Ex-VW chief admits organising sex parties

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A former senior Volkswagen executive who acted as a top adviser to the former German chancellor Gerhard Schröder has admitted to being the "initiator" of a multi-million sex and corruption scandal involving illegal company payments to union officials at the car manufacturing giant.

Peter Hartz, VW's personnel chief until 2005, appeared before a court in Brunswick on the first day of his trial yesterday in which he faces 44 charges of breach of trust, including allegations that he bribed the company's former works council boss with some €1.95m used for luxury trips abroad and sex parties.

Mr Hartz whose name is synonymous with a series of unpopular employment reforms adopted by Mr Schröder's former Social Democrat-led government, was barracked by demonstrators who accused him of being a "traitor to workers" as he entered the court building.

In a prepared statement read out by his lawyer, Mr Hartz, 65, confessed to wrongdoing and admitted that he was the initiator of the corruption scandal, viewed as one of the most spectacular in German business history. "I regret what I did. I realise that I did wrong and I take full responsibility for my punishable actions," Mr Hartz told the court.

Mr Hartz was initially accused of using company funds to pay for prostitutes in the scandal that was widely aired in the German press after it was exposed in 2005. However, prosecutors agreed to drop these charges in return for a detailed confession from Mr Hartz regarding payments to union bosses.

The court heard how Mr Hartz chose to lavish illegal bonuses on Klaus Volkert, the former VWworks council boss who under German law held a place on the car giant's board of directors. It is alleged that the bonuses were aimed at gaining union acceptance for changes in work practices at VW. "Because of the important position he [Volkert] held, I issued instructions that he be treated generously," Mr Hartz told the court.

Mr Hartz is also accused of authorising separate sums totalling €400,000 and €218,000 that were paid to Mr Volkert and his former Brazilian lover between 2000 and 2004. In the run up to the trial prosecutors disclosed details of VW-sponsored trips by union officials to Barcelona and Seoul in 2001, during which it is alleged that prostitutes were paid for sex.

The former personnel chief initially faced five years imprisonment. However, Gerstin Dreyer, the presiding judge, made it clear that as a result of his confessions, Mr Hartz would only face a two-year suspended jail term and a fine if convicted, provided his testimony proved "credible".

German media reports claimed last week that Mr Hartz had agreed to make his confession to spare himself and his family embarrassing testimony by prostitutes who could have been called to appear at his trial.

Mr Volkert was arrested in the wake of the scandal but released a month later. No formal charges have been brought against him. Prosecutors are investigating 13 suspects in the case, but only Mr Hartz and Hans-Jürgen Uhl, a German Social Democrat MP, have been charged.

Mr Uhl, also a former VW works council member, has been charged with being an accessory to breach of trust and with making false statement under oath. He denies any wrongdoing but his parliamentary immunity has been lifted to enable him to stand trial.