DaimlerChrysler Suspends Employees in Bribery Inquiry 
By Mark Landler
March 7, 2006
The New York Times
Original Source: http://www.nytimes.com/2006/03/07/business/worldbusiness/07daimler.html
FRANKFURT, March 6 — DaimlerChrysler has dismissed or suspended several employees after an internal investigation uncovered evidence that its executives paid bribes in Asia, Africa and Eastern Europe. 
In a report filed Monday with the Securities and Exchange Commission, the company said it had determined that improper payments were made in a number of jurisdictions. The payments, it said, could violate both German law and the Foreign Corrupt Practices Act in the United States.
The Justice Department and the S.E.C. have been investigating accusations of bribery at DaimlerChrysler since last year. The company has cooperated with the investigations, and these latest disclosures shed more light on the far-flung corruption inquiry.
The filing, however, does not answer a crucial question: whether senior Mercedes managers knew about the payments. It does not identify the countries where bribes were paid, or say how many people were involved.
A spokesman for DaimlerChrysler, Thomas Fröhlich, declined to comment beyond the facts in the filing. But he said, Dieter Zetsche and Bodo Uebber are keen to take action on this.
Mr. Zetsche is DaimlerChrysler's chief executive, and Mr. Uebber is the chief financial officer.
Last October, a report on the United Nations oil-for-food scandal said DaimlerChrysler paid a kickback of 6,950 euros ($8,372) to Iraqi officials in return for a contract from the government of Saddam Hussein. The Justice Department and the S.E.C. are investigating this as well.
Bribery of foreign officials used to be fairly common in the auto industry. As recently as 1997, bribes paid to foreigners by German companies were tax-deductible in Germany. Now, foreign corruption is illegal in the European Union, as it is in the United States.
The investigation is a distraction for Mr. Zetsche, as he begins to turn around the company's flagship Mercedes-Benz division. The brand has been tarnished by quality problems in recent years, but sales of the Mercedes car group rose 16 percent in February, the company said Monday.
DaimlerChrysler painted an optimistic picture of sales at Mercedes and Chrysler, as both divisions roll out new models. It warned, however, that sales at its truck division would suffer because of a downturn in the market and stricter emissions standards in the United States and Japan.
With DaimlerChrysler's performance improving, analysts have not paid much attention to the scandal. They prefer to focus on other issues, like DaimlerChrysler's effort to fix its ailing Smart minicar division. Mercedes will also update the design of its best-selling E-class sedan this year.
The make or break for Mercedes will be the face-lift of the E-class, said Arndt Ellinghorst, an analyst at Dresdner Kleinwort Wasserstein, adding, I have confidence in Dieter Zetsche.
Still, the bribery payments took a bite out of DaimlerChrysler's bottom line. It said it reduced its 2005 operating profit by 16 million euros ($17.2 million) and its net income by 64 million euros ($76.8 million).
To reflect improper payments made from 1994 to 2002, DaimlerChrysler said it had reduced the balance of stockholders' equity, as of Jan. 1, 2003, by 222 million euros ($266 million).
DaimlerChrysler's practices came to light in 2004 in a lawsuit filed by a former Chrysler accountant, David J. Bazzetta, who said the company had maintained secret bank accounts to bribe foreign government officials. Mr. Bazzetta sued after being fired from his job.
In its filing, DaimlerChrysler said it had set up a global compliance organization to review its policies and practices.
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.