Another Scorpene Submarine Scandal

The massive leak of secret documents on Scorpene military submarines purchased by Australia and India recently from French shipbuilder DCNS, possibly by a competitor, once again calls up the murky world of military procurement and the enormous bribes that are often paid.

Nobody knows who leaked the documents, which give detailed technical information about the combat capability of the Scorpene vessels, which are currently in use in Malaysia, Chile, Pakistan and other countries that were the focus of massive scandals.

Some defense analysts are conjecturing that the hacking was at the hands of one of DCNS’s rivals. According to news reports in international publications, such sensitive information in the wrong hands would have huge ramifications for national security in at least four countries that have purchased the submarines.

India signed a US$3.43 billion contract for six of the vessels in 2005, to be built in conjunction with an Indian government-owned Mumbai shipbuilder. Brazil is due to deploy the vessels in 2018. Australia earlier this year signed a contract with DCNS for A$50 billion to build an entire new submarine fleet, picking the French defense giant over Germany’s ThyssenKrupp AG and a Japanese consortium of Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

DCNS is hardly a stranger to such shenanigans. In January, two officials of Thales, a DCNS subsidiary, were indicted in France on charges of bribing Malaysian Prime Minister Najib Razak. The case awaits prosecution.

According to documents made available to Asia Sentinel in 2013, former Malaysian Prime Minister Mahathir Mohamad and then-French Foreign Minister Alain Juppe were both aware of the situation, in which €114.96 million (US$129.8 million at current exchange rates) was steered through a private company whose principal officers were Abdul Razak Baginda, then Najib’s best friend, and Razak Baginda’s wife, into the coffers of the United Malays National Organization in violation of the OECD Convention on Bribery.

Other documents made public by Asia Sentinel show that at least €36 million flowed from the DCNS subsidiary to Terasasi Hong Kong Ltd., whose principal officers were listed as Razak Baginda and his father. Najib was defense minister from 1991 through the time when the submarines were delivered in 2002. Terasasi only existed as a name on the wall of a Wanchai district accounting firm in Hong Kong.

Questions also have arisen over the purchase of submarines from DCNS in Chile, where “gifts” were made to the former security chief of onetime Chilean strongman Augusto Pinochet for the sale of two submarines. India’s defense procurement officials have been notorious for taking bribes, although no charges have arisen over the current sale.

In all, at least 16 suicides or other questionable deaths have been linked to DCNS’s campaign to sell submarines across the world. Perhaps the most spectacular – and questionable – was that of Thierry Imbot, who was said to have committed suicide in 2000 by falling or throwing himself down a stairwell at his Paris flat. Imbot was the head of French intelligence in Taiwan at the time six French frigates built by what was then Thompson Thales, a DCN subsidiary, were sold to Taiwan, a US$3 billion (in 1991 dollars) sale that generated "commissions" of US$550 million, or nearly 20 percent. Imbot’s father said his son’s body landed too far from the building to have been a suicide or to have fallen, and that Imbot had spoken of massive graft surrounding the case.

At least five other people connected with the Taiwan case died under suspicious circumstances, including a Taiwan naval captain, Yin Ching-feng, who was found floating off the country’s coast. Although it was first claimed that Yin had also committed suicide, his family hired a pathologist who said he had been beaten to death and dumped. His nephew, who was also pursuing the case, also died under suspicious circumstances, as did a former Taiwan-based Thomson employee named Jacques Morrison who also fell to his death from a high window after telling friends he feared for his life because he was the last witness to talks over the contract.

French judges have been investigating corruption allegations arising from the Taiwan contract over a number of years but have made no arrests, notably because documents are protected by defense secrecy laws, which the government refuses to lift. Nonetheless, it is widely believed that at least some of the alleged kickbacks were used as political campaign funds in the French 1995 elections.

Also, in what has come to be known as "L’Affaire Karachi," 11 French engineers employed by DCN, were blown up in a bus bombing in 2002 which was first thought to have been perpetrated by Islamic militants. The 11 were in Karachi to work on three Agosta 90 B submarines that the Pakistani military had bought in 1994, with payment to be spread over a decade. News reports said commissions were promised to middlemen including Pakistani and Saudi Arabian nationals. Agosta is a subsidiary of DCN.

Two French magistrates, Marc Trevidic and Yves Jannier, who were looking into the case on behalf of the victims, said kickbacks ended up in the campaign funds of Edouard Balladur, then the French prime minister and a rival of Jacques Chirac in the 1995 presidential election. Nicolas Sarkozy was Balladur’s campaign manager as well as budget minister when the contract for the subs was signed.

Although Sarcozy and Balladur have both denied any wrongdoing, a top-secret memo turned up in October 2008 from DCN, copies of which were shown on French television. The memo reportedly said France had stopped paying the bribes after Chirac won the 1995 elections despite requests by Pakistani officials for several years afterwards. Eventually, according to the story, the Pakistanis lost patience and orchestrated the bus attack on the Agosta engineers in retaliation. It is widely believed that at least some of the alleged kickbacks were used as political campaign funds in the French 1995 elections.