Rolls Royce and Daimler Subsidiary Faces Increased Scrutiny Amidst Corruption Charges

Board member Peter Kneipp of Tognum AG, the German engine maker majority owned by Daimler AG and Rolls-Royce Group Plc (RR/), has been relieved of his duties in the wake of an official probe into potential improper payments. Chief Executive Officer Joachim Coers will take over Kneipp’s tasks effective immediately.

German prosecutors are investigating a Tognum executive for corruption, over charges that commissions were paid in connection with sales of defense-related products in South Korea from 2000 to 2011. According to a draft report prepared for the company by Ernst & Young GmbH, some funds were used to host members of the Korean military at Asian vacation resorts and night clubs in the Bangkok red-light district, claims Bloomberg News.
The report is part of an internal review and focuses on commissions paid to a South Korean businessman. At least 23 million euros (US $32.6 million) of those payments may have been improper. Tognum management board member Kneipp was chief of MTU Friedrichshafen’s Asian unit from 2004 to 2010 and knew about the alleged payments, says the document.
Tognum is jointly acquired by Daimler AG (DAI) and Rolls-Royce Group Plc and is the world’s second-biggest manufacturer of high-speed diesel engines for the marine, energy and defense industries. Formerly, Tognum was a unit of Daimler before it was sold to private equity firm EQT Partners in 2006.

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