Corporate Governance | 17.01.2007
Former VW Executive Goes on Trial in Corruption Scandal
Hartz could be sent to prison if convicted
A former senior executive at Volkswagen goes on [color="Navy"]trial Wednesday in a sex and bribery scandal. Peter Hartz, whose name is also connected with Germany's welfare reform, faces 44 counts of breach of trust.

Once one of the country's most respected managers, Hartz, 65, is accused of sanctioning illegal bonuses while director of Volkswagen's human resources department. The payments were allegedly used to finance lavish foreign trips, mainly by the head of the company's works council, Klaus Volkert, and his South American mistress. [color="navy"]Other charges relate to visits to brothels and sex parties financed with company funds.

Hartz, who headed Germany's labor and social welfare reforms under former Chancellor Gerhard Schröder, left the company in July 2005. He admitted in October to "a criminal responsibility for giving preferential treatment to the former works council head."

Sources close to the case said that no witnesses were expected to be called during the two-day trial in Braunschweig, close to the town of Wolfsburg, where Volkswagen has its headquarters.

Hartz, who is said to have cooperated extensively with prosecutors, faces a hefty fine or a prison term of up to five years if convicted.

Paid pleasure trips

Europe's biggest carmaker has some image polishing to do
The VW scandal, which surfaced in June 2005, originally centered on allegations of bribes from potential suppliers and the creation of dummy companies which were used to secure lucrative contracts abroad. But it quickly widened to include claims that VW paid for so-called pleasure trips for work council members so as to keep them on their side. This included allegations about flying around high-class prostitutes.

The charges came after an 18-month investigation, which has also seen the indictment of Hans-Juergen Uhl, a former member of the works council, who is also a member of parliament in Berlin.

Uhl, who represents the co-governing Social Democratic Party (SPD), has been indicted on two counts of being an accessory to fraud and five counts of making false statements under oath.

Klaus Volkert
Volkert was arrested last year because of concerns about the suppression of evidence, but released after two months.

The former works council chief is alleged to have been paid illegal bonuses worth 1.9 million euros ($2.5 million) by Hartz between 1994 and 2005. His mistress is alleged to have received payments totalling 400,000 euros.

DW staff / DPA (win)
http://www.dw-world.de/dw/article/0,2144,2312822,00.html