Thursday, April 1, 2010

Daimler - "That's All Folks"

Growing up, I was fond of the Looney Tunes cartoons. These episodes ended with a character saying, "that's all folks" (see here).

Today, April Fools Day, marked the end of the Daimler enforcement action as Judge Richard Leon concluded that the settlement between the DOJ and Daimler AG and certain of its subsidiaries (described in more detail in this post) "is an appropriate and just resolution" of the matter. See here for Christopher Matthews first-hand account at Main Justice.

In other words, "that's all folks."

The DOJ release (here) states that Daimler (and three of its subsidiaries) "brazenly offered bribes in exchange for business around the world" and that Daimler "saw foreign bribery as a way of doing business."

Yet, despite such statements, the DOJ (as described in more detail in the above linked post) did not charge Daimler with violating the FCPA's antibribery provisions. Thus, yet another bribery, yet no bribery case.

In fact, by resolving the case via a deferred prosecution agreement, Daimler will not have to plead guilty to anything.

The message sent by DOJ in this case, and the other recent bribery, yet no bribery cases (i.e. BAE and Siemens) is that corporate criminals (per the DOJ's own evidence) can simply escape the most severe consequences of criminal conduct (see here for what that would have been in the Daimler case) by cooperating with the DOJ, paying several millions into the U.S. treasury, and offering up a few indirect, insignificant subsidiaries as sacrificial corporate lambs.

This is troubling and it is an alarming feature of FCPA enforcement in an increasing number of cases. It also smacks of hypocrisy from a DOJ that extols the virtues of the rule of law at every available opportunity.

The final tally, as noted in the DOJ release, is $93.6 million in criminal fines and penalties, a deferred prosecution agreement against Dailmer (but not as to FCPA antibribery charges), criminal pleas by a finance division (Export and Trade Finance GmbH) and a spare parts subsidiary (DaimlerChrysler Automotive Russia), and another deferred prosecution agreement against a Chinese subsidiary.

Before turning to the SEC component of the case, a settlement Judge Leon also blessed today, a bit more about the "independent corporate monitor" appointed in this matter.

As discussed in this post, that monitor is Louis Freeh.

The deferred prosecution agreement (here) states, at Appendix D, that the monitor should have "sufficient independence from Daimler to ensure effective and impartial performance."

Approximately two years ago, in the wake of much criticism over the selection and role of monitors in DOJ enforcement actions, the DOJ released the so-called Morford Memo (see here). Among other things, the memo states that "the Government should decline to accept a monitor if he or she has an interest in, or relationship with, the corporation or its employees, officers or directors that would cause a reasonable person to question the monitor's impartiality."

As confirmed in this Daimler release, Freeh has been associated with Daimler since 2006.


Today, the SEC announced (here) the filing of a civil complaint (here) against Daimler charging violations of the FCPA antibribery, books and records and internal control provisions.

The SEC's charges add little to the picture already painted in the DOJ's various charging and resolution documents. Further, because a company in an SEC enforcement action of this nature, is allowed to settle the SEC's allegations "without admitting or denying" the allegations, the SEC's charges do not change the above described dynamics and troubling features of this enforcement action.

For the the record, Daimler agreed to settle the SEC matter by, among other things, paying $91.4 million in disgorgement.

The SEC's Director of the Division of Enforcement stated, "it is no exaggeration to describe corruption and bribe-paying at Daimler as a standard business practice."

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