DaimlerChrysler AG's disclosure last week that the Department of Justice is investigating bribery allegations involving the car company's European executives is a sign of the U.S. government's stepped-up anti-corruption efforts targeting both domestic and non-U.S. companies, according to legal experts in the field.
"There's definitely been a substantial increase in these cases," said Raymond Banoun, head of Cadwalader, Wickersham & Taft LLC's business fraud practice. "And it's non-U.S. companies that are being investigated. There's loads of these cases right now."
In a July 28 Securities and Exchange Commission filing, the German carmaker said the Justice Department had joined an SEC investigation begun last year into possible violations of the Foreign Corrupt Practices Act, which bars U.S. companies from paying bribes abroad. The company said it is conducting its own investigation of "payments from certain accounts" that may have violated the law. A source familiar with the internal investigation said that the company made payments to government officials in Africa but that the company has not determined whether the payments were illegal. The source spoke on the condition of anonymity because of the continuing investigation.
A spokesman for DaimlerChrysler declined to comment on the investigation.
The probe grew out of a civil case filed last year by a former company accountant. The former employee charged in his wrongful-dismissal suit that senior DaimlerChrysler officials were aware of secret accounts used to bribe foreign officials but did nothing to stop the practice. The accountant, who worked for the company's Chrysler operation in Michigan, settled with DaimlerChrysler this year.
Though DaimlerChrysler is based in Germany, it lists its stock on the New York Stock Exchange and is subject to anti-bribery laws here. The SEC, which pioneered the anti-bribery investigations in the 1970s that led to FCPA's passage in 1977, often plays a main role in many anti-bribery investigations.
In a 1999 compact with the United States, European nations agreed to enact their own anti-bribery laws. Before then, bribery of officials in developing countries was common and considered a business expense.
But European prosecutions of bribery allegations of companies there have been slow in coming, said Matt T. Morley, chairman of the corporate department and a managing partner of Fried, Frank, Harris, Shriver & Jacobson LLC's Washington office.
"The acid test is still to come" in Europe, he said. "Just because laws are on the books there doesn't mean they will be enforced. You haven't seen a tidal wave of cases in those countries."
Both Morley and Banoun said the Department of Justice has aggressively pursued new cases since the 1999 compact gave it expanded jurisdiction over foreign companies with a significant presence in the United States. Morley added that the Justice Department and the SEC have done these types of investigations for decades and are good at it. "The U.S. is trying to show some leadership, so you're seeing them being very aggressive in enforcing the FCPA."
In another FCPA investigation, this one tied to Riggs Bank, New York oil company Amerada Hess Corp. disclosed yesterday that the SEC had upgraded its previously informal inquiry into Amerada's payments to the government and officials of Equatorial Guinea. The oil-rich West African country had oil payments routed to its account at Riggs Bank. Riggs's management of those accounts was a key factor in the D.C. bank's guilty plea and $16 million fine in January for failing to prevent possible money laundering.
An Amerada Hess spokesperson could not be reached for comment.
Other U.S. companies that have said they are being investigated for possible FCPA violations in Equatorial Guinea are Marathon Oil Corp. and ChevronTexaco Corp. A Senate investigative report last year detailed how many business deals and charitable activities the companies did in Equatorial Guinea benefited the country's ruling family. Equatorial Guinea is among the poorest countries in the world, and human rights organizations say its government is among the most repressive and corrupt in Africa.