermediaries with the assistance of DCCL employees in the commercial vehicles division.”

According to the information, “to make improper payments to Chinese government officials, Daimler and DCCL typically inflated the sales price of vehicles sold to Chinese government customers and then maintained the overpayments in debtor accounts on Daimler’s books and records, including one debtor account called the ‘special commissions’ account.” The information alleges that “DCCL employees, including its then head of sales and marketing disbursed payments” from the account and “at the time, no checks or policies were in place to ensure the legitimacy or appropriateness of such payments.”

According to the information, “DCCL and Daimler also employed agents to assist in securing” vehicles from Chinese government customers, but that “neither DCCL nor Daimler performed due diligence on these agents, and there were inadequate controls in place to ensure that payments made to these agents were not passed on to Chinese government officials and their designees.” The information states that “the agency agreements were often not in writing” and that “DCCL and Daimler lacked adequate oversight into the appropriateness or purpose of payments from debtor accounts that ultimately went to government officials in China and their designees.” The information charges that “finance and controls oversight was so lacking with respect to Daimler’s sale of commercial vehicles in China that DCCL’s Sales and Marketing Head was able to remove at least approximately €230,000 from a company debtor account without detection, and then direct those funds to the offshore bank account of his wife.”

Count one of the information charges conspiracy and alleges that DCCL, and others, were engaged in a conspiracy to “make improper payments to Chinese government officials to induce them to cause Chinese government agencies and instrumenalties to purchase Daimler vehicles.”

Among other things, the information charges that:

“in total, Daimler and DCCL made approximately €2,599,694 in improper payments to Chinese government officials associated with these entities to assist in obtaining sales worth approximately €71,562,882;”

“between 2001 and 2004, DCCL and Daimler at the direction of Chinese government officials made improper payments totaling at least €188,840 into U.S. bank accounts belonging to third parties to obtain contracts valued at €5,533,381 for the sale of vehicles to Chinese government customers “even though no part of the transaction involved the U.S., nor were the entities that nominally controlled the bank accounts parties to any of these transactions;” that “DCCL and Daimler did not perform any due diligence to discern who the recipients were” and the “corporate entities that received the payments from Daimler for the benefit of the Chinese government officials performed no legitimate services for DCCL or Daimler and did nothing to earn those payments;”

“between 1998 and 2005, DCCL and Daimler also provided at least €268,568 worth of delegation trips to employees of its government customers in China for the purpose of assisting in securing business from those customers;” according to the information “agents working as intermediaries between DCCL and Daimler, on the one hand, and its Chinese government customers, on the other hand, typically requested the delegation trips up front during the contract negotiation process on behalf of the customer involved” that “DCCL and Daimler then estimated the cost of the trip and increased the purchase price of vehicles accordingly” and that “some contracts characterized these trips as ‘factory inspection trips’ even though the trips were primarily visits to tourist locations.”

In furtherance of this conspiracy, the information identifies several agents used to make the improper payments including: M.F. Mechanical & Electrical; Shores International (a Texas corporation); Lily Energy Services, Inc. (a Texas corporation); King Jack, Inc. (a California corporation); and Chinese Agent A.

Additional payments charged in the information include: “€155,905 for the purpose of entertaining executives at” BGP and Sinopec; “payments totaling approximately €56,400 into accounts at multiple banks to an individual associated with an official at BGP in charge of operations in another country;” “a payment of approximately €14,800 to a relative of a Chinese government official associated with BGP in connection with the sale of commercial vehicles to BGP; “payments totaling approximately €30,000 in commissions for ‘market research’ to the Stuttgart bank account of the son of an official of BGP;” and “a payment of approximately €57,000 to the wife of a Chinese government official employed at Sinopec” disguised as a payment pursuant to a “phony consulting agreement with the wife of the Chinese government official.”

The information further charges a laundry list of “things of value” provided “to the son of a Chinese government official who made purchasing decisions for BGP in order to assist in securing business from BGP” including: interships at Daimler for his girlfriend; “letters from a former Daimler employee to German immigration officials to assist him and his girlfriend with their efforts to obtain student visas;” “€2,224 in expenses to attend a truck race;” “use of a Mercedes passenger car for a period of time;” and “employment at Daimler” for a five month period “with a monthly salary of €600.”

Count two of the information charges an FCPA antibribery violation. Because DCCL is a foreign entity, the applicable section of the statute is 78dd-3 which requires a U.S. nexus. As relevant to this issue, the information charges that “DCCL caused wire transfers to be sent from Daimler accounts in Germany to financial institutions in the United States.”

DaimlerChrysler Automotive Russia SAO and Russian Sales

DOJ also filed a two count criminal information against DaimlerChrysler Automotive Russia SAO (“DCAR”), a “Moscow-based, wholly-owned subsidiary of Daimler” that “sold Daimler spare parts, assisted with the sale of vehicles from various Daimler divisions in Germany, including in particular its overseas sales division (“DCOS”), to government customers in [Russia], and also imported Daimler passenger and commercial vehicles into Russia for sale to customers and distributors.”

The charged conduct focuses on Daimler’s, DCAR’s and DCOS’s relationships with: “the Russian Ministry of Internal Affairs (“MVD”) a department and agency of the Russian government principally responsible for police, militia, immigration and other functions” including supervising the “Russian traffic police; “the Special Purpose Garage (“SPG”) an ‘instrumenality’ of the Russian government” whose employees were “foreign officials” under the FCPA; “Machinoimport a Russian government-owned and controlled purchasing agent for the City of Moscow,” an “instrumentality of the Russian government” whose employees were “foreign officials” under the FCPA; and “Dorinvest a Russian government-owned and controlled purchasing agent for the City of Moscow,” an “instrumentality of the Russian government” whose employees were “foreign officials” under the FCPA.

According to the information, “Daimler’s business in Russia was substantial.” The information states that “Daimler sold passenger cars and commercial vehicles directly from its headquarters in Stuttgart, Germany, to its Russian government clients with the assistance of DCAR and Daimler’s representative office in Moscow” and that “Daimler carried out such sales from DCOS and DCAR acting as an agent to assist with such direct sales.”

The information charges that “Daimler, through DCAR, made improper payments at the request of Russian government officials or their designess in order to secure business from Russian government customers.” According to the information, payments were “made with the knowledge and involvement of the former senior management of DCAR and DCOS.”

The information states that “DCAR and Daimler sometimes made improper payments to government officials in Russia to secure business by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated third parties that provided no legitimate services to Daimler or DCAR, with the understanding that such payments would be passed on, in whole or in part, to Russian government officials.” The information further states that “when requested, Daimler employees wired and authorized the wiring of payments from Daimler’s bank accounts in Germany to, among other destinations, U.S. and Latvian bank accounts beneficially owned by shell companies with the understanding that the money, in whole or in part, was for the benefit of Russian government officials.”

Count one of the information charges conspiracy and that DCAR, and others, were engaged in a conspiracy to “make improper payments to Russian government officials to induce them to cause Russian government agencies and instrumentalties to purchase Daimler vehicles.”

Among other things, the information charges that:

“between 2000 and 2005” Daimler’s sale of vehicles to Russian government customers was approximately “€64,660,000” and that “in connection with these vehicle sales, DCAR and Daimler made over €3 million in improper payments to Russian government officials employed at their Russian governmental customers, their designess, or to third-party shell companies that provided no legitimate services to Daimler or DCAR with the understanding that the funds would be passed on, in whole or in part, to Russian government officials.”

According to the information, the payments were routed all over the world including: “to the Deutsche Bank acount in Stuttgart, Germany, of a Russian government official at the SPG;” to “Berwick Commercial LLC, a corporation registered in Delaware, with the understanding that the payment would be passed on, in whole or in part, to the SPG official;” “to Kongress Food Ltd., a corporation with an address in Dublin, Ireland, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;” “to Delight Commercial Ltd., a corporation with an address in the Seychelles, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;” “to Pyrmont Alliance Corp., a corporation with an address in the Bahamas, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;” “to Loretti LLP, a corporation with an address in the United Kingdom, with the understanding that the payment would be passed on, in whole or in part, to the SPG official;” “to a Bank of America account in San Diego, California, for Sittard Investments, a California corporation, to secure passenger car sales to the Moscow tarffic police;” “to a bank account in Latvia for Novitta Ltd., a Delaware corporation, in connection with passenger car sales to the MVD;” “to a bank account in Latvia for Tower Block Ventures, a U.K. corporation, for the benefit of a consultant to the MVD in connection with passenger car sales to the MVD;” “to a bank account in Latvia for Silvarado Ltd., a corporation that provided no legitimate services for Daimler or DCAR, in connection with passenger car sales to the MVD;” “to a bank account in Latvia for Capital Alliance Corp., a Florida corporation, in connection with passenger car sales to the MVD and to the Russian military;” “to Technoforex, a Delaware corporation, to secure the sale of one commercial vehicle to the SPG;” “to Contrex, a Cyprus corporation established for the benefit of the wife” of an official;” “to the Latvian bank account of Fidelity Finance Corporation, a Delaware corporation, in connection with the sale [of vehicles] to Gormost, a department within the city of Moscow responsible for bridges and tunnels, with the understanding that such payments would be passed on, in whole or in part, to Russian government officials in order to secure this sale;” “to Fidelity Finance Corporation’s Latvian bank account with the understanding that such payment would be passed on, in whole or in part, to Russian government officials;” “to the Latvian bank account of Forfun Co., a Delaware corporation, in connection with the sale [of vehicles] with the understanding that such payment would be passed on, in whole or in part, to Russian military officials;” “to the Swiss bank account of Northcote Holdings, a Costa Rican corporation, with the understanding that such payment would be passed on, in whole or in part, to Russian military officials;” and “to the bank account of Crofton Allianz, a Delaware corporation” “with the understanding that such payment would be passed on, in whole or in part, to a Russian government official.”

Count two of the information charges an FCPA antibribery violation. Because DCAR is a foreign entity, the applicable section of the statute is 78dd-3 which requires a U.S. nexus. As relevant to this issue, the information charges that “DCAR caused wire transfers to be sent from Daimler accounts in Germany to financial institutions in the United States and elsewhere, via international and interstate wires, in furtherance of corrupt payments to Russian government officials” and that “DCAR made payments to third party agents, including shell companies established in the United States, knowing that such payments would be passed on, in whole or in part, to Russian government officials on behalf of DCAR and Daimler.”

DOJ’s Sentencing Memorandum

In the sentencing memo (here) DOJ “respectfully requests that the Court” approve the disposition of the matter against Daimler and all of the above referenced entities and “accept the guilty pleas of DaimlerChrysler Automotive Russia SAO and Daimler Export and Trade Finance GmbH.” The memo notes, in a footnote, that “the court will not actually be sentencing Daimler AG and DaimlerChrysler China Ltd., as those entities have entered into deferred prosecution agreements.”

The DOJ provides this summary of the overall disposition of the matter:

“The Department and Daimler agree that the appropriate resolution of this matter consists of (1) a DPA with Daimler AG, the parent company; (2) a DPA with DCCL, the Chinese subsidiary; (3) guilty pleas pursuant to plea agreements with DCAR, the Russian subsidiary, and ETF, the Daimler Finance subsidiary; (4) overall payment of a $93.6 million criminal penalty, which is apportioned, based on a Guidelines analysis, among the subsidiaries and the parent company; (5) continued obligations to provide full, complete, and truthful cooperation to the Department and any other law enforcement agency, domestic or foreign; (6) implementation of rigorous compliance enhancements, including periodic testing of same, with a recognition that the Company has already implemented substantial changes due to the investigation; and (7) the imposition of a corporate compliance monitor who will, over a three-year term, conduct a review of the compliance code, the Company’s internal controls and related issues, and will prepare periodic reports on his reviews.”

DOJ specifically notes that its “analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts, and in particular European Union Directive 2004/18/EC, which provides that companies convicted of corruption offenses shall be mandatorily excluded from government contracts in all EU countries.”

As the Daimler, the BAE and Siemens enforcement actions all make clear, the simple way to avoid application of the European Union Directive is not to charge the company with a corruption offense, notwithstanding the existence of facts to support such a conviction.

This “let’s not call a spade a spade” silliness occurs notwithstanding the fact that the U.S. is a member of the OECD. As relevant, OECD guidance specifically states that “Member countries should be vigilant in ensuring that investigations and prosecutions of the bribery of foreign public officials in international business transactions are not influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved, in compliance with Article 5 of the OECD Anti Bribery Convention.”

The DOJ’s sentencing guidelines calculations contains a bit of irony in that Daimler received a sentencing credit (a credit which reduces the overall fine amount) because the “organization fully cooperated in the investigation and clearly demonstated recognition and affirmative acceptance of responsiblity for its criminal conduct” despite the fact that elsewhere in the sentencing memo the DOJ notes that the entire investigation started in March 2004 when a “former Daimler employee filed a whistleblower complaint with the U.S. Department of Labor Occupational Safety & Health Administration … allege[ing] that he was terminated for voicing concerns about Daimler’s practice of maintaining secret accounts, including accounts in its own books and records, for the purpose of bribing foreign government officials.”

In other words, even if an investigation is hatched by an internal whistleblower, a company may still be able to receive a sentencing credit for cooperating in the eventual investigation.

The sentencing range set forth in the DOJ memo is $116 – $232 million. Thus, the $93.6 million penalty is 20% below the bottom fine range of $116 million.

DOJ seeks to justify this reduction by stating that such a “reduction is appropriate given the nature and extent of Daimler’s cooperation in this matter, including sharing information with the Department regarding evidence obtained as a result of Daimler’s extensive investigation of corrupt payments around the world.”

The DOJ further states, “indeed, because Daimler did not voluntarily disclose its conduct prior to the filing of the whistleblower lawsuit, it only receives a two-point reduction in its culpability.” However, in a rather odd statement, DOJ then said that it “respectfully submits that such reduction is incongruent with the level of cooperation and assistance provided by the company in the Department’s investigation.” In other words, the DOJ seems to be saying something like “who cares what the guidelines say, we will do what we feel like.”

In conclusion, the DOJ notes that the disposition “promotes respect for the law, provides just punishment, and affords adequate deterrence to criminal conduct for Daimler and the marketplace generally.”

This would seem to be the biggest April Fools joke of all. How does another bribery, yet no bribery enforcement action “promote respect for the law?”

Finally, the DOJ states that Daimler’s cooperation in the investigation has been “excellent.” The DOJ notes that Daimler “conducted a worldwide internal investigation;” “regularly presented it findings” to the DOJ; “made certain witnesses available to the Department;” “voluntarily complied with requests for the production of documents from overseas;” and took disciplinary actions against over “60 company employees, with approximately 45 employees being terminated or separated under termination agreements.” “Finally, and perhaps most significantly,” in the words of the DOJ, “Daimler began to reform its anti-bribery compliance program while the investigation was still ongoing, without waiting until the finalization of a disposition with the Department.” The sentencing memo then sets forth a list of changes Daimler made to its compliance program. Such measures, no doubt, will now come to be viewed as “best practices.”

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