Mercedes 2006 Annual Report Download - page 211

Consolidated Financial Statements | Other Notes | 195
The US Securities and Exchange Commission (“SEC”) and the US
Department of Justice (“DOJ”) are conducting an investigation
into possible violations of law by DaimlerChrysler including the
anti-bribery, record-keeping and internal control provisions of
the US Foreign Corrupt Practices Act (“FCPA”). We have voluntar-
ily shared with the DOJ and the SEC information from our own
internal investigation of certain accounts, transactions and pay-
ments, primarily relating to transactions involving government
entities, and have provided the agencies with information pursuant
to outstanding subpoenas and other requests. We have also
had communications with the office of a German public prose-
cutor regarding these matters.
Below is a summary of what DaimlerChrysler uncovered to date
in connection with its internal investigation:
– DaimlerChrysler has determined that improper payments were
made in a number of jurisdictions, primarily in Africa,
Asia and Eastern Europe. These payments raise concerns
under the FCPA, under German law, and under the laws
of other jurisdictions.
– DaimlerChrysler has identified and self-reported potential tax
liabilities to tax authorities in several jurisdictions. These tax
liabilities of DaimlerChrysler AG and certain foreign affiliates
result from misclassifications of, or the failure to record,
commissions and other payments and expenses.
– DaimlerChrysler determined that certain payable accounts
related to consolidated subsidiaries were not eliminated during
consolidation.
– DaimlerChrysler has taken action designed to address and
resolve the issues identified in the course of its investigation to
safeguard against the recurrence of improper conduct. This
includes establishing a company-wide compliance organization
and evaluating and revising DaimlerChrysler’s governance
policies and its internal control procedures.
DaimlerChrysler is working towards completing its internal
investigation into possible violations of law. Some investigative
and remediation work, however, is still ongoing and further
issues may arise as DaimlerChrysler completes its investigation.
The DOJ or the SEC could seek criminal or civil sanctions,
including monetary penalties, against DaimlerChrysler and certain
of its employees, as well as additional changes to its business
practices and compliance programs.
DaimlerChrysler also determined that for a number of years a
portion of the taxes related to compensation paid to expatriate
employees was not properly reported. DaimlerChrysler voluntarily
reported potential tax liabilities resulting from these issues
to the tax authorities in several jurisdictions and took various
remedial actions to address these issues.
Litigation is subject to many uncertainties and DaimlerChrysler
cannot predict the outcome of individual matters with assurance.
The Group establishes an accrual in connection with pending
or threatened litigation if a loss is probable and can be reasonably
estimated. Since these accruals, which are reflected in the
Group’s Consolidated Financial Statements, represent estimates,
it is reasonably possible that the resolution of some of these
matters could require us to make payments in excess of the
amounts accrued in an amount or range of amounts that
could not be reasonably estimated at December 31, 2006. It is
also reasonably possible that the resolution of some of the
matters for which accruals could not be made, including the
arbitration proceeding and investigations mentioned above,
may require the Group to make payments in an amount or range of
amounts that could not be reasonably estimated at December 31,
2006. Although the final resolution of any such matters could have
a material effect on the Group’s consolidated operating results
for a particular reporting period, DaimlerChrysler believes that it
should not materially affect its consolidated financial position
and cash flow.