The investigation into alleged bribe taking and corruption at Volkswagen has been widened to nine suspects.
The nine were allegedly involved in a scheme to extort kickbacks from a paint shop contract involving middlemen who negotiated the deal with Swiss contractor ABB.
The investigation is being carried out by prosecutors in Braunschweig, Germany. Previously, prosecution sources said that five people were being investigated.
Although authorities would not disclose whether all nine were VW employees, sources close to the investigation say one of them is Jose Manuel Guttierez.
Gutierrez was the chief aide to Ignacio Lopez, the VW purchasing chief. Both were fired by VW as part of the settlement of a lawsuit brought by General Motors.
Another suspect has been suspended by VW and taken into custody by the prosecutor in Braunschweig, Germany, said Jens Neumann, a VW board member whose responsibilities include legal affairs.
German press reports have alleged that VW executives ran a network of corrupt purchasing managers and middlemen who extorted bribes from suppliers in exchange for contracts.
The practice allegedly began when the executives were at GM's German subsidiary Adam Opel AG. Both the US parent and its subsidiaries Opel and Saab are part of the investigation.
The case focuses on a paint shop built by ABB. ABB claimed in late January in Zurich that it had been asked to pay bribes in return for a contract that included the paint shop at VW's Czech-based Skoda subsidiary.
ABB said its internal audit showed attempts to extort between DM10 million and DM20 million for the DM400 million contract. The bribes were reportedly to be funnelled through middlemen, who are commonly used in Europe to negotiate contracts between suppliers and makers.
These middlemen normally build in a 5 percent fee to their bills. They introduce suppliers to purchasing executives, said an auto industry executive.
'Usually, it doesn't involve a major supplier. I am surprised ABB needed a middleman, but they admit they had a 5 percent relationship with some people,' said the executive.
A VW source said that before going to the Czech authorities, ABB had tried to settle the matter with the automaker. But Volkswagen was at the time embroiled in a industrial espionage dispute with GM. That made Volkswagen cautious about making a secret financial settlement.
VW therefore decided to let the matter become public through the courts, the insider said.
ABB filed charges in Switzerland in late January. VW then asked the nearby Braunschweig prosecutor to investigate on 14 February. Three days later, ABB also asked for an investigation in Germany.
A Skoda spokesman said the maker could not comment on the case. He said purchasing decisions as large as the paint plant were decided by a VW Group organization know as the Central Sourcing Committee, not by Skoda executives. 'Our paint shop was part of a group contract and was only one third of the contract,' said the Skoda spokesman.
Bruno Adelt, VW's board member for finance, said the Central Sourcing Committee has about 20 members and has been in existence for about four years, ever since Lopez arrived.
The group was set up to help Volkswagen take advantages of economies of scale, by purchasing jointly for all four marques. The group's annual bill for components and raw materials exceeds DM60 billion, he said.
Allegations of corruption and the GM industrial espionage suit have not led VW to introduce any new safeguards into its purchasing systems, said Neumann.
'We have internal audits and investigate as any other company does. We have no different ethical standards than any other company,' said Neumann.
Neumann said that VW has also concluded there was nothing suspicious about the death of Ludwik Kalma, the former Skoda chairman who died in a car crash last fall.
Der Spiegel, a prominent German news magazine, alleged he was assassinated because of the bribery case.
'The Czech police investigated it as an accident. We don't have any other information,' said Neumann. Dieter Langdorfer, VW's new security chief, conducted an internal investigation that also concluded there was no foul play.
GM has been implicated in the bribes scandal. Some of the VW suspects allegedly took bribes when they were employed at GM. Furthermore, it has been alleged that they continued to receive payments after they left, via their former associates.
Like the VW/Skoda investigation, the GM/Opel bribes investigation involves construction projects.
The main one is the Eisenach, Germany, assembly plant and its paint shop.
Saab has been brought into the investigation because of claims by some of the suspects. They are alleged to have contacted former GM associates in order to arrange kickbacks in a contract involving Saab's new paint shop in Sweden.
GM said its internal investigations had not showed any evidence of bribery at any of its subsidiaries.
'We have tried to ferret it out. So far, we have not uncovered any evidence that there has been wrongdoing by Opel employees,' said David Herman, chairman of Adam Opel.