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UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
DAIMLER AG,Defendant.
.. . . . . . . . . . . . . . . .
::::::::::
::
Docket No. CR10-63(RJL)
April 1, 2010
2:00 p.m.
TRANSCRIPT OF GUILTY PLEA and SENTENCING HEARINGBEFORE THE HONORABLE RICHARD J. LEON
UNITED STATES DISTRICT JUDGE
APPEARANCES:
For the Plaintiff: JOHN S. DARDENMARK F. MENDELSOHNU.S. Department of Justice1400 New York Avenue, NWWashington, DC 20005
For the Defendants: MARTIN J. WEINSTEINRUTH A. VAN VELDHUIZEN
CHRISTIAN J. NAUVELWilkie Farr & Gallagher, LLP1875 K Street, NWWashington, DC 20006
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CARL S. RAUHHogan & Hartson, LLP555 13th Street, NWWashington, DC. 20004
COLLEEN P. MAHONEYSkadden Arps Slae Meagher & Flom
LLP1440 New York Avenue, NWWashington, DC 20005
For the SEC: GERALD W. HODGKINSDivision of EnforcementU.S. Securities and Exchange
Commission
100 F Street, NEWashington, DC 20549
Also Present: Dr. Gero Herrmann, CompanyRepresentative
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Court Reporter: PATTY ARTRIP GELS, RMROfficial Court ReporterRoom 4700-A, U.S. CourthouseWashington, D.C. 20001(202) 962-0200
Proceedings reported by machine shorthand, transcript producedby computer-aided transcription.
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P R O C E E D I N G S
COURTROOM DEPUTY: Calling Criminal Case No. 10-63
United States of America versus Daimler AG, Criminal Case 10-6
United States of America versus DaimlerChrysler Automotive
Russia SAO, Criminal Case 10-65 United States of America versu
Daimler Export and Trade Finance GmbH, and Criminal Case 10-66
United States of America versus DaimlerChrysler China LTD.
Counsel, please come forward and identify yourself fo
the record.
MR. DARDEN: Good afternoon, your Honor, Jay Darden a
Mark Mendelsohn on behalf of the United States.
THE COURT: Welcome back.
MR. WEINSTEIN: Good afternoon, your Honor, Martin
Weinstein from the Wilkie Farr firm on behalf of Daimler AG,
DaimlerChrysler China Limited, Daimler Export and Trade Financ
GmbH, and DaimlerChrysler Automotive Russia SAO. May I also
introduce, your Honor, the General Counsel of Daimler AG, Dr.
Gero Herrmann, Mr. Carl Rauh from the Hogan & Hartson firm and
Ms. Colleen Mahoney from the Skadden firm.
THE COURT: Welcome everyone. Welcome back. Very
good. We are here obviously, counsel, to -- we mustn't forget
our friends from the SEC either. They are here somewhere.
There they are over there.
MR. HODGKINS: Yes, your Honor.
THE COURT: We will be speaking with you later. We a
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here to try to wrap up under one umbrella, so to speak, the
dispositions that have been reached between the Government and
the four corporate entities, obviously the parent being
overarching to the other three that have been reached in these
cases today.
The Court has had the benefit of a number of meetings
prior to today with counsel from both the Government and the
defense in an effort to fully explore and understand the
arrangements that have been worked out here and that are the
fruit of the investigation and the negotiations that occurred
over a protracted period of time. The arrangements are fairly
complex and the papers that reflect them have been filed and
have been on file now for well over a week and have been
available to the public for their evaluation and digestion, bu
today we have to go through, pursuant to the Rules of Criminal
Procedure and the Constitution, we have to go through the
colloquy process and we will.
And I think before we get into that, though, as to th
two entities that will be entering guilty pleas today and the
other two entities have what I will refer to as Deferred
Prosecution Agreements, I thought it would be prudent and
helpful to get sort of an overarching sense of the situation,
again, as reflected in extensive papers here but just for the
benefit of the record to have some sense of the
interrelationship of all of these cases to one another and
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particularly as it relates to the parent company, Daimler AG.
So I thought I would have Mr. Darden begin with kind
a relatively brief description of the situation. Go ahead, si
MR. DARDEN: Thank you, your Honor. May it please th
Court, as the Court is well aware and as the Court acknowledge
having been reflected in the voluminous filings in each of the
four cases pending before the Court today, the Department of
Justice and the SEC have been engaged in a multi-year
investigation of allegations of the Foreign Corrupt Practices
Act violations by Daimler AG, the parent company, and numerous
Daimler subsidiaries including the three subsidiaries for whic
there are separate criminal case numbers pending before the
Court.
As a result of the that multi-year worldwide
investigation, which included excellent cooperation on the par
of Daimler and its counsel, the Department was able to reach a
resolution in this matter having evaluated the Department's
corporate prosecution principles in determining what factors
weigh into the nature of the disposition as well as the amount
of money involved, but also the 3553 factors specifically as
related to those entities that will be taking a guilty plea
before the Court today.
In summary, in starting with the parent company, the
Department and the company have agreed to a Deferred Prosecuti
Agreement. That Deferred Prosecution Agreement has a two year
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term and although there are a number of provisions in it which
are available in the written documents, essentially the Deferr
Prosecution Agreement involves the company agreeing to the
filing of a two-count Criminal Information which is pending
before the Court. Count One of that Criminal Information is a
conspiracy to violate the books and records provisions of the
Foreign Corrupt Practices Act. Count Two of that Criminal
Information is actually violating the books and records
provisions.
Under the terms of the Deferred Prosecution Agreement
prosecution, further prosecution of that information will be
deferred for a period of two years. Pursuant to the terms of
the DPA, the company has undertaken or agreed to undertake
certain measures that include among other things a three-year
monitorship of the company's internal controls, books and
records, and specific anti-bribery compliance programs.
The Government refers to a number of improvements in
those programs that were made prior to the Department and the
company reaching a disposition, but the monitor will continue
evaluate the evolution of those changes over the three-year te
of the monitorship.
In addition, the parent Deferred Prosecution Agreemen
involves the payment of a $93.6 million criminal penalty. Tha
criminal penalty was calculated as described in the papers, bu
just very briefly, your Honor, that $93.6 million penalty is
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based on a universe of transactions that had a territorial nex
to the United States, either a payment went through a U.S. ban
account in connection with the transaction or a U.S. based thi
party agent was used to facilitate the payment. We described
what those transactions are.
THE COURT: Indeed, there is a 60 plus page Statement
of the Offense that's attached to the documents so the public
could read it and analyze what you believe you have uncovered.
MR. DARDEN: That's exactly right, your Honor. In
great detail the papers describe country by country the
transactions that make up that $93.6 criminal fine which is
calculated pursuant to the Sentencing Guidelines.
THE COURT: And the company has acknowledged in the
pleadings their acceptance of the accuracy of the statements i
that statement of the offense, have they not?
MR. DARDEN: That's exactly right. Attachment A to t
parent DPA is a Statement of Facts that the company acknowledg
is true and in which the company accepts responsibility for th
conduct of the subsidiaries further described in the Statement
of Facts. Company number one.
Company number two is a German subsidiary of Daimler
AG -- it is actually a two-level below subsidiary -- called
Daimler Export and Trade Finance GmbH. For purposes of the
hearing, your Honor, I may refer to that as ETF which stands f
Export and Trade Finance.
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THE COURT: That's fine.
MR. DARDEN: A third company will also -- is also
involved in the disposition. That is a Russian subsidiary. T
name of that company is DaimlerChrysler Automotive Russia SAO,
now known as Mercedes-Benz Russia SAO.
THE COURT: Okay.
MR. DARDEN: I may refer to the Russian subsidiary as
DCAR as an abbreviation there. Both ETF as part of this overa
disposition and DCAR will be entering guilty pleas before the
Court in response to two-count Informations filed against each
one of those companies.
In both instances, the Informations charges an 18 USC
Section 371 conspiracy to violate the anti-bribery provisions
the Foreign Corrupt Practices Act as well as substantive
violation of those anti-bribery provisions. Those Information
the charges in them, parallel one another for both ETF and DCA
Before the Court are written Plea Agreements of which
both ETF and DCAR have entered into. Those Plea Agreements
contain a separate Guidelines calculation for each of those tw
companies. That separate Guidelines calculation in those Plea
Agreements is based on the transactions engaged in by those tw
subsidiaries that are part of the universe of transactions I w
describing earlier that was used to calculate the overall
$93.6 million penalty.
THE COURT: Right. And each of those Informations wil
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carry with it under the C-plea arrangement a fine -- one is
$29.12 million, one is $27.3 million -- that will be offset
against the parent company's $93.6 million fine; is that right
MR. DARDEN: That's exactly right, your Honor. The
$93.6 million figure is an overarching figure that covers the
entirety of the disposition. The individual fine --
THE COURT: Excluding the SEC.
MR. DARDEN: Excluding the SEC. I was going to get to
that at the end.
THE COURT: All right. Go ahead.
MR. DARDEN: But at least on the criminal side, the
criminal penalty for ETF and DCAR will be included or offset
against the $93.6 million figure.
Finally, your Honor, there is a fourth company that i
part of the criminal disposition. That is DaimlerChrysler
China, Limited which is now known at Daimler North East Asia,
Limited. I may refer to that as DCCL during the plea colloquy
today.
DCCL is the Chinese subsidiary of Daimler and, like t
parent company, the Department and DCCL have reached a Deferre
Prosecution Agreement based on the conduct described in those
papers as it relates to Daimler sales in China. DCCL pursuant
to the terms of the DPA will not itself be paying a separate
criminal penalty. However, the papers do reflect that if a
separate penalty were being paid by DCCL, it would be as
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calculated in those documents.
That results in roughly a $5 million penalty by DCCL,
again, based on those transactions related to that particular
subsidiary that are included in the universe of transactions
described previously.
Finally, your Honor, as you alluded to earlier, there
is a civil component to this overall deposition which the
Department believes is relevant and was a part of our process
evaluating overall whether or not this was an appropriate
disposition, and that is an agreement with the Securities and
Exchange Commission to resolve civil FCPA violations in the
payment of approximately $91.4 million in disgorgement related
to those violations.
THE COURT: So the total fines are the $91.4 and the
$93.6?
MR. DARDEN: For a total of $185 million, that's
correct, your Honor.
THE COURT: Now, I want to give you a brief opportuni
to at least put on the record the Government's thinking as to
why in this case here --
MR. DARDEN: Yes.
THE COURT: -- a disposition of that magnitude, $185
million, is a fair disposition under these circumstances
recognizing that it is an amount lower than the Federal
Sentencing Guideline range total for all four companies.
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MR. DARDEN: Yes.
THE COURT: I think the range for all the companies
combined would be higher than that. It would be --
MR. DARDEN: The low end of that would be approximate
$116 million, your Honor, and the $93.6 million figure
represents roughly a 20 percent reduction from that low end
figure. That's correct.
THE COURT: Right. So why is it the Government
believes that in considering the entirety of these circumstanc
and Daimler's cooperation and assistance along the way that th
is in the interest of justice, this type of an arrangement?
MR. DARDEN: Thank you, your Honor. I appreciate tha
opportunity. As the Court knows from its review of the
extensive papers in this case, the FCPA violations described i
those papers are wide ranging, and they existed over a lengthy
period of time. Those are significant violations, and the
Department takes those violations as they are described in tho
papers very, very seriously.
Balance that on the other side against the excellent
cooperation as I described or noted earlier that the company h
shown, the company itself engaged in a worldwide internal
investigation of these allegations and routinely reported to t
Government the findings of those investigations that preceded
country by country and many of the findings of those
investigations are directly reported in the papers that are
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publicly available. That's an important fact.
Another important fact, though, in addition to just t
fact of cooperation are the efforts that the company undertook
even prior to reaching a disposition with the Department or wi
the SEC, to begin cleaning its own house. That deserves credi
in the Department's view, credit both under the 3553(a) factor
as well as under the corporate prosecution principles that we
used to evaluate when an appropriate disposition is, in any
case, including in this case.
We describe in our Sentencing Memorandum what some of
the changes that the company began to implement several years
ago and that was laudable on their part. They needed to do
that, don't get me wrong, but that conduct is laudable and was
very relevant to the Department in our evaluation as to what a
appropriate disposition was in that case.
In addition to beginning the process of cleaning its
own house, the company also hired an independent compliance
monitor during that same process. It empowered that monitor t
make recommendations that under the terms of the monitor's
agreement, the company was required to implement at the risk o
losing his services. Again, that is an excellent step on the
part of a company that we think reflects a serious change of
mind on the part of those at Daimler.
Having said that, your Honor, let me directly also
address the 20 percent reduction. As the Court knows, the
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Sentencing Guidelines provide for certain reductions that come
into play during the calculation of a criminal fine. In this
case, Daimler AG was entitled to a two-point reduction under t
Sentencing Guidelines, although the Guidelines actually
contemplate the possibility of up to a five-level reduction if
the company not only cooperates but self-reports prior to a
public allegation of being made of wrongdoing.
Daimler did not self-report prior to a public
allegation of wrongdoing being made, and we described the
genesis of the investigation along those lines in our Sentenci
Memorandum. However, notwithstanding that, the excellent
cooperation that the company engaged in during the process as
well as its own internal changes that began to be made prior t
reaching any disposition with the Department, we respectfully
submit to the Court, meant that a strict adherence to the
Guidelines calculation didn't accurately reflect the amount of
cooperation and changes that were occurring from Daimler AG.
As a result of that, the Department believes that a
20 percent reduction from low end of the Guidelines calculatio
was appropriate in this case and, indeed, is in line with
reductions in other cases that have been before the Court and
other Courts in the jurisdiction as well.
THE COURT: Very good. All right. Is there anything
else that you think at this point might be helpful to put on t
record in terms of giving kind of an overview of the situation
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here today before I go through the plea colloquies with the
companies?
MR. DARDEN: Unless the Court has any further
questions, that's all I would have at this time. Thank you,
your Honor.
THE COURT: Very good. Thank you very much, Mr. Darde
I think the General Counsel can come up and be sworn, and we c
begin with the colloquy.
(Company Representative Dr. Gero Herrmann sworn.)
COMPANY REPRESENTATIVE HERRMANN: Yes.
COURTROOM DEPUTY: Your Honor, the company
representative is sworn.
THE COURT: All right. Welcome, sir. I understand
that you are here on behalf of the two companies today; is tha
correct?
COMPANY REPRESENTATIVE HERRMANN: Yes, sir.
THE COURT: Very good. Now, you are under oath so th
answers that you give to the Court could be used against you
later in a prosecution for perjury or making false statements
you don't answer truthfully. Do you understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, sir.
THE COURT: Very good. And please don't hesitate at
any time if you don't understand any question I ask, to ask me
the repeat it or, if you want to consult with your counsel, Mr
Weinstein, please free to do that. You understand that?
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COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. Now, as I indicated previousl
I understand that you are prepared to go forward today and ent
a plea of guilty on behalf of both Defendants, is that correct
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. So with regard to
DaimlerChrysler Automotive Russia SAO, which I am just going t
refer to as Daimler Russia, have you been duly authorized to
speak for them today?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: And, Mr. Weinstein, have you not entered
into the record a resolution of the corporation to that effect
MR. WEINSTEIN: Yes, we have, your Honor.
THE COURT: Very good. And as to Daimler Export and
Trade Finance GmbH, which I will refer to as Daimler Export an
Trade, have you also been duly authorized by them?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. Mr. Weinstein, has that also
been entered into the record?
MR. WEINSTEIN: It has, your Honor.
THE COURT: Very good. Now, I believe, would it be a
fair statement to say that you are fully familiar with the fac
and circumstances of this investigation?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. And it would be fair to say
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that the Board of Directors of the company has authorized you
take these pleas today, isn't that accurate?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. Now, I need to ask you certain
questions before I can accept these pleas as to each of the
companies and, again, don't hesitate to ask me to stop or repe
them if there is any question in your mind about it.
First of all, I want to emphasize that I want to be
satisfied that the company is entering into this agreement
voluntarily, and I also want to ensure that the company is doi
it competently. There is no question as to the competency of
this witness to -- I mean this General Counsel -- to go forwar
today, is there?
MR. DARDEN: No question, your Honor.
MR. WEINSTEIN: None at all, your Honor.
THE COURT: Very good. So I will find that Mr.
Herrmann is perfectly competent and capable and authorized to
forward today. Now, have you had an adequate opportunity to
discuss this case with your counsel?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: And are you satisfied with your -- well,
you have three counsel here -- are you satisfied with all your
counsels' representation of you?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. All right. Now, let me go ove
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some of the rights that the corporation has under the
circumstances like this. First of all, they have a right to b
charged in a Grand Jury with the offense in question here that
being charged in the Information. Is the company, both
companies, prepared to waive that right today?
COMPANY REPRESENTATIVE HERRMANN: Yes, we are.
THE COURT: Very good. They also have a right to
challenge the choice of venue in this Court. Are both compani
prepared to waive any challenge to venue in this Court?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. Now, Of course, under the
Constitution each company is entitled to a trial by jury with
regard to the charges contained in these Informations. Do you
understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: Very good. And you understand that if
there were a trial, that both companies would be presumed to b
innocent and that the Government would be required to prove ea
company individually guilty beyond a reasonable doubt? Do you
understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: Furthermore, if there were a trial,
witnesses for the Government would have to come into Court and
testify in the presence of the company's representatives and b
subjected to Cross-Examination, and the company would also be
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able to present its own witnesses. Do you understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand,
your Honor.
THE COURT: Okay. Furthermore, if there were a trial
the Government -- I mean the defense would not have the put on
any evidence whatsoever, would have a right to remain silent a
no adverse inference could be drawn from the fact that they
chose not to put on any evidence. Do you understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand,
your Honor.
THE COURT: Very good. Now, of course, if I accept t
pleas for each of these companies, they will be waiving these
rights, there will be no trial, and I will be entering a
judgment of guilty. Do you understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: Very good. Of course, each will as a resu
be waiving their right against self-incrimination since they
will have to acknowledge their guilt in order for me to accept
the plea. Do you understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: Very good. Now, the offenses to which yo
would be pleading guilty today are felony offenses and, as a
result of that, there consequences, collateral consequences to
the company as it relates to its involvement with the U.S.
Government or perhaps even foreign government. Do you
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understand?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: And you are willing to move forward
nevertheless; is that right?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: All right. So you still wish to go forwa
with the plea; is that right?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. Now, each Defendant, of cours
has received a copy of the Information in this case charging i
with the offenses in particular which I will get to in a secon
Have you had a chance to review those Informations personally?
COMPANY REPRESENTATIVE HERRMANN: Yes, I have, your
Honor.
THE COURT: Yes. And have you had a chance to discus
them with your various counsel here?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: All right. And let me see if we have a
copy here. Here is the one for GmbH, and here is the one for
Russia I think. So let me just ask Mr. Weinstein, let's start
with the Russia one, Daimler Russia, if you could put that
information in front of Mr. Herrmann. Have you seen this
document before, Mr. Herrmann?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. And this is a document that
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provides that Daimler Russia would be pleading guilty to one
count of conspiracy to violate the anti-bribery provision of t
Foreign Corrupt Practices Act under 15 U.S. Code Section 78
dd-3, in violation of 18 U.S. Code Section 371 and one count
violating the anti-bribery provisions of the Foreign Corrupt
Practices Act under 15 U.S. Code Section 78 dd-3.
Would it be fair to say you understand these charges
they relate to Daimler Russia?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand,
your Honor.
THE COURT: Very good. As to the second one, if you
could put that in front of him, please, Mr. Weinstein, this is
Daimler Export and Trade, this Information, is this also an
Information you have seen before?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: And have you had a chance to review and
discuss that with your counsel?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: All right. And have you had a chance to
review and discuss it with your board?
COMPANY REPRESENTATIVE HERRMANN: Yes, also, your
Honor.
THE COURT: Very good. This one also provides for on
count of conspiracy in violation of 18 U.S. Code Section 371 t
violate the anti-bribery provisions of the Foreign Corrupt
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Practices Act, in particular, 15 U.S. Code Section 78 dd-3 and
then, of course, one count of also, like in the prior
Information, of violating the anti-bribery provision of the
Foreign Corrupt Practices Act under 15 U.S. Code Section 78
dd-3.
Would it be fair to say that you also understand tho
charges as they relate to your client Daimler Export and Trade
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. Now, you are aware, are you
not, that the maximum penalty for each violation of 18 U.S. Co
Section 371 is a fine of $500,000 or twice the gross gain or
gross loss resulting from the offense, whichever is the
greatest, five years probation and a mandatory special
assessment of $400? You understand that, don't you?
COMPANY REPRESENTATIVE HERRMANN: Yes, I understand.
THE COURT: Very good. And the Defendants also
understand, do they not, both of them that the maximum penalty
for each violation of 15 U.S. Code Section 78 dd-3 is a fine o
$2 million or twice the gross gain or gross loss resulting fro
the offense, whichever is the greatest, five years of probatio
and a mandatory special assessment fee of $400? You understan
that, do you not?
COMPANY REPRESENTATIVE HERRMANN: Yes.
THE COURT: Very good. And the companies understand
that. Now, I think you have there in front of you, Mr.
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Weinstein, the Plea Agreements themselves as to these two
Defendants, is that not right?
MR. WEINSTEIN: That's correct, your Honor.
THE COURT: Let's start with the first of the two
Daimler Russia. If you could put that in front of Mr. Herrman
I would appreciate it.
MR. WEINSTEIN: Yes, your Honor.
THE COURT: This plea agreement, is this a document y
have had a chance to review before, Mr. Herrmann?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: And have you had a chance to discuss it
with your counsel?
COMPANY REPRESENTATIVE HERRMANN: Yes, I had the
chance.
THE COURT: Would it be fair to say you understand th
terms and conditions of this agreement?
COMPANY REPRESENTATIVE HERRMANN: Yes, it is fair.
THE COURT: And at the end of that agreement, if Mr.
Weinstein could turn you to the last page, I believe your
signature appears there on behalf of the company as accepting
the terms and conditions of the agreement.
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Is that your signature there?
COMPANY REPRESENTATIVE HERRMANN: Yes, that is my
signature.
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THE COURT: Very good. And, Mr. Weinstein, is your
signature there also? I don't have the original in front of m
but --
MR. WEINSTEIN: I believe that our signature appears
other places in the record, your Honor. We confirm that.
THE COURT: Other places. Very good. Now, I am going
to ask Mr. Weinstein just to basically describe the terms and
conditions of the Plea Agreement as it relates to Daimler Russ
and then listen carefully and then I will ask you a few
questions about his description.
Go ahead there, Mr. Weinstein.
MR. WEINSTEIN: Your Honor, it is a two-count
indictment. The first count is a conspiracy with the object
being a substantive -- a violation of the anti-bribery provisi
of the Foreign Corrupt Practices Act as set forth -- the facts
are fully set forth appended to the document.
There is a second count, your Honor, which is a
substantive violation of the anti-bribery provision of the
Foreign Corrupt Practices Act. There is an agreement that the
fine shall be $27,360,000, and that's to be offset against the
overall fine of the parent Daimler AG.
There is a special assessment, your Honor, of $400 pe
count which gives a total of $800. There is appended to that
also a requirement, your Honor, of a three-year monitoring ter
which is coterminous with the monitoring term of the other
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entities as well as the parent Daimler AG. That is a summary
the Daimler Russia disposition, your Honor.
THE COURT: Very good. And, of course, it is also a
C-plea, is it not, Mr. Weinstein?
MR. WEINSTEIN: That is correct, your Honor.
THE COURT: If the Court were to accept it, the Court
will be essentially bound to the terms that were reached betwe
the parties as to the resolution; is that right.
MR. WEINSTEIN: That is correct, your Honor.
THE COURT: Very good. Mr. Herrmann, you have heard
the description, of course, you have already acknowledged havi
reviewed it and discussed it with your counsel, but let me ask
you general terms does that comport with your understanding of
it?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. And do you have any questions
that you would like to ask either the Court or Mr. Weinstein
about that, the terms and conditions of it, or are you satisfi
you understand it completely?
COMPANY REPRESENTATIVE HERRMANN: I understand it. N
questions, your Honor.
THE COURT: Very good. All right. Well, then let's
move for a moment over to the other Plea Agreement that I thin
you also have there in front of your client, the Daimler Expor
and Trade Plea Agreement. If you could put that in front of M
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Herrmann, please.
Let me ask you with regard to this particular documen
have you seen this before, Mr. Herrmann?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: And have you had a chance to review it an
discuss it with your counsel?
COMPANY REPRESENTATIVE HERRMANN: Yes, also.
THE COURT: All right. And turning to the last page
there, is that not your signature acknowledging that you
understand and accept the terms and conditions of this agreeme
on behalf of the corporation?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: Very good. And, Mr. Weinstein, is your
signature or other counsel's also in the record reflecting tha
you have reviewed this and discussed it with your clients?
MR. WEINSTEIN: That is correct, your Honor.
THE COURT: Very good. All right. So let me again a
Mr. Weinstein to give us a brief description of the overview o
the terms of this particular Plea Agreement as well.
MR. WEINSTEIN: Your Honor, as to Daimler Export and
Trade Finance GmbH, it is also a two-count charge. The first
count is conspiracy to violate a substantive provision of the
Foreign Corrupt Practices Act, that is the anti-bribery
provision. The second count is in fact a substantive violatio
of the anti-bribery provisions of the Foreign Corrupt Practice
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Act. This is also a C type plea, your Honor. The fine amount
$29,120,000. It is to be offset against the overall fine to b
assessed to Daimler AG, the parent, and there is a $400 specia
assessment per count for a total of $800.
The three-year monitoring term that we referenced
previously with regard to Daimler Russia also applies here and
is coterminous with the other monitoring provisions or
recommendations in each of the other documents, your Honor.
THE COURT: Very good. Thank you, Mr. Weinstein. Al
right. Mr. Herrmann, you have heard Mr. Weinstein's summary o
it and, of course, you have already acknowledged as you did wi
the other that you have reviewed it and discussed it with your
board and the company. Would you say that's consistent with
your understanding of it?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor, it
is consistent.
THE COURT: Very good. And do you have any questions
that you would like to either ask the Court or Mr. Weinstein
about the terms and conditions or anything else regarding that
document?
COMPANY REPRESENTATIVE HERRMANN: No, your Honor.
THE COURT: Very good. Let me ask you this. With
regard to the -- we will do this individually -- with regard t
the Daimler Russia Plea Agreement, is it fair to say that no o
has threatened your client in any way to enter into this Plea
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Agreement? Is that a fair statement?
COMPANY REPRESENTATIVE HERRMANN: Yes, it is a fair
statement, your Honor.
THE COURT: You haven't been personally threatened in
any way with regard to entering this plea, have you?
COMPANY REPRESENTATIVE HERRMANN: No.
THE COURT: No. Now, with regard to the Daimler Expo
and Trade Plea Agreement, would it also be a fair statement to
say that that company has not been threatened in any way to
enter into this Plea Agreement?
COMPANY REPRESENTATIVE HERRMANN: It is also a fair
statement, yes.
THE COURT: And you haven't personally been threaten
in any way to enter into a plea here, have you?
COMPANY REPRESENTATIVE HERMANN: No.
THE COURT: Very good. All right. Now, I am going t
ask the Government to give a brief description recognizing tha
the pleadings in this case set out in great detail the evidenc
or that which the Government would have proven if the case had
gone to trial, but I will ask Mr. Darden, we will do it one at
time, we will start with the Russia plea and then we will do t
Export and Trade plea, what the Government would have proven i
this case had gone to trial. Feel free to make whatever
editorial adjustment you need to the existing documents which
are very lengthy.
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MR. DARDEN: Thank you, your Honor. I appreciate tha
As the Court acknowledged, there is a lengthy Statement of
Offense attached to the Plea Agreement which has been signed b
representatives for the Defendant, but in abbreviated form wit
respect to DCAR, or the Russian subsidiary, the United States
would have been able to prove the following had this matter go
to trial.
During the period relevant here, Daimler AG was a
German vehicle manufacturing company with business operations
throughout the world. Among other things, Daimler sold all
manner of cars, trucks, vans, and buses including unimogs whic
are heavy duty all terrain trucks primarily used for hauling a
well as other trucks of a commercial nature known as Actros.
Daimler was a major global producer of premium passenger cars
well as the largest manufacturer of commercial vehicles in the
world.
As a result of its luxury car and commercial vehicle
lines, Daimler AG had among its customers government and state
owned entities from many countries in which it did business.
Daimler sold its products worldwide, had production facilities
on five continents, did business in many foreign countries and
employed more than 270,000 people.
DaimlerChrysler Automotive Russia, now known as
Mercedes-Benz Russia, was a Moscow based wholly owned subsidia
of Daimler AG. The Russian company, or DCAR, the abbreviation
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that I referred to earlier, your Honor, sold Daimler spare
parts, assisted with the sale of vehicles from various Daimler
divisions in Germany including in particular DaimlerChrysler's
overseas sales division and it assisted in those sales with
respect to government customers in the Russian Federation; and
also DCAR imported Daimler passenger and commercial vehicles
into Russia for sale to customers and distributors.
DCAR also acted as an agent to assist in Daimler sale
in Russia of all of the various types of vehicles referred to
previously. DCAR and Daimler's government customers in Russia
included the Russian Ministry of Internal Affairs, the Russian
military, the City of Moscow, the City of Ufa, the City of Nov
Urengoi among others. Daimler through DCAR made improper
payments at the request of Russian government officials or the
designees in order to secure business from Russian government
customers.
DCAR sometimes made these improper payments to
government officials in Russia to secure business by
over-invoicing the company and paying that excessive amount ba
to the Government officials or to other designated third parti
that provided no legitimate services to Daimler or to DCAR wit
the understanding that such payments would be passed on in who
or in part to Russian government officials.
These overpayments were maintained as reserves on
Daimler's books and records in certain internal debtor account
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including debtor accounts that were identify by the name of a
government customer with which Daimler and DCAR were doing
business. When requested, Daimler employees wired and
authorized the wiring of payments from Daimler's bank accounts
in Germany to, among other destinations, United States as well
as Latvian bank accounts beneficially owned by shell companies
with the understanding that the money in whole or in part was
for the benefit of Russian government officials.
DCAR employees also made and authorized the making of
cash payments to Russian government officials employed at
Russian government customers or their designees in order to
secure or induce sales of Unimogs to several Russian governmen
municipalities.
Overall, between 2000 and 2005, Daimler's vehicle sal
in Russia consisted of sales of passenger vehicles, commercial
vehicles and Unimogs. Those sales totaled approximately 1.4
billion euros of which approximately five percent was derived
from the sale of vehicles to Russian government customers.
In connection with these vehicle sales, DCAR made ove
three million euros in improper payments to Russian government
officials employed at the Russian government customers to thei
designees or to third party shell companies that provided no
legitimate services to Daimler or to DCAR with the understandi
that the funds would be passed on in whole or in part to Russi
government officials.
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THE COURT: Very good. Thank you, Mr. Darden. All
right, Mr. Herrmann, you have heard a summary of the evidence.
Of course, it is put out in greater detail in the documents th
have been filed here, but you have heard a summary of the
evidence that the Government believes it would have proven,
could have proven if this case had gone to trial against Russi
Daimler Russia. Would you say that's a fair and accurate
summary of the evidence as you understand it that the Governme
would have had?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: All right. And do you have any questions
that you would like to either ask your counsel or the Court or
challenge in any way any of the statements that have been made
by the Government attorney in that regard?
COMPANY REPRESENTATIVE HERRMANN: No, your Honor.
THE COURT: Very good. Now, let's go shift gears and
move over to Daimler Export and Trade, and I will ask the
counsel for the Government to once again give us an overview,
summary of the evidence that the Government would have proven
this case had gone to trial as to this particular Defendant.
MR. DARDEN: Thank you, your Honor. And with the
Court's permission, I will not repeat the general introduction
of Daimler AG.
THE COURT: That won't be necessary.
MR. DARDEN: Daimler Export and Trade Finance or ETF,
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as I will be referring to it, was a German corporation wholly
owned subsidiary of Daimler Financial Services or DFS which
itself was a wholly owned subsidiary of Daimler.
ETF specialized in the structuring and arranging of
customized financing solutions for exports by Daimler and
external customers to countries without a local DFS company.
In addition to these financing services, ETF
participated in business ventures outside of Daimler's core
businesses of the manufacturer and sale of passenger cars and
commercial vehicles. Your Honor, I am going to give two brief
introductions that contain acronyms that I may be referring to
during the reading of the statements.
THE COURT: That's fine.
MR. DARDEN: The Croatian Ministry of the Interior or
MOI was a department and agency of the Croatian government and
was responsible for, among other things, public safety includi
the purchase of fire trucks. Another company called IM Metal
IMM, as it is referred to in the documents, was a Croatian
government controlled and partially owned former weapons
manufacturer.
IMM was an instrumentality of the Croatian government
and executives employed by IMM or their designees were foreign
officials as those terms are used in the FCPA.
In 2002, the Croatian government initially appropriat
75 million euros so that MOI could purchase fire trucks. The
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2002 public tender which was initially published, voided and
then ultimately awarded in 2003 was actually valued at
approximately 85 million euros and provided for the purchase o
210 fire trucks by the MOI from a consortium led by ETF.
These trucks were to be delivered in tranches between
2003 and 2009; and during this recitation, your Honor, I may
refer to that generally as the fire trucks contract.
THE COURT: Right.
MR. DARDEN: ETF and others took the following action
Prior to being awarded the fire trucks contract, ETF understoo
that improper payments to Croatian government officials would
required in order to secure the fire truck contract from the
Croatian MOI. ETF made improper payments directly to Croatian
government officials and to third parties with the understandi
that the payments would be passed on in whole or in part to
Croatian government officials in order to assist in getting th
fire truck contract.
At the request of the Croatian government and prior t
the award of the public tender, ETF included IMM as part of th
consortium of companies bidding on the fire truck contract.
Between 2002 and January of 2008, ETF made approximately
3.02 million euros in payments to IMM and/or its principals in
connection with the contract to sell fire trucks to the Croati
MOI. These payments were made with the understanding that all
or a portion of the funds were paid to IMM's employees,
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themselves foreign government officials, and that another
portion of the funds were to be paid to Croatian government
officials outside IMM in exchange for assistance in securing t
ETF led consortium to get the fire truck contract.
In addition to the improper payments made through IMM
ETF also made improper payments to a Delaware corporation and
Wyoming based corporation here in the United States. I will
refer to those two corporations as Biotop and MRC respectively
THE COURT: All right.
MR. DARDEN: ETF entered into contracts with Biotop a
MRC reflecting their places of incorporation in Delaware and
Wyoming as I just described. ETF received invoices from Bioto
and MRC reflecting their corporate addresses in Delaware and
Wyoming. ETF drafted and approved credit notes to Biotop and
MRC reflecting their corporate addresses as described
previously.
In total, between 2002 and January of 2008, ETF made
approximately 1,673,349 euros in improper payments to Biotop a
MRC in connection with the fire truck contract with the
understanding that those payments would be passed on in whole
in part to Croatian government officials. Neither Biotop nor
MRC performed legitimate services for ETF sufficient to warran
payments in these amounts.
There are another series, your Honor, of overt acts
listed in the Statement of Offense. I will not read those out
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as they have already been acknowledged in the documents by the
Defendant.
THE COURT: Thank you very much, Mr. Darden. Well, M
Herrmann, you have heard the summary that the Government has
just provided and, of course, is in greater detail in the
documents that you have already acknowledged reviewing, let me
just ask you this. Does the summary that the Government has
provided appeal to you as being a fair and accurate summary of
the facts that you are aware of in this case?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: So would it be fair to say that as to bot
Daimler Russia and Daimler Export and Trade the facts as you
understand it as to both are such that each corporate entity
individually is guilty as a matter of fact?
COMPANY REPRESENTATIVE HERRMANN: Yes, your Honor.
THE COURT: All right. Very good. Now, are both
companies aware that if I accept this plea that they will be
waiving any right to appeal the sentence that is provided in t
Plea Agreement because, in accepting the plea, I am accepting
the sentence that's provided in the Plea Agreement? Do they
understand that?
COMPANY REPRESENTATIVE HERRMANN: Yes, they understan
it.
THE COURT: All right. So they are prepared to waive
any right of appeal of the sentence that the Court might hand
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out in this particular case; is that right?
COMPANY REPRESENTATIVE HERRMANN: Yes, that's right,
your Honor.
THE COURT: Very good. Now, do you have any question
that you would like to ask me or Mr. Weinstein before I accept
your plea as to each of these cases recognizing that once I
accept it, I am not likely to allow you either company to
withdraw their plea? So if you have any questions, this would
be the time to ask either the Court or Mr. Weinstein.
COMPANY REPRESENTATIVE HERRMANN: No questions, your
Honor.
THE COURT: You still want to go forward with the ple
is that right.
COMPANY REPRESENTATIVE HERRMANN: Yes, that's right.
THE COURT: All right. It is the finding of the Cour
that each Defendant, Daimler Russia and Daimler Export and
Trade, are aware of their rights under the Constitution and la
of the United States, their right against self-incrimination,
their right to a trial, their right to indictment, and they ha
fully chosen to waive those rights.
The Court finds as to each Defendant that each
Defendant is aware of the maximum possible punishment under th
law for the offenses to which they are pleading guilty. The
Court also finds that each Defendant in this case is aware --
I should say entering this plea in a knowing and voluntary way
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and that it is a plea in each case that is supported by an
independent basis in fact as to each of the essential elements
of the offense. So I will accept the plea for Daimler Russia a
Daimler Export and Trade and enter a judgment of guilty on the
counts contained in the Informations.
Normally, as everyone here is aware, we would have a
period of time where a Presentence Investigation Report would
prepared. In anticipation of this day, a preliminary report a
assessment was prepared by our U.S. Probation Office; and it w
provided to this Court, counsel has had a chance to review it,
and, of course, before the Court accepted, or I should say
indicated that it would accept these pleas for the Government,
it already had a chance to make that kind of an assessment on
preliminary basis.
So having done that, having reviewed the materials an
having done an independent guideline calculation with the
assistance of U.S. Probation, the Court is satisfied that this
is an appropriate and just resolution of this matter.
So I have accepted the pleas and will sentence the
companies as follows, and consistent with the Plea Agreement I
may add too, it is the judgment of the Court that the
corporation DaimlerChrysler Automotive Russia SAO be hereby
sentenced pursuant to 11 C1C as follows: DaimlerChrysler
Automotive Russia SAO shall pay a total fine in the amount of
$27,360,000. The fine shall be paid in one full payment due
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within ten days of imposition of this sentence.
It is further ordered that DaimlerChrysler Automotive
Russia SAO pay a special assessment fee of $800. The special
assessment is due immediately.
Additionally, DaimlerChrysler Automotive Russia SAO
will be monitored by a corporate compliance monitor pursuant t
the terms of Daimler AG's Deferred Prosecution Agreement that
was also entered into on this date.
The corporation normally would have a right to appeal
the sentence imposed by the Court, but in this particular case
they have waived that right so we don't need to focus on that.
With regard to Daimler Export and Trade Finance GmbH,
consistent with the terms of the C-plea that the Court has
accepted today, it is ordered that Daimler Export and Trade
Finance GmbH shall pay a total fine in the amount of
$29,120,000. The fine shall be paid in one full payment due
within ten days of imposition of sentence.
It is further ordered that Daimler Export and Trade
Finance GmbH pay a special assessment of $800. The special
assessment is due immediately. Additionally, Daimler Export a
Trade Finance GmbH will be monitored by a corporate compliance
monitor pursuant to the terms of Daimler AG's Deferred
Prosecution Agreement entered into on this date. And I believ
that monitor in both cases is former FBI Director Judge Louis
Freeh; is that correct?
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MR. WEINSTEIN: That is correct, your Honor.
THE COURT: Very good. Are there any other issues
relating to the plea as to these two corporations, Mr.
Weinstein, that you see?
MR. WEINSTEIN: No, your Honor.
THE COURT: Mr. Darden, do you see any?
MR. DARDEN: Nothing from the Government, your Honor.
THE COURT: Well, then in that case, I will hear from
the SEC. We will have our representative of the SEC come up.
You can have a seat, Mr. Herrmann. Thank you very much.
Welcome.
MR. HODGKINS: Gerald Hodgkins on behalf of the SEC.
Gerald Hodgkins.
THE COURT: The SEC has entered a consent, have they
not, agreement here?
MR. HODGKINS: That's correct, your Honor. On Monday
March 22nd, we filed a civil complaint against Daimler AG. At
the same time, we also filed a consent on behalf of Daimler AG
with a proposed final judgment attached.
THE COURT: Right. The Court has reviewed that final
judgment and finds that it is acceptable and it is consistent
with all the other paperwork that has been introduced in this
case. I will sign it now as part of this proceeding dated
today's date.
Are there any points or comments that the SEC would
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like to make under the circumstances recognizing the
extraordinary effort the SEC has also put in in this particula
investigation and in the resolution of this case?
MR. HODGKINS: Your Honor, we would just like to note
one correction to the consent. In paragraph two of the consent
the consent states that the Defendant agrees or consents to th
filing of the final judgment and goes on to describe the final
judgment.
In paragraph 2 C, the consent states: That among oth
things, the final judgment orders the Defendant to make certai
certifications that are laid out in subsequent paragraphs of t
consent. That's not an accurate description of the final
judgment. I think a more accurate description of the final
judgment would be that it orders the Defendant to retain an
independent compliance monitor to perform the services describ
in those subsequent paragraphs so we would just like to make
that correction to the consent. Other than that, we have
nothing else, your Honor.
THE COURT: What I would recommend you do is, to the
originals, make whatever adjustments you need and have it
initialed by all the parties involved here and then the Court
have also initial it later.
MR. HODGKINS: Thank you, your Honor.
THE COURT: So that would be perfectly acceptable and
then it will be part of the record.
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MR. HODGKINS: Thank you, your Honor.
THE COURT: Anything else you need to point out?
MR. HODGKINS: No, your Honor.
THE COURT: Very good. Mr. Darden, does the Governme
have any other business relating to these issues that need to
be -- it occurs to me that the Court might want to hear
periodically from the monitor and from the counsel for the
parties here just an update on how things are progressing,
certainly during the two-year period that this case -- that
these deferred prosecutions against the parent company and the
Chinese subsidiary remain on the Court's docket. So the Court
would appreciate a periodic update.
I believe Judge Freeh is going to be submitting
written reports every six months or something like that.
MR. DARDEN: That's correct, your Honor.
THE COURT: If that would be agreeable to the
Government and to the Defendants, the Court with appreciate ju
being kept abreast of what's going on.
MR. DARDEN: It is agreeable to the Government, your
Honor. Thank you.
MR. WEINSTEIN: It is agreeable to the Defendants, yo
Honor.
THE COURT: Very good. Anything else for the
Government?
MR. DARDEN: Nothing further from the Government.
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THE COURT: Mr. Weinstein, anything else?
MR. WEINSTEIN: Nothing further from the Defendants,
your Honor.
THE COURT: I want to compliment the parties on their
hard work. This is not -- this has been a very complex matter
as is reflected in my notebook here of the pleadings and
various other documents and, to a certain extent, this is the
tip of a very large iceberg, a lot of work that's gone on for
long time; and I was convinced certainly by reviewing these
papers and meeting with these counsel that these companies hav
gotten the message and are taking the right steps to solve the
problems that were unearthed in this process, and so I
compliment both sides for their hard work and their commitment
to bringing this company into full compliance with the United
States laws.
MR. DARDEN: Thank you very much, your Honor.
THE COURT: It is a just resolution. We will stand i
recess.
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(Whereupon, at 3:25 p.m., the proceedings were
concluded.)
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CERTIFICATE OF REPORTER
I, Patty A. Gels, certify that the foregoing is a
correct transcript from the record of proceedings in the
above-entitled matter.
_________________________
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