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Tognum $32 Million Payments Prompt Prosecutor Probe of Executive

Tognum AG (TGM)’s review of 23 million euros ($32 million) in commission payments at its MTU Friedrichshafen unit prompted prosecutors to open a corruption probe.

Prosecutors in Ravensburg, Germany, have reviewed a report prepared by Ernst & Young GmbH and submitted by Tognum. The document led them to open an investigation against a management- board member on suspicion of bribery and breach of trust, Karl- Josef Diehl, spokesman for the prosecutors’ office, said in an interview today. He declined to identify the executive.

“The report is very voluminous,” said Diehl. “We are working through it now, and may in the course of that extend the probe, depending on our judgment of the facts.”

Tognum confirmed last week it has reviewed commissions that may have been wrongfully paid in connection with sales of defense-related products in South Korea from 2000 to 2011.

Some funds were used to host members of the Korean military at Asian vacation resorts and night clubs in the Bangkok red- light district, according to a management summary of a draft version of the report obtained by Bloomberg News. The document, part of an internal review, focused on commissions paid to a South Korean businessman. At least 23 million euros of them may have been improper, according to the draft.

Tognum management board member Peter Kneipp, who was chief of MTU’s Asian unit 2004 to 2010, knew about the practice, according to the Ernst & Young draft report.

Tognum spokesman Stefan Wortmann said prosecutors told the company today a management board member is being probed and he declined to comment further. Kneipp didn’t immediately reply to an e-mail seeking comment.

Daimler AG (DAI) and Rolls-Royce Group Plc (RR/) in a 50-50 joint- venture have acquired Friedrichshafen, Germany-based, Tognum, the world’s second-biggest manufacturer of high-speed diesel engines for the marine, energy and defense industries. Their bid was announced in March and the venture secured at least about 97 percent of Tognum shares, Daimler said Aug. 26.

To contact the reporter on this story: Karin Matussek in Munich via kmatussek@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net.

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