A German court on Friday convicted two executives and issued what is likely to be the only prison sentence in the sex, bribery and corruption scandal that brought many executives at car-maker Volkswagen to their knees.
A regional court in the western German city of Braunschweig sentenced the former head of Volkswagen AG's works council, 48-year-old Klaus Volkert, to two years and nine months in prison on incitement of breach of trust charges for his role in the scandal.
Volkert, who represented employees on the company's supervisory board, received special bonus payments of close to €2 million ($2.9 million) from the company's former personnel director, Peter Hartz. The court said he should not have received that money. It is believed that Hartz ordered the money to be paid to executives on the company's works council in order to secure favorable votes in important company decisions taken by the supervisory baord.
On Friday, the court also sentenced former senior personnel executive Klaus-Joachim Gebauer to one year of probation on 40 counts of breach of trust. Under orders from Hartz, Gebauer had organized lavish pleasure trips abroad for members of the works council that included prostitutes. Hartz had ordered Gebauer to treat works council leaders "generously."
But Friday's sentences proved to be milder than those called for by prosecutors in the case. They had called for Volkert to spend an additional year behind bars for 48 charges of breech of trust. For Gebauer, they had called for 20 months of probation. Volkert's defense attorneys had called for acquittal or, at the most, probation for their client.
Volkert and Gebauer are considered the key figures in the VW's bribes and corruption scandal -- which first became public in summer 2005. In January, Hartz pleaded guilty to making the secret payments to Volkert between 1995 and 2004 to smooth labor relations and to ensure the works council accepted VW's restructuring plans. Hartz received a two-year suspended sentence and a fine of €576,000.
On Friday, it remained unclear whether Volkert or Gebauer would appeal their sentences.
Volkert had entered a not-guilty plea in the case, denying that he had persuaded Hartz to pay him almost €2 million. He did admit in court, though, that he helped to arrange a lucrative contract for his former girlfriend, though he denied any wrongdoing in the action.
Gebauer, accused of organizing lavish, company-paid holidays for works council officials on instructions from Hartz, has admitted most of the charges against them -- although he said he had acted at the behest of his superiors. But attorneys for both defendants argued as recently as this week that they should be acquitted or, at the most, receive mild suspended sentences. The men had said their actions had not been damaging to the company.
The trial, however, which saw senior executives including VW Chairman Ferdinand Piech testifying in court, caused significant image damage to Europe's biggest carmaker, which has struggled financially in recent years.
The investigation into corruption at Volkswagen is one of many high-profile cases of clean-ups by prosecutors of dirty practices at German businesses in recent years. Former senior officials at Siemens are awaiting trial on corporate bribary charges. Plus, in a case that has nothing to do with his employer, Deutsche Post CEO Klaus Zumwinkel was forced to resign last week after he became embroiled in a massive tax-evasion case. The investigation of Zumwinkel was part of a nationwide sting involving hundreds in Germany thought to have illegally parked their wealth, tax-free, in Liechtenstein.