U.S. probing alleged DaimlerChrysler bribes

[schmosef]

Criminal investigation centers on automaker's Mercedes unit

The Associated Press
Updated: 10:53 a.m. ET Aug. 5, 2005

FRANKFURT, Germany - DaimlerChrysler AG said Friday it is cooperating with the U.S. Justice Department, which is investigating claims that the company’s Mercedes Car Group may have paid bribes to foreign officials and that senior executives were aware of it.

DaimlerChrysler spokesman Toni Melfi said the investigation was linked to an inquiry last year by the U.S. Securities and Exchange Commission. That investigation began after a former Chrysler accountant in Detroit claimed the company kept secret bank accounts with which to bribe foreign officials.

Melfi did not say how many countries or how many people were being investigated. The Wall Street Journal, citing unidentified U.S. officials, said Friday the claims centered on a dozen countries and that senior executives in Stuttgart, Germany, were aware of it.

Justice Department officials did not immediately return calls for comment.

The German-American automaker had mentioned that it was cooperating in the investigations in its July 28 earnings report and said its internal investigation had not reached any conclusions as to whether any laws were broken. It added that adjustments to past earnings reports may be required as it completes its investigation.

The Journal said German officials were also investigating after 53-year-old Rudi Kornmayer, the managing director of a Mercedes plant in Nigeria, shot and killed himself in a park in Esslingen on July 22.

Prosecutors in Stuttgart said he left a suicide note behind, but it provided no details on the claims.

SEC Seeks Information From DaimlerChrysler

FRANKFURT, Germany - DaimlerChrysler AG was asked for a written statement and documents regarding its role in the U.N.'s oil-for-food program, according to documents filed with the U.S. Securities and Exchange Commission.

The German-American automaker said in a filing that the SEC had asked it for details on any role it may have had in the scandal-tainted program, set up to govern the sale of Iraqi oil under Saddam Hussein, and to see if the company had violated any provisions.

DaimlerChrysler spokesman Toni Melfi declined to comment Tuesday.

"It is our position that we cannot comment," he said. "It is an ongoing investigation."

Melfi wouldn't say if the documents had been turned over to the SEC yet or to what extent DaimlerChrysler was involved in the oil-for-food program.

The massive program was launched in 1996 to help Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait. It allowed Saddam's regime to sell oil, provided the proceeds went primarily to buy humanitarian goods and pay war reparations. Saddam allegedly sought to curry favor by giving former government officials, journalists and others vouchers for Iraqi oil that could then be resold at a profit.

In DaimlerChrysler's July 28 filing, the company said it received the SEC's request after the commission "supplemented the formal order of investigation to add DaimlerChrysler to the list of named companies. In that regard we received an order from the SEC to provide a written statement and to produce certain documents regarding transactions in that program."

On Monday, a U.N.-backed committee investigating the overall program accused its former chief, Benon Sevan, of corruption for taking illegal kickbacks and recommended his immunity from prosecution be lifted.

The Independent Inquiry Committee led by former U.S. Federal Reserve Chairman Paul Volcker will issue a final report next month, and will examine the U.N. management of the oil-for-food program.

DaimlerChrysler shares were flat Tuesday at 40.46 euros ($50.05) in Frankfurt trading.

I have customers at several different tiers of the automotive industry. Knowning what I know I'm not surprised that bribes and kick-backs might be common when dealing with foreign officials. What surprises me is the willingness to contravene international sanctions by dealing with Saddam.

[Dr Mordrid]

Bribery of this kind is commonplace across the pond so I'm not suprised one little bit. It's this kind of cavalier attitude re: bribery that's likely at the root of the oil for food scandal at the UN.

Dr. Mordrid

[Brian Ellis]

Aren't you being holier than thou blaming the Europeans? http://www.the-catbird-seat.net/BoeingBound.htm

[schmosef]

I don't think he's being "holier than thou". I implied that it happens here too (I said I wasn't surprised it happened with foreigners because of what I knew [about here]) and he didn't at all try to refute me.

Let's all take a deep breath. This thread wasn't supposed to be about pointing fingers. Also, consider that Americans have a reason to be touchy about this issue. The botching of the Oil 4 Food program seriously undermined international efforts to deal with Saddam peacefully. Had the sanctions been successful they wouldn't have had grounds for the War.

Brian, with your experience in the UN, do you have an insight into what's going on there with the Oil 4 Food program scandal?

[Dr Mordrid]

Why Americans are cynical about the UN;

UNITED NATIONS, United States (UPI) --

The latest report on the Iraq Oil-for Food Program inquiry Monday set off a chain reaction of events resulting in a guilty plea by a former U.N. official.

Benon Sevan, 67, a now-retired undersecretary-general who was the former head of the $64 billion oil-for-food plan, was accused of receiving more than $160,000 in illicit payments. He was in his native Cyprus. Former U.N. procurement officer Alexander Yakovlev, 57, a Russian, was accused of accepting illegal payments.

This, then, is how the scenario unfolded within about four hours.

After the Independent Inquiry Committee into the program accused the two former U.N. officials of corruption at about midday it asked their diplomatic immunity be lifted.

U.N. Secretary-General Kofi Annan immediately said he would.

Within a couple of hours, Yakovlev was in custody in New York, accused of seeking about $1 million in payoffs. A few hours laterthe U.S. Attorney`s office for the Southern District of New York, said Yakovlev entered a guilty plea on conspiracy, wire fraud and money laundering charges in Manhattan federal court before U.S. District Judge William Pauley, who accepted the plea.

Yakovlev faces up to 20 years on each of three counts and fines up to $250,000 or twice the gross gain or loss resulting from the offense, prosecutors said.

The criminal information filed against Yakovlev said he established a company "to facilitate the illicit and secret payment of money to him by foreign companies seeking to secure contracts to provide goods and services to the United Nations."

Federal charges arose out of Yakovlev`s "receipt of at least several hundred thousand dollars from foreign companies in connection with the performance of his duties as a procurement officer at the United Nations between 1993 and 2005," said the office of U.S. Attorney David Kelley.

The speed with which Yakovlev was arrested, charged and entered a plea only on a criminal "information," an instrument prosecutors use to bring someone before a judge, indicates he has had prior conversations with the U.S. Attorney`s office and, more than likely, that he has been cooperating in what was described Monday as the prosecutors` "long term investigation of the U.N. Oil-for-Food Program."

This could explain a remark to reporters by the inquiry committee chairman, Paul Volcker, former head of the U.S. Federal Reserve, in releasing the latest report, faulting the U.S. Attorney`s office for not cooperating with his investigation. It indicates the two agencies are competing for the same incriminating, if there is any, information.

Yakovlev resigned in June after allegedly aiding his son get a position with a company doing business with the United Nations, but not involved with oil-for-food. However, the procurement officer was involved in awarding of oil-for-food program contracts.

One of the companies getting such a contract was Cotecna, a Swiss verification firm, which for a time had employed Annan`s son, Kojo.

The question of what Kofi Annan knew and when about Cotecna`s bid and his son`s role in the process remains unanswered. It was expected to be discussed in next month`s report, Volcker said. New information following the previous report raised new questions after the secretary-general said it exonerated him.

Also in the next report, Volcker expected "a more comprehensive listing of firms participating in the program, either in the purchase of oil or the sale of yumanitarian goods, as well as a more detailed analysis of the manner in which Iraq and its vendors and oil purchasers maipulated the program."

This would be the report not only individual companies would rather not see, it is one some governments will be girded against.

The final report is expected in late October.

Annan voiced deep concern over the report and vowed tighter controls on procurement, something that already was in the works under U.N. reforms.

In a statement read out to reporters at U.N. World Headquarters in New York, Mark Malloch Brown, the secretary-general`s chief of staff, said the United Nations was already cooperating with inquiries from the Manhattan District Attorney, the local prosecutor.

"With respect to broader U.N. procurement practices, following a series of reforms put in place since the late 1990s, the United Nations recently commissioned an independent review of procurement practices from the U.S. National Institute of Governmental Purchasing," Malloch Brown said. "That review, which was completed last month, strongly supported the thrust of the (secretary-general`s proposed) reforms and made a number of additional technical recommendations."

He explained the U.N. Office of Internal Oversight Services would separately make recommendations for further reforms, "particularly regarding strengthened supervision and controls over individual procurement officers. The secretary-general intends to act expeditiously to implement those recommendations."

He said the Volcker committee`s report next month was also expected to include recommendations for action.

That report was expected to include an overall assessment of the oil-for-food program and specific conclusions about the role members of the U.N. Security Council, the U.N. Secretariat and the secretary-general and U.N. agencies played.

Annan "very much looks forward to that report, not least in the strong expectation that it will clear up any remaining questions concerning his own conduct," said Malloch Brown.

Bottom line: Two down and counting.

Both Benon Sevan, the former head of the UN Oil for Food program, and former UN procurement officer Alexander Yakovlev are crooks.

Kofi Annan and his sorry excuse for a son are prime candidates to be next, not counting a plethora of their minions and assorted go-betweens.

IF we're lucky by the time the prosecutors run out of indictments there will be some prime development property available on 44E

Dr. Mordrid

[Brian Ellis]

Brian, with your experience in the UN, do you have an insight into what's going on there with the Oil 4 Food program scandal?

Absolutely not. I have worked for/with UNEP, UNMF, UNIDO, WB, UNDP and WMO, but mainly concerning the environment and industry (some of these indirectly at a low level) as a scientist/engineer. I have never had any connections with the political UNSC/UNGA, nor with Iraq. The only ME countries I've been directly involved with are Turkey, Egypt, India and Pakistan (depending where you set the ME borders).

Speaking frankly, what has happened there does not surprise me. The various projects I've had dealings with have been fairly small (mostly $1M to 25M), although there may have been multiple projects in a given country. There is little doubt that money sticks to greasy palms along the way. I was never able to prove it, as I had little remit to do financial audits other than to give a general opinion as to whether I thought the money in a project was well-spent or not, but I believe that I saw 3 or 4 cases of fairly overt corruption on a minor scale, within developing countries. Worse, I had strong suspicions of a UN employee taking kick-backs of a few $'000 at a time from suppliers, but no proof allowing me to blow the whistle, although I did discuss this orally with some high UN officials to whom I reported, who agreed with me. Unfortunately, the guy in question worked for a different UN agency and it would have raised lids of all sorts of worm cans for one agency to interfere with the runnings of another on just a suspicion.

I'm afraid that corruption and bribery are just facts of life due to the flesh being weak. Whenever large sums of money are involved, there are sure to be sticky fingers and these are on the hands of people in ALL countries to some degree or another. As long as there not adequate audits involving individuals' wealth, as well as corporate, this will continue. Nothing to do with the UN, but many years ago I was doing some business with an Indian government organisation and was overtly asked, by telex, for a kick-back from the purchasing manager, who asked that I increase the price of the equipment by 25% to cover his "commission". I refused but I told the guy that if I didn't receive the order (which I knew was the lower of two tenders), I would ask for an official enquiry why.

That having been said, I believe the great majority of UN employees and consultants and government officials in most countries to be honest. I would except from this generalisation one Far East country where I got the impression that everyone from the Ministers down to low functionaries were on the make. The single time I have given in to corruption was a shocker to me: I had to give a customs official a bribe to release some goods from a bonded area for an exhibition that was opening in a few hours - and this was in a large European country noted for its correctness, because he was "off-duty".