DaimlerChrysler Finds Improper Payments

FRANKFURT, GERMANY, March 6 -- DaimlerChrysler AG said that an internal bribery probe has determined the company made "improper payments" in Africa, Asia and Eastern Europe and that it has dismissed and suspended "several employees," while the U.S. Justice Department and Securities and Exchange Commission continue to investigate whether the automaker violated U.S. anti-bribery and whistle-blower protection laws.

In its 2005 annual report filed with the SEC on Monday, the company said: "We have determined that improper payments were made in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe. These payments raise concerns under the U.S. [Foreign Corrupt Practices Act], German law, and the laws of other jurisdictions."

Bribery is illegal across the European Union. But before passage of the Organization for Economic Cooperation and Development Anti-Bribery Convention in 1997, several European governments, including Germany's, openly allowed tax deductions for bribery overseas, according to Transparency International, a Berlin-based nonprofit group dedicated to fighting corruption. Germany's Parliament ratified the convention in 1999.

The United States has stepped up enforcement of its anti-bribery law in recent years. Foreign bribes by companies or individuals were outlawed by Congress in the 1977 Foreign Corrupt Practices Act. In recent years, the United States has pushed other countries to adopt similar laws.

Inquiries into possible bribery by DaimlerChrysler stem from a wrongful-dismissal lawsuit filed in U.S. District Court in Detroit in 2004. The plaintiff, former Chrysler accountant David Bazzetta, alleged he was fired in part because he complained to superiors about secret bank accounts kept by the company's Mercedes unit. According to court filings, Bazzetta also claimed that a senior audit manager told the group that foreign bribery had once been a "common practice" and that Mercedes managers in a few countries were resisting efforts to "wind down" the practice to comply with U.S. law. The suit was settled under confidential terms last year.

The bribery investigations took on new impetus last summer after the July 22 suicide of Rudi Kornmayer, managing director of the company's plant in Nigeria. German investigators said the 53-year-old executive shot himself in a park in Esslingen, Germany, and left a note referring to bribery inquiries.

In its Form 20-F filing with the SEC on Monday, DaimlerChrysler said that, "in connection with these issues, we recognized charges in our 2005 consolidated statement of income to correct misstatements relating to the years 2003 and 2004." It said operating profit and net income for 2005 were decreased by $19.3 million and $76.9 million, respectively. The company also said that, "to safeguard against the recurrence of the type of conduct that resulted in these issues," it has taken remedial actions such as "the severance of employment and suspensions of several employees." It also is establishing "a global compliance organization so that our business practices are thoroughly reviewed, and our policies upgraded and enforced as necessary."

DaimlerChrysler said that it is cooperating with the continuing U.S. investigations and that it has "had communications" with the office of the public prosecutor in Stuttgart, Germany.

"We have initiated improvements in our business processes as well as in compliance, control and training activities in order to foster a culture defined by openness and honesty," the company said in its filing.