Noose Tightens in French Defense Scandal
After years of inaction and coverup, details are emerging in France of the sale of armaments by the French state-owned defense contractor DCNS to countries across the world including Pakistan, Malaysia, Chile, India, Taiwan and Saudi Arabia, with bribes and kickbacks built into DCNS’s budget, ensnaring politicians across the globe.
Allegations involving DCNS, formerly known as DCN, range from murder to bribery and corruption and go from defense procurement officials in each of those countries to some of the top politicians in France.
Under the French legal system, prosecutors under the control of the Ministry of Justice must make a preliminary enquiry, during which no one has access to the files, so that any information the police have obtained cannot be shared. The prosecutors have been stymied for years by the ministry. However, investigators appear to be losing their awe of politicians all the way up to President Nicholas Sarkozy.
In September, for instance, Nicholas Bazire, 54, the best man at Sarkozy’s wedding to supermodel Carla Bruni, was arrested and charged with misuse of public funds in the 1995 presidential campaign of Edouard Balladur. Sarkozy was Balladur’s campaign spokesman and budget minister at the time. Another friend, Thierry Gaubert, Sarkozy’s cabinet chief when he was budget and communication minister, was arrested earlier. Sarkozy is seeking avoid the appointment of an instruction judge in an effort to keep the cases under control. But the political knives may be out for Sarkozy.
That increases the chances that investigating judges will allow prosecutors a more detailed look at DCNS’s books to probe kickbacks in Pakistan, where 11 French submarine engineers were killed in a bomb attack, and Taiwan, where a number of murders and suicides have been recorded in connection with the sale of frigates to Taiwan’s navy. The details can be found here.
William Bourdon, the leader of a three-lawyer team investigating Malaysia’s US$1 billion purchase of submarines from DCNS for the Malaysian reform organization Suaram, earlier told Asia Sentinel he hoped his team would have access to the files by October. Bourdon was summarily deported from Malaysia in July after giving a speech in Penang describing some of the details of the allegations.
Prime Minister Najib Tun Razak was defense minister at a time when Malaysia bought two Scorpene-class submarines from DCNS. Included in the transaction was a €114 million commission paid to Perimekar Sdn Bhd, a company owned by Najib’s close friend, Abdul Razak Baginda. The transaction has been mired in controversy since 2006, when Altantuya Shaariibuu, a party girl and translator ostensibly hired to help in the contract, was murdered after demanding US$500,000 from Razak Baginda, her jilted lover, for unspecified reasons. Razak Baginda was acquitted of her murder under unusual circumstances without having to provide a defense. Two of Najib’s police bodyguards were convicted and sentenced to death. They have appealed the verdict.
Joseph Breham, a lawyer with Solicitors International Human Rights Group and a member of Bourdon’s team, said in London last week that DCNS often budgeted as much as 8 to 12 percent of its total receipts as "commissions" paid to grease sales of armaments in third-world countries. Breham’s speech was reported for the Malaysia website Malaysiakini by Mariam Mokhtar.
Malaysia bought two Scorpene submarines from DCNS for about US$1 billion and leased a third from a DCNS subsidiary for training. Of that, the €114 commission was paid to Razak Baginda’s company, Perimekar Sdn Bhd.
Breham said Razak Baginda’s company Perimekar had received the commission for "supporting the contract," which he said was a euphemism for unexplained costs, and also for "housing the crew" of the submarines in France. Perimekar was wholly owned by another company, KS Ombak Laut Sdn Bhd, which in turn was also controlled by Razak Baginda. His wife Mazalinda, a lawyer and former magistrate, was the principal shareholder, according to the French lawyers.
Breham questioned why such vast sums could be paid to Razak Baginda’s company. The €114 million obtained by Ombak Laut, he said, was more than the amount paid by France to all of its primary school teachers for a year. He also revealed that DCNS’s former finance director had written memos in which he alleged that €31 million of the €114 million had been used for "commercial engineering", a term Breham said had no legal meaning.
Breham said that in France, before 2002, any money used to bribe foreign officials was tax deductible. When the former finance director of DCN made a claim for the €31million allegedly used to bribe the Malaysians for the purchase of the Scorpenes, the Minister of Budget questioned such a large bribe, although he did eventually authorize the tax break.
The French lawyer mentioned a possible third commission, which arose because of the different mechanisms that enabled the submarines to operate. The Malaysian submarines had to be modified to operate in tropical waters, he said, which required altering the technical specifications. A variation order was made which incurred a further US$2.5 million. Breham concluded that the only doubt about the €114 million payment, which is reflected in Perimekar's financial statements, was whether the payment was for valid reasons or unethical ones.
The sticking-point for DCNS is the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed by all 34 members of the OECD including France in 1997. The convention establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective. Thus the alleged bribery by a French company of Malaysian officials became an offense under French law.
In April 2010, the lawyers, acting for Suaram filed a 'plainte avec constitution de partie civile' complaint, which is a criminal prosecution with a concurrent independent action for civil damages. That would mean there would be two trials, one a criminal trial and the second a civil trial for compensation.
This has two great advantages, Breham said. First, an independent instruction judge is appointed for the civil case. Second, Suaram becomes a party to the case, at which point the legal team, acting for Suaram, can then have access to all the files about the case and can ask questions of the instruction judge and request that he investigates on its behalf.
There is a huge struggle in France between the prosecution and the instruction judge. Breham says that unlike a prosecutor, this independent judge has investigative powers to subpoena officials from DCN, and access documents in the DCN offices to obtain evidence of commissions. The judge can also request "mutual criminal assistance" from the Malaysian authorities for purposes of information and cooperation. So far, there is no indication that Malaysian officials intend to cooperate.