Prosecutors open a corruption probe over Tognum $32 million payments

Article by Christian Andrei, on October 26, 2011

A corruption investigation has been opened by prosecutors over an assessment by German engine manufacturer Tognum AG into commission payments of 23 million euros or $32 million at its MTU Friedrichshafen unit. Prosecutors in Ravensburg, Germany, have looked at a report served by Ernst & Young GmbH and presented by Tognum.

The document prompted them to open an investigation against a management board member on suspicion of breach of trust and bribery, according to Karl-Josef Diehl, who serves as a spokesperson for the prosecutors' office. He declined to name the executive.

He further stated that the report is "very voluminous," adding that they are currently working on it and may be extending the probe. Last week, Tognum confirmed what the review had found out about the commissions to the sales of defense-related products in South Korea from 2000 to 2011 being wrongfully paid out.

Some finances were utilized to host Korean military members at Asian holiday resorts and nightclubs in the Bangkok red-light area, according to a management summary of a draft report which Bloomberg News had obtained.

The document, a portion of an internal review, centered on commissions paid to a South Korean businessman. A minimum of 23 million euros might have been inappropriate, according to the draft. Tognum management board member Peter Kneipp, who was chief of MTU's Asian unit from 2004 to 2010, was aware of the practice, according to the Ernst & Young draft report. [source: Bloomberg]

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