Mercedes 2012 Annual Report Download - page 231

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28. Legal proceedings
Various legal proceedings, claims and governmental investiga-
tions (legal proceedings) are pending against Daimler AG
and its subsidiaries on a wide range of topics, including vehicle
safety, emissions, fuel economy, financial services, dealer,
supplier and other contractual relationships, intellectual prop-
erty rights, product warranties, environmental matters, and
shareholder matters. Some of these proceedings allege defects
in various components in several different vehicle models
or allege design defects relating to vehicle stability, pedal mis-
application, brakes or crashworthiness. Some of the claims
asserted by way of class action suits seek repair or replacement
of the vehicles or compensation for their alleged reduction
in value, while others seek recovery for damage to property,
personal injuries or wrongful death. Adverse decisions in
one or more of these proceedings could require us to pay
substantial compensatory and punitive damages or undertake
service actions, recall campaigns or other costly actions.
In mid-January 2011, the European Commission carried out
antitrust investigations of European commercial vehicle manu-
facturers, including Daimler AG. Daimler is taking the Com-
mission’s initial suspicion very seriously and is also – parallel
to the Commission’s investigations – carrying out its own
extensive internal investigation to clarify the underlying circum-
stances. If antitrust infringements are discovered, the Euro-
pean Commission can impose considerable fines depending on
the gravity of the infringement. In accordance with IAS 37.92
the Group does not provide further information on this antitrust
investigation and the associated risk for the Group, especially
with regard to the measures taken in this context, in order not
to impair the outcome of the proceeding.
On April 1, 2010, Daimler announced a settlement of the
previously disclosed US Securities and Exchange Commission
(SEC) and US Department of Justice (DOJ) investigations into
possible violations by Daimler of the anti-bribery, record-keeping,
and internal-controls provisions of the US Foreign Corrupt
Practices Act (FCPA).
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
denying 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-settlement 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 con-
tinue 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
SRO (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
agreements, 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.
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.