Tognum Payments of $37.2 Million to Get Review, Prosecutors Say

Tognum AG (TGM) commission payments in South Korea that need to be reviewed amount to 26.7 million euros ($37.2 million), according to prosecutors in Ravensburg, Germany.

The probe into bribery and breach of trust may be moved to a unit in Stuttgart that specializes in white-collar crime, Karl-Josef Diehl, spokesman for Ravensburg prosecutors, said in an e-mailed statement today. They are investigating a Tognum board member, who they haven’t identified, over the issue.

Tognum, which is majority held by Daimler AG (DAI) and Rolls- Royce Group Plc, confirmed last week it reviewed commissions that may have been wrongfully paid in connection with sales of defense-related products in South Korea from 2000 to 2011 by its MTU Friedrichshafen unit. They submitted their report to prosecutors and are cooperating, Diehl said.

“From 2000 to 2011 about 40 million euros were paid, which is about 4 percent of sales, which as a rule is a standard amount,” said Diehl. “However, 26.7 million euros were paid under side agreements, whose legality needs to be reviewed.”

About 14.5 million euros were paid to offshore accounts and 1.1 million euros by checks, Diehl said. Prosecutors will also look at 160,000 euros spent for seven “on-the-job training” events for members of the South Korean military that included “unofficial parts” with trips to Thailand.

Tognum management board member Peter Kneipp, who was chief of MTU’s Asian unit from 2004 to 2010, knew about the practice, according to a draft version of the report prepared for the company by Ernst & Young GmbH and obtained by Bloomberg News.

Tognum spokesman Stefan Wortmann declined to comment. Kneipp has referred requests for comment to Wortmann.

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.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.