Volkswagen is the world’s fourth-largest automaker, right behind General Motors, Toyota and Ford. Nearly 25,000 vehicles roll off its assembly lines during a typical work day in more than 40 plants across Europe, the U.S. and elsewhere. The Wolfsburg (Lower Saxony) Germany-headquartered company, with a worldwide work force of 325,000, is heavily dependent upon union cooperation to maintain smooth operations. That’s true in industry in general throughout Western Europe, where labor officials take a far more active role than here in shaping key management decisions. Unfortunately, this concentration of power presents possibilities for shady quid pro quo arrangements. And union officials are no more immune to corruption than management, especially with the prospect of lusty sex.
That was brought home in the recent case of Klaus Volkert, chairman of the VW Works Council from the early 90s until his resignation three years ago. On February 22, Volkert received a two-year, nine-month prison sentence in a Braunschweig court for his role in a bribery scandal. He had been found guilty of accepting about 2.6 million Euros (about US$3.8 million) in illegal payments from Volkswagen management during roughly 1995-2005, much of which allegedly went for pleasure holidays for VW labor representatives. Benefits included prostitutes and Viagra prescriptions filled by the company health care provider. Part of Volkert’s unusual compensation was over 400,000 Euros in benefits for his Brazilian girlfriend, Adriana Barros. According to presiding judge Gerstin Dreyer, Volkert “knew that the payments were channeled to him outside the usual procedures of Volkswagen.” Volkert, it must be stated, wasn’t simply a union representative to the company; he sat on its board of directors.
The main focus of the German government probe was former Volkswagen Group personnel director Peter Hartz. Prosecutors had accused him of organizing the slush fund out of which Volkert had received payments. Hartz was found guilty and received a two-year suspended sentence and a fine of 576,000 Euros. His trial also raised suspicions of involvement by VW Supervisory Board Chairman and former CEO Ferdinand Piech, a near legend in European automotive design and industry management. Piech, as a witness, testified in January that he had “at no point been aware” of any wrongdoing. Another ranking employee, personnel manager Klaus-Joachim Gebauer, had been accused of arranging sex tours for work council members. He was found guilty of embezzlement and given a one-year suspended sentence. The company refused to comment, stating that the scandal concerned wrongdoing by specific individuals and was not related to official policy.
Volkert is the only person in the scandal to be sent to prison, prompting his lawyer, Johann Schwenn, to denounce his sentence as a “terrible case of a two-class justice system in Germany.” Volkert plans to appeal. Prosecutors insist his sentence was tougher because unlike Hartz and Gebauer, he financially benefited. Whether or not injustice lurks, the case underscores the risks of labor, management and government getting too cozy with one another. The avowed purpose of the under-the-table payments from Hartz to Volkert was to ensure the latter’s support for a company restructuring plan, initiated in response to economic reforms proposed by then-Chancellor Gerhard Schroeder. Hartz was a key advisor to Schroeder; indeed, the reform package often was called the “Hartz reforms.” The German way of doing business makes for colorful headlines, but it does have a few design flaws. (International Herald Tribune, 2/22/08; Financial Times, 2/23/08; other sources).