Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 1 of 8 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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1 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 1 of 8 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA v. Crim. No (RJL) DAIMLER AG, Defendant. GOVERNMENT'S MOTION TO DISMISS CRIMINAL INFORMATION Pursuant to Rule 48(a) of the Federal Rules of Criminal Procedure, the United States of America, by and through its undersigned counsel, hereby moves to dismiss the criminal information filed in the above-captioned case against defendant Daimler AG ("Daimler"). In support of this motion, the government states as follows: 1. On or about March 22, 2010, the United States filed a criminal information charging Daimler, in Count One, with conspiracy to violate the books and records provisions ofthe Foreign Corrupt Practices Act ("FCPA"), Title 15, United States Code, Sections 78m(b)(2)(A), 78m(b)(5) and 78ff(a), in violation of Title 18, United States Code, Section 371; and in Count Two, with violating the books and records provisions ofthe FCPA, in violation of Title 15, United States Code, Sections 78m(b)(2)(A), 78m(b)(5) and 78ff(a) and Title 18, United States Code, Section 2. Dkt. Entry No On or about March 24, 2010, the United States filed a deferred prosecution agreement ("DPA") entered into by the United States and Daimler. Dkt. Entry No. 3 & Attachment 1. The DPA required, among other things, that Daimler acknowledge responsibility for the actions of its employees, subsidiaries and agents in (a) engaging in a

2 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 2 of 8 long-standing practice of paying bribes to foreign officials through a variety of mechanisms, including the use of corporate ledger accounts known internally as "third-party accounts" or "TPAs," corporate "cash desks," offshore bank accounts, deceptive pricing arrangements, and third-party intermediaries; (b) making hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries - including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam and others - to assist in securing contracts valued at hundreds of millions of dollars with government customers for the purchase of Daimler vehicles; (c) in some cases, wire transferring these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies, in order for those entities to pass on the bribes; (d) often identifying bribe payments as "commissions," "special discounts," and/or "niitzliche Aufwendungen" or "N.A." payments, which translates to "useful payment" or "necessary payment," and which was understood by certain Daimler employees to mean "official bribe"; (e) in all cases, improperly recording these corrupt payments in Daimler's corporate books and records; (f) causing Daimler to earn more than $50 million in profits from corrupt transactions with a nexus to the territory of the United States; and (g) agreeing to pay kickbacks to the former Iraqi government in connection with contracts to sell vehicles to Iraq under the U.N.'s Oil for Food program. DPA K 2 & Attachment A. 3. As part of the DPA, Daimler also agreed, among other things, to pay a $93,600,000 penalty; continue to cooperate with the United States; and adhere to certain compliance undertakings. DPA ^ 5-6, The DPA provided that any criminal penalty imposed by the Court on, or otherwise paid by, Daimler subsidiaries in connection with their 2

3 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 3 of 8 guilty pleas and plea agreements or deferred prosecution agreements entered into simultaneously with the Daimler DPA would be deducted from the $93,600,000 penalty contemplated by the Daimler DPA. 4. Daimler paid the $93,600,000 penalty on or about April 1, 2010, with offsetting credits for monetary penalties paid by DaimlerChrysler Automotive Russia SAO ("DCAR"), now known as Mercedes-Benz Russia SAO (see U.S. v. DaimlerChrysler Automotive Russia SAO, No. l:10-cr (RJL)), and Daimler Export and Trade Finance GmbH ("ETF") (see U.S. v. Daimler Export and Trade Finance GmbH. No. l:10-cr (RJL)). 5. Daimler also reached a settlement with the U.S. Securities and Exchange Commission ("SEC") in a companion civil action involving similar violations of the FCPA. U.S. Securities and Exchange Commission v. Daimler AG. No. 1:10-CV (RJL). On April 1, 2010, the Court entered final judgment ordering Daimler to pay $91,432,867 in disgorgement of profits and permanently enjoining Daimler from violating the FCPA. Id., Dkt. Entry No Pursuant to the DPA, Daimler was required, among other things, to engage an independent corporate compliance monitor (the "Monitor") for a period of three years to "assess and monitor [Daimler's] compliance with the terms of [the DPA] so as to specifically address and reduce the risk of any recurrence of [Daimler's] misconduct, including evaluating [Daimler's] corporate compliance program with respect to the [FCPA] and other relevant anticorruption laws." DP A110 & Attachment D 11. Daimler proposed, and the Department of Justice approved, that the Monitor would be Louis J. Freeh. DPA Tf 10. The three-year period of the monitorship ended on April 1, Pursuant to the final judgment in the SEC civil action, Daimler was similarly ordered to retain an independent corporate compliance monitor 3

4 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 4 of 8 for a period of three years. U.S. Securities and Exchange Commission v. Daimler AG, No. l:10-cv (RJL), Dkt. Entry No. 4, at Pursuant to the DPA, Daimler, on behalf of itself and its subsidiaries and affiliates, retained the Monitor to "review and evaluate the effectiveness of Daimler's internal controls, record-keeping and existing or new financial reporting policies and procedures as they relate to Daimler's compliance with the books and records, internal accounting controls and anti-bribery provisions of the FCPA, and other applicable anti-corruption laws ("the Policies and Procedures"). DPA Attachment D f 4. The DPA provided that the Monitor's review and evaluation "shall include an assessment of the Policies and Procedures as actually implemented." Id. The DPA further provided that Daimler "shall cooperate fully with the Monitor and the Monitor shall have the authority to take such reasonable steps as, in his view, may be necessary to be fully informed about the compliance program of Daimler within the scope of his responsibilities under [the DPA]." DPA Attachment D f The term of the DPA originally ran from April 1, the date of the entry of guilty pleas by two Daimler subsidiaries, namely, DCAR and ETF - through April 8, 2012 (two years and seven days from the starting date of the term of the DPA). DPA 3. However, by Amendment to the DPA filed on April 4, 2012, the term of the DPA was extended to December 31, Dkt. Entry No. 10, fl. The Amendment to the DPA left the term of the monitorship as originally agreed upon (i.e., ending April 1, 2013). Id. f 2. The Amendment to the DPA, however, added a provision that on or before October 31, 2012, the Monitor "shall certify whether the compliance program of Daimler, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations within Daimler of the FCPA and other applicable anti-corruption laws." Id. f 3. 4

5 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 5 of 8 9. Pursuant to the DPA, the Monitor conducted an initial review and three subsequent reviews of Daimler's anti-corruption compliance program, and documented the Monitor's findings and recommendations in four reports dated July 30, 2010, July 28, 2011, July 27, 2012 and October 29, Over the course of the three years of the monitorship, the Monitor, with the assistance of his staff, conducted on-site reviews of Daimler's activities in over 20 countries, including reviews at Daimler's corporate headquarters in Germany; reviewed millions of pages of documents in over 10 languages; interviewed or met with over 1,800 Daimler employees, directors, officers and business partners; observed over 180 regularly scheduled company events, including Executive Committee meetings, Audit Committee meetings, "Integrity Dialogues," and "Compliance Town Hall Meetings"; and spent the equivalent of several thousand staff days conducting monitoring activities. 10. During the monitorship, the Monitor made a total of 33 major recommendations - including but not limited to in the areas of ethics and integrity, investigations, third-party risks, remediation, testing and compliance policies and training - that, pursuant to the DPA, were "reasonably designed to improve the Policies and Procedures of Daimler for ensuring compliance with the FCPA and other anti-corruption laws." DPA Attachment D f 7(e)(ii). Without objection, Daimler adopted and implemented all 33 recommendations. Those recommendations and the other remedial measures and internal controls improvements undertaken by Daimler have included the following: enhanced ethics and compliance policies; additional and more frequent training for employees, agents and business partners on the enhanced compliance policies and procedures; additional staffing and resources dedicated to coordinating and overseeing the implementation and enforcement of the ethics and compliance program; improved hotline mechanisms for reporting potential violations of the 5

6 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 6 of 8 code of conduct; improved investigation capabilities and the creation of a Special Investigations Unit for detecting, investigating and remediating violations of the company's ethics and compliance policies; improved internal controls designed to ensure the maintenance of accurate books and records; and improved due diligence and review processes for agreements with business partners. 11. In accordance with the DPA, representatives of Daimler and the Department of Justice, along with the staff of the SEC, met on multiple occasions to discuss the monitorship. See DPA f 10. Additionally, the Monitor conferred with the Department of Justice, as well as with the staff of the SEC, on multiple occasions to discuss the monitorship and to provide periodic updates onthe status of Daimler's progress. 12. Pursuant to the Amendment to the DPA, the Monitor certified on October 29, 2012 that "the overall compliance program of Daimler, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations within Daimler of the FCPA and other applicable anti-corruption laws." See Dkt. Entry No. 10, f Based on the foregoing, the government concludes that Daimler has satisfied its obligations under the DPA with respect to the corporate compliance monitorship. 14. Daimler has also fully met its obligation of cooperating with the United States. See DPA f Pursuant to the DPA, if Daimler fully complied with all of its obligations under the DPA, the United States would not continue the criminal prosecution against Daimler and would move to dismiss the criminal information. DPA Given that Daimler has paid the $93,600,000 penalty, fully cooperated with the United States, met its compliance obligations and has not otherwise breached the DPA, the 6

7 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 7 of 8 United States believes that dismissal is appropriate under the circumstances and is called for by the DPA. WHEREFORE, pursuant to Rule 48(a) of the Federal Rules of Criminal Procedure and by leave of Court endorsed hereon, the United States hereby moves to dismiss with prejudice the criminal information filed in the instant case. A proposed order is submitted herewith. Respectfully submitted, JEFFREY H. KNOX CHIEF, FRAUD SECTION Criminal Division United States Department of Justice DATED: May 2, 2013 Washington, D.C. By: Isl Nicholas Acker Nicholas Acker Senior Trial Attorney Fraud Section, Criminal Division U.S. Department of Justice 1400 New York Avenue, N.W. Washington, D.C Tel: (202) Fax: (202) nicholas.acker(5),usdoi.gov 7

8 Case 1:10-cr RJL Document 11 Filed 05/02/13 Page 8 of 8 CERTIFICATE OF SERVICE I certify that on May 2, 2013,1 am serving a copy ofthe foregoing motion and a proposed order using the CM/ECF system on the following: F. Joseph Warin, Esq. Gibson, Dunn & Crutcher, LLP 1050 Connecticut Avenue, NW Washington, DC fwarin@gibsondunn.com Counsel for Defendant Isl Nicholas Acker Nicholas Acker Senior Trial Attorney Fraud Section, Criminal Division U.S. Department of Justice 1400 New York Avenue, N.W. Washington, D.C Tel: (202) Fax: (202) nicholas.ackerfsiusdoj.gov 8