China's Sinopec says Daimler allegedly paid bribes

[March 26, 2010]  SHANGHAI (AP) -- China Petroleum & Chemical Corp., Asia's biggest refiner, acknowledged Friday that German automaker Daimler AG had allegedly paid bribes to one of its staff, and urged the government to tighten oversight of lawbreaking foreign companies.

The case is part of a wider one in which Daimler is accused of paying tens of millions of dollars in bribes through subsidiaries to officials of at least 22 foreign governments, including China.

It comes as four employees of Anglo-Australian mining giant Rio Tinto await a verdict from a Shanghai court in a bribery and commercial secrets case that has highlighted China's handling of corruption charges against foreign companies.

In a statement on its Web site, the Beijing-based refiner, better known as Sinopec, said the employee, which it identified only by the surname "Du," was convicted and sentenced by a Beijing court in 2006 from crimes committed in 2002-2003. It gave no further details.

After the case arose, the state-owned company severed its business relations with Daimler, corrected any problems and moved to strengthen its anticorruption measures, it said.

"We urge and hope that the government will encourage a normal market environment and good business conduct by working to severely punish audacious challenges from multinational companies and lawbreaking business people," the statement says.

The kickbacks of cash and gifts allegedly paid by Daimler were meant to help fix contracts for purchases of hundreds of millions of dollars worth of Daimler vehicles. Prosecutors say the payments violated the U.S. Foreign Corrupt Practices Act, which prohibits improper payments to officials of other countries.

Following a five-year probe, Daimler is to pay a $185 million settlement and avoid indictment when two of its subsidiaries enter guilty pleas in a U.S. federal court, where a judge must still rule on the proposed settlement.

Former FBI Director Louis Freeh is to act as an independent monitor for the automaker's corporate compliance in the next three years, according to government court documents.

The stringent provisions of the U.S. anti-corruption law has tightened controls over multinational companies which face trouble in the U.S. as well as overseas if caught engaging in bribery and other illegal practices in any market.

China has also sought to tighten rules against unethical or illegal behavior, although it often does so selectively. So far, the government has not named any of the people alleged to have offered bribes to the Rio Tinto employees, who have pleaded guilty to taking payments but have contested some of the details of the accusations.

[Associated Press; By ELAINE KURTENBACH]

Associated Press researcher Ji Chen contributed to this report.

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