'Useful Payments': US Investigators Crack Down on Daimler's Culture of Corruption

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For this reason, the lawsuit is now directed against Daimler and not against Schrempp or any other Daimler board member. The first hearing in the case is scheduled for April 1, before the US District Court for the District of Columbia. At that point, the out-of-court settlement will likely be announced, under which Daimler is to settle the suit with a payment of $185 million.

The automaker has little to fear from prosecutors in Germany. The public prosecutor's office in Stuttgart is still investigating two cases, but other investigations have already been closed. According to a spokeswoman, the prosecutor's office has no evidence to suggest that a corruption system existed that was given the blessing of upper management.

Daimler is getting away relatively cheaply compared with Siemens, whose bribery scandal has cost the company more than €2 billion in total. This is partly because the bribes at Daimler were significantly smaller than at Siemens. Nevertheless, corruption did not pay off for the Stuttgart-based automaker.

In addition to the settlement payment in the United States, the company must pay for the years of investigations by Skadden, as required under US law -- a sum in the triple-digit millions. When all is said and done, the affair will have cost the company more than half a billion euros.

'World Champion in Bribery'

The news of corruption scandals at Daimler, Siemens, MAN and, most recently, Ferrostaal, creates the impression that German companies owe some of their success abroad to their bribery practices. But this is a fallacy, argues Peter von Blomberg, who is deputy head of the German chapter of the anti-corruption non-governmental organization Transparency International.

French and British corporations, like Alstom and BAE Systems, are also plagued by corruption scandals. Although Germany held the title of "export world champion" for many years, before recently being overtaken by China, it didn't do so by being a "world champion in bribery," says Blomberg.

The most interesting question, however, is whether abandoning bribery will mean that sales decrease at Siemens, MAN and Daimler. There are countries in which it is virtually impossible to conduct business, or at least win major contracts, without paying kickbacks to key decision-makers. In those cases, it remains to be seen whether the US Securities and Exchange Commission will be just as quick to look into suspicions of corruption among US companies.

No Alternative

But the companies involved have no alternative. The management of Daimler, MAN and Siemens should have already installed many of the controls that have now been introduced more than a decade ago, when Germany prohibited bribery abroad.

Instead, a system that had been previously set up was simply allowed to continue. Companies didn't even change their euphemism for bribes. As the Daimler files discovered in 2006 demonstrate, they were still being called "useful payments."

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• Part 1: US Investigators Crack Down on Daimler's Culture of Corruption
• Part 2: Concerns about Loss of Sales
• Part 3: Daimler Has Little to Fear in Germany