A former Allison Transmission executive claims the company booted him from a top post in China because he raised concerns about bribery.
Stephen Lowe, who was a managing director based in Shanghai, alleges that Allison’s top salesman in Beijing plied government officials with cash, card parties and expensive gifts—all with a vice president’s blessing.
The allegations are spelled out in a lawsuit for retaliatory discharge, which the 42-year-old filed Nov. 15 in Marion Superior Court.
When firing Lowe on July 1, Vice President of International Sales and Marketing Michael Headly told him he lacked leadership potential. Lowe alleges that was a pretext to protect Headly and fellow executive Steven Chew, who had landed big contracts through his relationships with Beijing officials.
“We’re looking into the allegations but we can’t comment on the specifics of pending litigation,” Allison spokeswoman Melissa Sauer said. The company has not yet filed an answer to the lawsuit.
The allegations Lowe raises are potential violations of the Foreign Corrupt Practices Act, which forbids U.S. companies and their employees from bribing foreign officials.
Lowe’s attorney, R. Scott Oswald of the Employment Law Group in Washington, D.C., would not say whether he lodged a complaint with the Justice Department. The federal agency would not confirm nor deny an investigation.
The Justice Department isn’t likely to ignore allegations like Lowe’s these days, said Seymour Mansfield, a Minneapolis attorney who has a large practice in whistleblower cases.
The number of foreign corruption investigations exploded five years ago, Mansfield said. The past two years have brought huge fines for companies and even jail sentences. Halliburton and KBR last year received a collective penalty of $579 million.
The longest sentence so far, seven years, was handed down in April to Charles Jumet, who worked for a Panamanian affiliate of Overman Associates, a Virginia Beach, Va., engineering firm. Jumet paid government officials for his firm’s contract to maintain lighthouses and buoys on the Panama Canal.
Corruption in China is relatively common, but becoming less so, said Scott Kennedy, a China expert and associate professor of political science at Indiana University.
“The political system and extent of intervention in the market creates a good environment for corruption to occur,” he said.
But recent high-profile Chinese bribery cases involving Siemens and Rio Tinto have shown how companies and employees contribute to corruption as well, Kennedy said.
“There’s a lot of pressure on salespeople. Folks on the ground sometimes are mavericks, and do what they need to do to make sales or get information.”
Behind the scenes
Allison, the world’s largest supplier of automatic transmissions for commercial vehicles, has had a growing presence in China since winning contracts to provide thousands of bus transmissions to Beijing leading up to the 2008 Olympics.
Lowe’s lawsuit paints a dark version of those success stories.
The allegations center on Chew, commercial director of Asia strategy, who, according to the lawsuit, has spent most of a 30-year career with Allison in China sales.
Chew’s nickname at Allison China is “The Emperor,” and he’s described as a “hero” because of his success with Olympics-related contracts, the lawsuit says.
Allison, which has $2 billion in annual revenue, doesn’t disclose the value of contracts. By unit volume, the China deals were larger than anything else the company has reported in Asia. In 2007, for example, Beijing bought 2,500 transmissions. By comparison, the largest deal in India that year was for 500 units.
Allison had 12,000 transmissions running on Beijing buses by the 2008 Olympics. Since then, the company reports that it has expanded to seven other cities in China.
Lowe, an Asian-American who speaks Mandarin, was a rising executive working in Shanghai when Allison hired him in October 2009. He claims he soon witnessed Chew’s methods.
At a dinner with Beijing City Bus officials in March, he saw Chew take a fat envelope out of his computer bag and put it in his pants pocket, according to his lawsuit. The flap of the envelope fell open, and Lowe says he could see that it was stuffed with red hundred-yuan bills. (One hundred yuan is about $15.)
Then Chew walked one senior official out of the dining room. “When he returned, the envelope was gone,” Lowe’s lawsuit says.
Although Lowe held an executive position, he didn’t supervise Chew. Allison realigned the hierarchy before hiring Lowe, so that Chew reported directly to Headly, according to the lawsuit.
Headly also attended the dinner in Beijing. Lowe says he told his boss what he’d seen the next day, during a ride to the Beijing airport.
Shortly after that dinner, the lawsuit says, Lowe, Headly and Chew were together in a car when Chew took out his wallet and showed them receipts for silver jewelry he’d bought for Beijing officials on a trip to Gualin.
“Chew said he paid ‘in order to please the officials,’” the lawsuit says. “Chew added he could not expense the receipts ‘for obvious reasons.’”
Later, however, Lowe says Chew admitted he would use receipts from legitimate expenses to get reimbursed—with Headly’s approval.
“Chew told Lowe he did ‘whatever it took to please the officials,’” the lawsuit says. That included hosting—and losing—high-stakes card games at his apartment in Beijing.
The gambling parties became a sore point, as Lowe refused Chew’s repeated requests that he go to Beijing to help entertain.
“Chew told Lowe that competitors ZF and Voit had begun to complain to Beijing officials about Allison’s monopoly of Beijing City Bus business,” the lawsuit says.
Lowe at one point told Headly that his refusals “may have pissed Chew off.” Lowe also alleges that Headly knew Chew was throwing the card games, and helped him finance the activity.
At one dinner with officials from King Long, a Xiamen-based bus maker, and Beijing, Headly jokingly asked whether Chew had been “the ATM” and “Who else was the ATM?” the lawsuit says. According to Lowe, Headly really was asking who had lost the card games.
As Lowe describes the reimbursement scheme, Headly or another executive would pay for dinner and keep the credit-card receipt for their own reimbursement. They also would request a copy of the Chinese “tax receipt,” which is simply another receipt, and give it to Chew so he, too, could be reimbursed.
Lowe alleges that the double-dip supplied Chew with the cash he needed for entertaining officials. He says the March dinner in Beijing, for example, cost more than 10,000 yuan, the equivalent of about $1,500.
Lowe’s career path
Lowe moved to China in 2007 to serve as general manager for Mueller Water Products in Shanghai. The company was one of several stops Lowe made as he climbed the ranks of management after earning an MBA from Indiana University in 1997.
Allison hired Lowe as a consultant for various projects in Asia in June 2009 and followed up with a full-time offer Oct. 28.
Lowe’s lawsuit suggests his demise came after the sales team’s karaoke outing in June, during which he told a marketing manager that Headly was “corrupt.” Headly fired him on July 1.
Several days later, Lowe sent a letter to Headly saying “you want to terminate me because I told you about one employee’s FCPA violations in China. You want to protect this employee and yourself.” Lowe sent copies to Allison CEO Lawrence Dewey and two other managers.
Lowe, whose base pay was $195,000 a year, wants to be reinstated, or compensated for his lost pay, plus damages. He also wants Allison to pay his $100,000 retention bonus, which was promised in the event that he was fired “without good reason.”
Unlike the Sarbanes-Oxley financial reform law, the Foreign Corrupt Practices Act doesn’t have its own whistleblower provision. Lowe brought his case under Indiana’s whistleblower statute.
“Indiana law protects courageous employees who, like Stephen Lowe, oppose and report illegal conduct and suffer retaliation for their opposition,” said Oswald, his attorney.
Mansfield said Lowe might have a hard time proving his retaliation claim. “Ninety-nine percent of the time, you don’t find a document somewhere that says, ‘Fire this guy because ... .’”•