Former VW director goes on trial in corruption scandal

Jan 17, 2007, 10:20 GMT

Braunschweig, Germany - A former top executive at Volkswagen AG became the first person to stand trial on Wednesday in a scandal involving sex and bribery at Europe's biggest carmaker.

Peter Hartz, 65, is accused of sanctioning nearly 2 million euros (2.6 million dollars) in illegal bonuses while director of Volkswagen's personnel 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 Brazilian mistress, Adriana Barros.

Hartz, who left the company in July 2005, admitted in October to 'a criminal responsibility for giving preferential treatment to the former works council head.'

The scandal highlighted the lengths that the respected former manager went to in order to keep work's council members on the management's side.

Hartz, who also gave his name to the labour market reforms introduced under former chancellor Gerhard Schroeder, faces 44 counts of breach of trust.

A small group of protesters jeered Hartz when he arrived by car for the hearing at a court in Braunschweig, close to the town of Wolfsburg, where Volkswagen has its headquarters.

No witnesses were expected to be called during the two-day trial after reports that the former executive cooperated extensively with prosecutors.

Hartz faces a large fine or a prison term of up to five years if convicted, but sources close to the case said he could walk away with a two year-suspended sentence when the verdict is handed down on January 25.

The scandal, which surfaced in June 2005, originally centred 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 about flying around high- class prostitutes, visits to brothels and sex parties financed with company funds.

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, a member of Chancellor Angela Merkel's coalition partner, the 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.

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 by Hartz between 1994 and 2005. His mistress is alleged to have received payments totalling 400,000 euros.