On December 11, 2009, the MAN Group (“MAN”), one of the leading providers in the international vehicle industry, announced that its Executive Board accepted two administrative orders issued by the public prosecution authorities in the Munich District Court imposing fines totaling €150.6 million on MAN subsidiaries, MAN Nutzfahrzeuge AG and MAN Turbo AG. The fines are a result of MAN’s discovery of suspicious payments of €51.6 million paid to advisors and agents which breached statutory and company regulations. MAN also settled a €20 million outstanding tax liability resulting from the suspicious payments.

Case Facts:
In May of 2009, MAN reported that it had launched an internal investigation into suspicions that commission payments made at MAN Nutzfahrzeuge AG between 2002 and 2005 breached relevant regulations in force. According to press releases issued by MAN, the internal investigation expanded to include the analysis of suspicious payments made in the past 10 years at all of MAN’s subgroups.

Statements given by Munich prosecutors relate their suspicions that MAN made payments to customers both in and outside of Germany in order to “boost the sales of trucks and buses.” Those payments were at times paid into the bank accounts of relatives and friends to disguise the transactions. MAN has admitted that its internal investigation revealed that employees breached statutory and company regulations by making suspicious payments to advisors and agents and that the option to pay “referral commissions” was abused.

During the internal investigation, MAN cooperated closely with the public prosecution office and hired an external auditing firm to investigate the suspicious payments. The internal investigation revealed approximately 80 instances of suspicious payments being made, which were reported to the public prosecution authorities. MAN has indicated that it will terminate approximately 20 employees and examine whether it will pursue damages from any of the terminated individuals due to the allegations of corruption.

As a result of the investigation, MAN has strengthened its compliance program, emphasizing informing public prosecution authorities of any serious cases of suspicion, strengthening compliance organization, using internal audit to assist in uncovering misconduct, reviewing organizational structure and processes, and maintaining a dialogue with anti-corruption experts at non-governmental organizations to develop a strong compliance organization and fight corruption in joint projects.

Analysis:
This case highlights the ongoing anti-corruption efforts which have occurred world-wide in the last year. In addition to the multiple Foreign Corrupt Practices Act related cases that have been settled in the United States, many countries, including the United Kingdom, Japan, and Germany have stepped-up anti-corruption efforts resulting in the resolution of several cases. (See "Fulbright Briefing: Recent International Anti-Corruption Enforcement Efforts & Compliance Guidance" and “Fulbright Briefing: Japan Prosecutes First Major Foreign Bribery Case”)

According to Transparency International’s 2009 OECD Progress Report, 15 countries currently have moderate or active enforcement of international anti-bribery legislation. Germany and the United States have each brought more than 100 international anti-bribery cases. Public prosecutors in Munich and Department of Justice representatives cooperated in obtaining the largest international anti-bribery enforcement fines ever imposed in their respective enforcement actions against a single company, with fines totaling over €1 billion. (See “Fulbright Briefing: Record-Setting Penalty Imposed for FCPA Violations”)

The historic investigation and subsequent settlement brought exposure to Germany’s efforts to combat corruption and also emphasized the importance of cooperation with public prosecutors. As a result, companies like MAN took actions to detect and prevent behavior that could violate Germany’s laws. MAN appointed two ombudsmen to accept tip-offs from whistle-blowers in the company and investigate reports. MAN’s investigation into the suspicious payments at issue reportedly arose after a tip-off from tax authorities. After receiving the tip, MAN launched a substantial internal investigative team consisting of around 70 lawyers, auditors, and tax experts, which worked closely with public prosecutors to bring a swift resolution to the investigation.

This article was prepared by Richard C. Smith (rcsmith@fulbright.com or 202 662 4795), John Kelly (jkelly@fulbright.com or 202 662 0256), Kimberly S. Walker (kwalker@fulbright.com or 202 662 0434) and Cristina Lunders (clunders@fulbright.com or 713 651 5619) from Fulbright’s White Collar Crime Practice Group and Government Investigations and Enforcement Practice Group.

Fulbright’s White Collar Crime Practice Group
Fulbright’s White Collar Crime Practice Group is experienced in the management of complex federal and state civil and criminal litigation on behalf of U.S. companies, including Fortune 500 corporations, their officers and directors, international corporations and entities, and individuals. Fulbright’s White Collar Crime Practice Group also is experienced in the practice of preventative counseling and compliance programs. From a strategic perspective, this is important for reducing the risk of civil and criminal litigation. Our representation includes all phases of governmental investigations and criminal and civil litigation.