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Daimler Tells of SEC Inquiry

October 29, 2004|From Times Wire Services

DaimlerChrysler said Thursday that it had been notified that it was under investigation by the Securities and Exchange Commission for alleged violations of a federal anti-bribery statute after a fired employee complained to labor officials.

The automaker made the disclosure in its third-quarter earnings statement, in which the company's Mercedes division saw operating profit fall more than 60%.

"The investigation follows the filing of a whistle-blower complaint with the U.S. Department of Labor under the Sarbanes-Oxley Act by a former DaimlerChrysler employee whose employment was terminated earlier this year," the company said.

David Bazzetta, a former employee in the automaker's corporate auditing department, said in the complaint that he was fired in January after he notified senior company executives about the use of secret bank accounts to bribe government officials.

Chief Financial Officer Manfred Gentz mentioned the investigation in a conference call Thursday but provided no details. He said the allegations were without merit.

Gentz also said the SEC investigation was based on the 1977 Foreign and Corrupt Practices Act, which bars companies from bribing foreign officials and requires compliance controls.

The German automaker reported third-quarter net income of 951 million euros, or $1.17 billion, reversing a 1.7-billion-euro loss a year earlier, thanks to a strong performance from its Auburn Hills, Mich.-based Chrysler unit.

The rough spot was luxury division Mercedes, which includes the Smart subcompact car division. Operating profit fell to $387.5 million from $1 billion a year earlier. The division, whose dependable profit sustained the company while Chrysler was bleeding money, suffered from weaker sales in Western Europe and from added costs to improve quality and roll out models, the company said.

Another German automaker, Volkswagen, sprang an earnings surprise Thursday by reporting improved cash flow that limited third-quarter losses.

Europe's biggest automaker maintained its 2004 earnings guidance after posting a 65% decline in net profit, as cost cutting failed to offset losses at the core VW brand.

Associated Press and Reuters were used in compiling this report.

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