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Looking for some Freeh advice

Kyle James Dec 26, 2006

BOB MOON: When the company that makes Mercedes Benz joined forces with Chrysler a few years back. It bought itself some of the complications that are part of globalization. What might be customary in some parts of the world…is downright illegal elsewhere. Paying bribes to foreign officials, for example. That was legal in Germany until a few years ago. And now, the German company that owns one of Detroit’s “Big Three” carmakers. DaimlerChrysler is struggling to explain conduct that’s long been illegal under U.S. law. As Kyle James reports from Berlin, the company is hoping the former head of the FBI can help.

KYLE JAMES: Louis Freeh was the nation’s top investigator when he headed the FBI from 1993 to 2001. Now he’s been brought on board by DaimlerChrysler to review that company’s own internal investigation of bribery charges.

The Justice Department and the SEC are both looking into the carmaker. Their investigations were triggered by a whistle blower in 2004. He claimed he’d been fired by the company after complaining to superiors about secret bank accounts kept by the Mercedes unit. And Daimler itself has said it found evidence of “improper payments” to officials in Africa, Asia and Eastern Europe.

Peter Morici is a professor of business at the University of Maryland who follows the car industry. He says DaimlerChrysler’s decision to hire the former FBI director was a smart one.

PETER MORICI: Well, it’s just the kind of person you want. If you’re having trouble with your books, you get an independent accounting firm, if you’re having trouble of this nature, you get a criminal investigator whose qualifications and integrity are beyond question. Chrysler’s done exactly the right thing if corporately it has nothing to hide.

He says there may have been managers who did offer bribes, but as long as it wasn’t official company policy or orders from the CEO’s office, it’s a storm the carmaker can likely weather. Bribing foreign officials and even deducting the bribes from taxes was legal in Germany until 1999. But these kind of payments were made illegal in the U.S. back in 1977. Maybe even more serious for DaimlerChrysler these days are its weaker U.S. car sales, lots full of unsold Chrysler cars and recent marketing campaigns that have fizzled.

In Berlin, I’m Kyle James for Marketplace.

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