WASHINGTON -- At a 1999 meeting in Germany, board members at Daimler, one of the world's largest vehicle manufacturers, took a step that could have saved the company the guilty pleas and $185 million in civil and criminal payments it agreed to in a U.S. courtroom Thursday.
Before a federal judge, Justice Department prosecutor John Darden outlined some of the dirty laundry of the company best known for its elegant Mercedes-Benz autos.
His account and court papers reveal a pattern of bribery that for many decades helped fuel the company's sales and illicitly added millions of dollars to its profits.
Judge Richard Leon accepted guilty pleas from Daimler lawyer Gero Herr mann on behalf of Daimler's Russian and German subsidiaries, and deferred prosecution agreements from parent Daimler AG and its Chinese subsidiary.
Together, Daimler and its subsidiaries agreed to pay the U.S. government $93.6 million in criminal fines and $91.4 million in disgorgement of profits to settle a civil complaint by the U.S. Securities and Exchange Commission.
The SEC said Daimler and its subsidiaries made at least $56 million in improper payments over more than a decade in at least 22 countries to illicitly earn at least $90 million in profits through tainted sales of 6,300 commercial vehicles and 500 passenger cars.
It said bribes were paid to win sales to governments in Russia, China, Vietnam, Nigeria, Hungary, Latvia, Croatia and Bosnia, among others.
According to court papers filed in the case, the company's board 11 years ago adopted an integrity code with anti-bribery provisions.
The problem is, Daimler didn't enforce it; many Daimler executives actively resisted it, and improper payments continued until 2008.
The court papers provide a case study of how executives at one of the world's blue chip companies responded when governments said "no" to bribery.
In 1999, at a Daimler Board of Management meeting, the company's chief internal auditor proposed changing the company's way of doing business. He advocated a new integrity code with anti-bribery provisions in light of a new German law that had the effect of outlawing tax deductions for foreign bribes, according to the court papers.
In response, participants at the meeting discussed the prospect "that adopting such policies would result in Daimler losing business in certain countries," the court documents state.
Inside Daimler, bribes were referred to as "useful payments," and the money for them came out of what Daimler executives called "TPAs," short for "third-party accounts."
"At that time, Daimler maintained over 200 TPAs, and was aware of methods through which its employees, subsidiaries and affiliates had regularly paid bribes to assist in securing business," according to the court records, which are signed by Daimler's legal team and U.S. prosecutors.