The corruption scandal at Volkswagen (VW) this year robbed Europe’s largest carmaker of at least â,¬5-million in illegal kickbacks and theft, an independent report by auditors KPMG disclosed on Friday.
The report, laying bare the scandal involving allegations of paid-for sex, false expenses, extravagant gifts, misuse of company funds to set up bogus firms and the supply of Viagra, brought closer criminal charges against Peter Hartz, the former personnel director and close adviser to the outgoing German Chancellor, Gerhard Schröder.
Hartz, architect of Schröder’s labour-market reforms, stands accused of signing off some invoices totalling â,¬635 000 submitted by a “girlfriend” (prostitute) of Klaus Volkert, the disgraced former head of VW’s group works council.
He resigned in August after taking responsibility for the scandal that claimed the jobs of Skoda’s personnel director, Helmuth Schuster, and VW’s personnel manager, Klaus-Joachim Gebauer, over suspicions that they set up fake firms backed by misappropriated company funds for their personal gain. They have denied any wrongdoing.
Bernd Pischetsrieder, VW’s chief executive, said the KPMG report will be handed over to state prosecutors who are examining whether to bring criminal charges against the former executives and union leader for their role in the scandal.
Pischetsrieder, struggling to restore VW’s reputation and profitability, said the group will sue the men involved for restitution and set up a global ombudsman system enabling whistle-blowers to report suspected cases of corruption anonymously.
After the report was submitted to the VW supervisory board at its Wolfsburg headquarters, he said: “Volkswagen will be a more transparent firm both internally and externally.” He promised tighter controls over all spending, including expenses.
The KPMG investigation, still incomplete, drew on 25Â 500 pages out of 97Â 500 documents submitted, 400Â 000 computer files encompassing 134 gigabytes and evidence obtained in interviews with 100 people. It confirmed that company employees, working with outsiders, had comprehensively tried to defraud the company but Klaus Liesen, head of the board’s audit committee, insisted that many of the activities had been intercepted by VW’s internal control systems.
Pischetsrieder added that the outcome is not satisfactory and said substantial “parts of the puzzle” are still missing and unavailable to VW, notably the spending activities of Gebauer.
Both he and Schuster were found by KPMG to have used company funds to set up bogus firms in Angola, India and the Czech Republic and to have received unspecified money in their private accounts. Schuster had also tried, unsuccessfully, to invest pension-fund money on the stock market.
Gebauer, the report found, signed off personal expenses claims for â,¬939Â 000, getting the company to pay for private spending by himself and outsiders on journeys, jewellery and in bars. Schuster was found to have submitted travel claims “with dubious company purposes”.
The board on Friday approved plans to invest â,¬22,7-billion in its core cars business over the next three years to boost pre-tax profits by â,¬4-billion to â,¬5,1-billion by 2008.
Besides the sex-and-bribery scandal, VW has been brought low by heavy losses. It has accelerated plans to improve group earnings by â,¬10-billion over five years by slashing costs, possibly cutting up to 30Â 000 jobs and closing or selling plants. It also faces a probable European Court of Justice ruling that the German law giving its homeland state of Lower Saxony a blocking vote on the board is illegal. — Guardian Unlimited Â