Daimler Accused of Bribing Russians

German carmaker Daimler paid more than 3 million euros ($4 million) in bribes to Russian government officials, largely to secure the sale of cars to the police and Federal Guard Service, the agency that provides transportation for Russian and visiting dignitaries, the U.S. Justice Department said in a lawsuit.

The maker of the Mercedes sedans favored by top officials "made improper payments at the request of Russian government officials or their designees in order to secure business from Russian government customers" between 2000 and 2005, when government purchases comprised 5 percent of all sales in Russia, the Justice Department said in the lawsuit filed Tuesday.

Daimler is accused under the Foreign Corrupt Practices Act, which prohibits bribery and requires transparent bookkeeping. Although Daimler is a German company, it is traded on four U.S. stock exchanges and uses U.S. bank accounts, which makes it subject to some U.S. laws, according to the Justice Department's 77-page court filing, a copy of which was obtained by The Moscow Times.

Daimler's spokeswoman in Russia declined to comment Wednesday.

The Wall Street Journal, Reuters and other media outlets reported Wednesday, citing unidentified sources, that Daimler planned to plead guilty on charges regarding its subsidiaries in Russia and Germany and has agreed to pay $185 million to resolve the dispute.

A U.S. federal court will hear the case against Daimler on April 1.

The Justice Department said Daimler made improper payments worth "tens of millions of dollars" to officials in at least 22 countries, including Turkmenistan, Uzbekistan,?  Latvia and China in the decade from 1998 to 2008.

Daimler engaged in a "long-standing practice" of bribing foreign officials through offshore accounts, "deceptive pricing arrangements" and other schemes under which it registered transactions as "commissions" or "special discounts," the filing said.

The company has no central oversight of its sales and a "corporate culture that tolerated and/or encouraged bribery," it said.

Daimler has been a strategic player in the Russian car industry since purchasing a 10 percent stake in the KamAZ truck maker as the financial crisis struck the car market in December 2008. Daimler increased its stake to 11 percent last month, and stakeholders have discussed a further boost. Russian Technologies chief Sergei Chemezov has said the company might control KamAZ by 2017.

The wholly owned Russian subsidiary of the company involved in the bribery allegations is Mercedes-Benz Russia SAO. The Justice Department described Daimler's business in Russia as "substantial" and named its main government clients as the Interior Ministry and the Federal Guard Service, as well as the military, and cities of Moscow, Ufa and Novy Urengoi.

It said Daimler made improper payments worth more than 3 million euros in connection with those sales, with most bribes going to officials in the Interior Ministry and the Federal Guard Service's Special Purpose Garage.

A total of 1.44 million euros was paid in connection with Daimler passenger car contracts to the Interior Ministry, including some made on purchases for the Moscow traffic police, the filing said.

Daimler paid 1.4 million euros for passenger car contracts with the Special Purpose Garage between 2001 and 2005, it said. Of the payments, 928,023 euros was deposited in the Deutsche Bank account of a single person, identified in the filing as a "government official at the SPG."

The Special Purpose Garage is a subsidiary of the Federal Guard Service and manages transportation for Russia's top officials as well as visiting heads of state.

Russian drivers routinely accuse government officials of hypocrisy for advocating the purchase of Russian-made cars while widely using foreign luxury cars, mainly Mercedes, themselves.

Daimler also made cash payments to officials in the government-connected firms Dorinvest and Mashinoimport to promote the sale of Unimogs, German-made all-wheel-drive trucks, the filing said.

Mashinoimport is 100 percent-owned by the Federal Property Agency, while Dorinvest is a unitary enterprise controlled by the city of Moscow. Both acted as purchasers of Unimog cars for Moscow. In total, Daimler paid 433,000 euros in bribes for Unimog purchases, which totaled 17.89 million euros from 2000 to 2005 and included acquisitions by the military and the cities of Ufa and Novy Urengoi, the filing said.

Daimler sold 13,435 Mercedes cars and vans in Russia in 2009, accounting for 0.9 percent of all new car sales, according to the Association of European Businesses.

In Turkmenistan, Daimler allegedly presented a Turkmenistan official with an armored Mercedes SUV in February 2000 believing that "if Daimler failed to provide this birthday gift … all sales to the Turkmenistan government in 2000 would be in jeopardy." The official is not identified, but former President Saparmurat Niyazov, who died in 2006 after ruling for more than 20 years, was born on Feb. 19.

The company also spent $250,000 to translate "the Turkmen government official's personal manifesto" into German and printed 10,000 copies of it, the filing said. Niyazov famously authored "Ruhnama," an autobiographical and spiritual manifesto that became pervasive throughout school and government systems.