Mercedes 2010 Annual Report Download - page 225

Consolidated Financial Statements | Notes to the Consolidated Financial Statements | 221
Pursuant to the settlement reached with the SEC, the SEC filed
a civil complaint against Daimler AG in the US District Court
for the District of Columbia (the Court). Without admitting or de-
nying the allegations in the complaint, Daimler AG consented
to the entry by the Court of a final judgment. Pursuant to the
Court’s judgment: (i) Daimler AG disgorged US$91.4 million in
profits, (ii) Daimler AG is enjoined from violating the anti-bribery,
record-keeping and internal-controls provisions of the FCPA,
and (iii) the Honorable Louis J. Freeh is Daimler AG’s post-settle-
ment monitor for a three-year period.
Pursuant to the settlement reached with the DOJ, Daimler AG
entered into a deferred-prosecution agreement with a two-
year term under which the DOJ filed with the Court a two-count
criminal information against Daimler AG charging it with:
(i) conspiracy to violate the record-keeping provisions of the
FCPA, and (ii) violating the record-keeping provisions of the
FCPA. Herewith, Daimler AG agreed to pay a maximum criminal
fine of US$93.6 million, to engage the Honorable Louis J. Freeh
as post-settlement monitor for a three-year period, and to continue
to implement a compliance and ethics program designed to
prevent and detect violations of the FCPA and other applicable
anti-corruption laws. In addition, a China-based subsidiary,
Daimler North East Asia, Ltd. (DNEA), entered into a deferred-
prosecution agreement with the same term with the DOJ
under which the DOJ filed with the Court a two-count criminal
information against DNEA.
In addition, a Russia-based subsidiary, Mercedes-Benz Russia
S.R.O. (MB Russia), and a Germany-based subsidiary, Daimler
Export and Trade Finance GmbH (ETF), each entered into plea
agreements with the DOJ with a three-year probation period under
which they pleaded guilty to: (i) conspiracy to violate the anti-
bribery provisions of the FCPA, and (ii) violating the anti-bribery
provisions of the FCPA. Under their respective plea agree-
ments, the Court sentenced MB Russia to pay a criminal fine of
US$27.36 million and sentenced ETF to pay a criminal fine
of US$29.12 million. These amounts were deducted from the
maximum fine Daimler AG agreed to pay (US$93.6 million).
As a result of the SEC and DOJ settlements, Daimler paid a total
of US$185 million in fines and civil disgorgement. Daimler
previously recognized sufficient provisions to cover these fines.
In addition, Daimler has taken personnel and remedial actions
to ensure that its conduct going forward complies with the FCPA
and similar applicable laws, including establishing a company-
wide compliance organization and evaluating and revising Daimler’s
governance policies and internal-control procedures.
The failure to comply with the terms and conditions of either the
SEC or the DOJ settlement, including the terms of the deferred-
prosecution agreements, could result in resumed prosecution and
other regulatory sanctions.
Communications with and provision of documents to the offices
of German public prosecutors regarding the matters that have
been under investigation by the DOJ and SEC have taken place.
On August 17, 2009, the Official Committee of Unsecured
Creditors of OldCarCo LLC (formerly Chrysler LLC) filed a lawsuit
with the United States Bankruptcy Court, Southern District
of New York, against Daimler AG, Daimler North America Corpo-
ration and others. The Committee has been substituted by
the Liquidation Trust, which claims unspecified damages based
on theories of constructive fraudulent transfer and other legal
theories, alleging that the consideration received in certain trans-
actions effected in connection with the investment by Cerberus
in Chrysler LLC was not fair consideration. Daimler has submitted
miscellaneous legal defense arguments and considers these
claims and allegations of the Liquidation Trust to be without merit
and will defend itself vigorously.
The Federal Republic of Germany initiated arbitration proceedings
against Daimler Financial Services AG, Deutsche Telekom AG
and Toll Collect GbR and submitted its statement of claims in
August 2005. It seeks damages, contractual penalties and
the transfer of intellectual property rights to Toll Collect GmbH.
In particular, the Federal Republic of Germany is claiming
– lost revenue of €3.33 billion for the period September 1,2003
through December 31, 2004 plus interest at 5% per annum
over the respective base rate since submission of claims
(amount as of November 21, 2010 at €1.4 billion),
– and contractual penalties of approximately €1.65 billion
through July 31, 2005 plus interest at 5% per annum over the
respective base rate since submission of claims (amount as
of November 21, 2010 at €282 million),
– plus refinancing costs of €115 million.