| Volkswagen boss denies slush fund knowledge |
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| Thursday, 10 January 2008 | |
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The former chief executive of Europe’s largest car manufacturer Volkswagen has denied any knowledge of a system of perks and prostitutes set up to bribe key workers and union reps.
Ferdinand Piëch told a German court that he had no idea that the firm had paid an estimated €2.6 million (£1.8 million) for parties, escorts, brothel visits, viagra, jewellery, backhanders and holidays for wives and mistresses at the company’s expense out of a special bank account, referred to as account 1860, between 1995 and 2005. He added that the luxury car giant had an estimated 5,000 to 7,000 different bank accountants and that it had not been his job to keep track of them. Piëch, who had a reputation for micro-management, claimed that was unaware of perks extended to union representatives under his watch. He added that 30,000 redundancies had been avoided after he took over as the firm’s head only because VW was able to reach agreement with unions and employee representatives on a four-day working week and other stringent measures to avoid a collapse. Illegal bonuses The Brunswick court case was brought against two former senior Volkswagen employees, personnel manager Klaus-Joachim Gebauer and employee council chairman Klaus Volkert. Volkswagen’s former head of human resources Peter Hartz last year pleaded guilty to paying Volkert a total of €1.9 million (£1.3 million) in illegal bonuses. He was found guilty of breach of trust and given a fine plus a two-year suspended sentence. The case was reopened after an unnamed whistle-blower alleged that Piëch had not only been aware of the bribes, but had ordered an internal investigation into corruption in the mid-Nineties. Gebauer’s secretary testified on Tuesday that she had been ordered to arrange the most minute details of a discreet apartment with underground parking where union leaders could meet mistresses and prostitutes for sex, as well as flights and hotel rooms for the mistresses of members of the workers council out of the VW account. She said she had not been able to blow the whistle as company executives at the highest level had been aware of the scheme. Escorts and hospitality Both Gebauer and Volkert have denied defrauding the company and said that, by contrast, they were merely at the receiving end of a company-run system of rewarding employees with escorts and hospitality. Last month Hartz explained to the court that Gebauer had asked for more money in 1994 and that he had paid him in the form of bonuses rather than a pay rise to avoid similar requests from others within the firm. Piëch confirmed Gebauer's request, but said that he had left the details for Hartz to sort out. He praised Hartz's ability to reach consensus with unions and workers when negotiating tough decisions and said that he would have put an immediate stop to perks and prostitutes had he been aware of such a scheme. The case has focused attention sharply on Germany’s much-hailed consensus economy. Union leaders and employee representatives are involved in important decisions, including investments, in large companies in Germany. Gebauer could be sentenced to five years in prison if found guilty of administering a corruption and bribery network to keep union and worker representatives on side. Volkert faces a total of 48 charges and could face up to ten years in jail. Piëch, 70, was VW’s chief executive from 1993 until 2002 and was the winner of the award of Car Executive of the Century in 1999. He is currently chairman of the firm’s supervisory board. His grandfather Ferdinand Porsche founded the carmaker after a meeting with Adolf Hitler in 1933. A verdict in the trial is expected at the end of March. Related articles
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