So MVD finished its thorough investigation of the corruption allegations against Daimler. Recall, this April Daimler settled violations of the U.S. Foreign Corrupt Practices Act (FCPA) with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC). The investigation started in 2004 after David Bazzetta, a whistleblower in the internal audit department, was terminated by Daimler (presumably for blowing the whistle) and filed a wrongful termination suit. The 6-year investigation that followed uncovered the widespread use of “third party accounts” (interne fremdkonten) in offshore bank accounts to funnel cash payments to foreign officials in many countries, including Russia.
In fact, the payments in Russia were so significant that the DOJ singled out a Daimler Russian subsidiary for a guilty plea (the parent settled with a Deferred Prosecution Agreement). This subsidiary – DaimlerChrysler Russia SAO (DCAR) – assisted with sales of Daimler product to government customers in Russia, including the Russian Ministry of Internal Affairs (MVD). The primary method for paying kickbacks to officials at government customers was overinvoicing, for example, the MVD and then paying the excess amount back to officials in cash or through bank transfers (hence the need for offshore third party accounts). As you can tell, this is not a difficult thing to verify given that Daimler controlled the offshore accounts (i.e., it wasn’t from some cash box, or a rogue employee), and I imagine they turned over records from these accounts to the DOJ. Indeed, that’s why the DOJ complaint against DCAR was able to identify the companies to which payments were transferred by Daimler on behalf of these officials (e.g., Sittard Investments, Novitta Ltd., Tower Block Ventures). A total of $2.3 million “was used to pay bribes to Russian government officials with the MVD or was used to pay third parties with the understanding that such payments would be passed on … to Russian government officials with the MVD.”
Today Interfax is reporting that the MVD has finished its investigation of the Daimler allegations – including those involving MVD officials – and has concluded that Daimler did not pay any bribes in Russia. To put it simply, this is a disappointing result that is simply ludicrous and hopefully will help fuel the inevitable reform that is coming to MVD. Essentially, MVD is saying that Daimler willingly handed over false evidence of its own guilt to DOJ, apparently because it enjoys making donations to the U.S. Treasury, as the embedded blog post below argues. The Prosecutor’s General Office is still looking into the matter but a decision on whether charges will be brought should be imminent. More interesting, however, is whether Medvedev will comment on the MVD investigation, which was carried out on his direct orders.