On Dec 10th the Munich prosecutor settled with MAN Group for a total of €150.6 million ($222m). The fines equated to the “gain” resulting from contracts won between 2002 and 2009 in respect of which the alleged bribe payments were made.
The investigation started in May 2009 and involved raids on 59 sites and interviews with over 100 individuals. The amount of the bribes was reportedly €51.6million. While the settlement with the company concludes matters on a corporate basis, individuals still face prosecution – including the former CEOs, CFOs and other senior management.
This yet again confirms the leading position that the Munich prosecutor’s office is taking in European corruption enforcement as well as the “American” approach they have adopted despite the lack of a US nexus or any obvious DoJ involvement (and finally no US listing). A great deal has been written on this already so we thought we would just provide a few high level bullet points that we think are interesting:
- These fines do not appear to be criminal, but rather “administrative” and appear to be based on a “books and records” basis – i.e. controls were not sufficiently robust to prevent bribes from taking place as opposed to clear cut bribery charges per se. This also avoids any debarment issues that may arise from a guilty plea.
- Size of the fines were significant – though the Munich prosecutor publicly stated that the magnitude of the wrongdoings paled when compared to those committed by Siemens.
- US-style “gain” based fines
- Very senior people being individually prosecuted (cf. Siemens).
- Investigative costs of allegedly €50 million incurred to Dec 09. MAN hired Wilmer Hale in May 2009 to do an independent investigation reporting to the Audit Committee and Supervisory Board (http://www.man.eu/MAN-Downloadgalleries/All/2Presse/Pressemeldungen/2009/090519_MAN_AR_E.pdf) – a very hefty run rate in any context but especially an EU one. It is also interesting that MAN appointed a US firm (with a major German presence) to do the investigation, which implied that a US approach in terms of evidence gathering and analysis was adopted. Also according to Wilmer Hale they made numerous compliance/controls improvement recommendations (http://www.wilmerhale.com/de/about/news/newsDetail.aspx?news=1940&leftnav=no).