Handelsblatt Exclusive Dodgy Daimler Deals Down Under

Questionable business dealings by two former Daimler executives have come under scrutiny by auditors at the German automaker. The men allegedly charged for lavish personal expenses, and may have awarded contracts to each other's companies, Handelsblatt has learned.
Ernst Lieb, left, and Daimler Chief Executive Dieter Zetsche attended a gala opening of Mercedes-Benz Manhattan in 2011 in New York City.

Daimler's internal auditors are once again opening the compliance books.

Ernst Lieb, a manager who had worked for Daimler for 35 years – from way back when it was Daimler-Benz through its incarnations as Daimler Chrysler and now, simply Daimler – was fired in October 2011.

Mr. Lieb was accused of improperly billing his employer for illegitimate expenses, including a personal wine refrigerator for $2,500 (€2,243), a fitness center for $22,000 and a home theater for $89,000. In a public courtroom, Mr. Lieb had to explain why he had Daimler pay for the $20,000 in Christmas lights at his villa.

When Mr. Lieb lost the case, he decided to appeal. But in July 2013, the Stuttgart State Labor Court confirmed his dismissal without notice and the misappropriation of $120,000 in company funds.

Mr. Lieb's downfall was painful for some at Daimler, where a 35-year tenure is no small matter. Internally, Mr. Lieb was simply known as "Ernst," and in the outside world, where he was unmatched in his ability to sell vehicles, he was "Mister Mercedes."

In the past, someone like him might have been allowed to carry on, but in 2011 Daimler was under special observation by the United States Securities and Exchange Commission (SEC).

Now Mr. Lieb’s name is being mentioned once again at the automaker's headquarters in Untertürkheim, near Stuttgart. Although he is now long gone, he appears to have left a legacy at his former employer. That is his association with an Australian named Clyde Campbell.

While his company was being bailed out by the government, Mr. Campbell billed the company $400,000 for the use of a luxury yacht and $380,000 for gift vouchers.

Mr. Lieb met Mr. Campbell in 2003, when Daimler transferred him to Australia to boost sales. Mr. Campbell’s background was in the legal department, but he moved to sales and was soon promoted to general manager of sales for Australia under Mr. Lieb.

Mr. Campbell laid the groundwork for an astonishingly successful business relationship. He secured a contract with Motortrak, a company specializing in Internet services. Thanks to him, Chrysler became one of Motortrak's biggest customers. The deal would prove to be extremely profitable for Mr. Campbell.

Mr. Campbell and Mr. Lieb parted ways in 2006, or at least it seemed that way. Mr. Lieb was transferred to the United States, where he was made CEO and President of Mercedes-Benz USA. Mr. Campbell remained in Australia and went to work for Motortrak, the company for which he had arranged an enormous deal. Was it a coincidence? If so, it would not be the only one.

While he was working as managing director of Motortrak Australia, Mr. Campbell contacted his German friend. As head of Mercedes' U.S. operations, Mr. Lieb was now in control of more than 300 dealers in the United States.

What happened then is now the subject of an intense investigation by Daimler's internal auditors. For reasons unknown until now, a deal was made for Motortrak Australia to provide web services for all Mercedes dealers in the United States. Mr. Campbell had successfully put together his biggest deal to date. But his masterpiece was still ahead.

 

Clyde Campbell, former Chrysler CEO, is being accused of underhand dealings.

 

 

He gave notice in September 2010. His wife Simone, a director at Motortrak, also left the company. And then, four weeks later, Clyde Campbell became chief executive of the Chrysler Group in Australia.

Chrysler was in deep trouble in 2008 and had to be bailed out with billions in government funds. The U.S. company filed for bankruptcy in April. In June 2009, Italian competitor Fiat acquired a 20-percent stake in Chrysler and announced plans for a complete takeover. Tens of thousands of jobs were slashed.

While his company was being bailed out by the government, chief executive Mr. Campbell allegedly had both hands in the cash register. He billed the company $400,000 for the use of a luxury yacht, $244,800 for his membership in a car-racing club and $380,000 for gift vouchers, according to a complaint filed by Chrysler in a Melbourne court in mid-May.

 

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Now the company, which has since changed its name to Fiat Chrysler Automobiles, wants to have Mr. Campbell's accounts frozen, claiming that he embezzled 30 million Australian dollars (€20.7 million, or $22.8 million). Mr. Campbell's attorney denies any wrongdoing by his client, calling the accusations scandalous.

There is hard evidence that Mr. Campbell mixed his business and personal life. According to the complaint, some of his friends' companies received orders worth millions, while others accompanied him on luxurious trips. There were excursions to Rio and golf trips to New Zealand, and all the while Mr. Campbell gave away vehicles as if they were candy. Even his wife's hairdresser received a free Jeep Wrangler as a gift.

According to Fiat Chrysler, Mr. Campbell wasted no time before engaging in his questionable activities. In December 2011, only two months after he had taken office, Chrysler awarded a contract to his former employer, Motortrak. From then on, Chrysler paid $690 a month per dealership for Motortrak's services. In May 2012, Mr. Campbell increased the payment to $1,695. By August 2012, the monthly payment per dealership had shot up to $4,100. The "supplementary agreements" were only two pages long and signed by Mr. Campbell.

For years, Chrysler paid $754,400 Australian dollars a month to Motortrak – far too much, says the company today. But the contract is valid until 2018.

Ernst Lieb also benefited from the fact this his former colleague, Mr. Campbell, was now living the high life. When Mr. Lieb was let go from Daimler in October 2011, he didn't remain in his luxury home in the United States, nor return to his native Germany. Instead, he decided to go into business for himself in a city where his friend now had access to substantial funds: Melbourne.

In February 2013, Mr. Lieb acquired a share in Motorworld Australia, a car dealership. The money began flowing immediately. Chrysler put up $1.2 million to acquire two car dealerships in Melbourne. According to the complaint, this was highly unusual. Chrysler also paid Motorworld $2.49 million in marketing support – 10 times the normal amount.

If Fiat Chrysler takes it former Australian chief executive to court, Mr. Lieb will not only be called to testify, but he could also be sued for damages in the future.

By now, Mr. Campbell was taking Mr. Lieb on golf trips to New Zealand or to Monaco to attend Formula One races. In return, Mr. Lieb allegedly helped hand out cars to Mr. Campbell's friends through his company.

It doesn't bode well for the compliance culture at Fiat Chrysler that the carmaker supposedly had no idea any of this was happening. Mr. Campbell wreaked havoc in Australia for two-and-a-half years before stepping back. On his recommendation, the company made Veronica Johns its new chief executive for Australia. She resigned 14 months later. Fiat Chrysler's complaint also includes incriminating details about Ms. Johns, including that she allegedly used company money to renovate her house.

It's the kind of allegation that Mr. Lieb ought to be familiar with. The former “Mister Mercedes” could soon find himself in a courtroom once again. If Fiat Chrysler takes its former Australian chief executive to court, Mr. Lieb will not only be called to testify, but he could also be sued for damages in the future. Mr. Lieb did not respond to any inquiries by Handelsblatt.

The Australian scandal reopens old wounds for Daimler. "Compliance is central to Daimler," said a company spokeswoman. In 2011, when auditors found the invoices for Mr. Lieb's private wine refrigerator and home theater, the company acted swiftly. At the time, there was no suspicion that Mr. Lieb may have been funneling company money to his friend, Mr. Campbell. But now, says the company spokeswoman, Daimler is "examining all supply relationships with Motortrak throughout the company."

It won't be an easy task. Mr. Campbell, who is most likely in a position to provide information, lives 16,000 kilometers (10,000 miles) away from Daimler headquarters, in an upscale suburb of Melbourne, not far from Mr. Lieb.

 

Sönke Iwersen heads up the investigative desk in Handelsblatt's Düsseldorf bureau. Mark Hawthorne reports from Melbourne. To contact: [email protected].