Tuesday, June 30, 2009

Weapons Sales and Corruption

In arms deals involving the French government, the chances of corruption are high French arms sales, kickbacks and murder seem to go hand in hand. In the latest indictment of French use of arms deals not only to win business abroad but fund politicians at home, credible allegations have surfaced that a kickbacks dispute was behind the killing of 11 French shipbuilding engineers in Karachi seven years ago. The engineers and three Pakistanis were the victims of a bomb attack on a bus.
This follows another submarine kickback and murder scandal touching the Malaysian Prime Minister, previously the defense minister, Najib Tun Razak, and a frigate sale to Taiwan which left a Taiwan naval officer dead and a corruption investigation in France which was snuffed out at the highest level.

At the time the Karachi bombing was blamed on al-Qaida, an obvious and easy scapegoat given its record. However French magistrates have now pointed the finger not at al-Qaida but at high-ranking Pakistani officials. They are said to have been retaliating for the stopping of secret commission payments supposedly due to them in connection with a 1994 contract worth about US$1 billion for three submarines. The engineers were working on that contact.

Investigators are now working on the theory that the Pakistanis were supposed to have received kickbacks, part of which would then be repatriated via complex offshore companies to feed political slush funds in France. In this case, the theory goes, the payments were helping to finance the 1995 election campaign of Edouard Balladur, for whom now President Nicolas Sarkozy was campaign manager. But payments to the Pakistanis were stopped by President Jacques Chirac after he defeated Balladur. After years of unsuccessfully trying to get them resumed, the Pakistanis took revenge.

The motive for the bombing, according to these reports, was known to the French secret service which may have retaliated by breaking the legs of two Pakistani admirals and killing a junior officer. The al-Qaida story was just useful cover. Sarkozy says the claim is "ridiculous" but it may not go away. It may also touch Pakistani president Asif Ali Zardari, who was then Investment minister in the government of his late wife Benazir Bhutto and may have been involved. The evidence for these allegations is said to come from documents seized in the offices of DCN, the state-owned company building the submarines, by French investigating magistrates and revealed by a lawyer for families of the victims of the bombing.

The scandal comes hard on the heels of that in Malaysia over the killing of Mongolian model and French-speaking translator Altantuya Shaaribuu. She had been the mistress of Malaysian defense analyst Abdul Razak Baginda, a close friend of then Defense Minister Najib. Razak Baginda was acquitted of the murder but two guards working for Najib were found guilty following a bizarrely conducted trial which appeared managed in a way to prevent the admission of sworn statements and protected Najib and his wife from questioning. Although the murder may have seemed related to the sexual relationship between Razak Baginda and a pregnant Altantuya, a more plausible motive may well have been her demands for money given her knowledge of the details of a deal between involving the Malaysian government and Razak Baginda and a French submarine builder. Under this Razak Baginda received a commission of 114 million million euros or about 10 percent of the sale price of three submarines. Whether that money was kick backed to politicians in France is not clear, but it is unlikely that Malaysian politicians did not benefit from this commission.

The Taiwan case, still continuing after 18 years, also related to naval procurement, this time for the 1991 purchase of six Layafayette Class frigates – a deal which was so lucrative for the French that they were willing to jeopardize relations with Beijing to push it through. Two years after it was signed, a the body of Taiwan naval captain, Yin Ching-feng, was found floating off the coast, a victim of foul play. While the affair was long covered up, it gradually emerged that some $600 million in commissions on a $2.8 billion contract had been paid into various Swiss accounts set up by Andrew Wang Chuan-pu, the Taiwan agent for French company Thomson-CSF (now Thales).

Yin is believed to have been killed because he planned to blow the whistle on the deal. Other subsequent unexplained deaths included that of Yin's nephew who was pursuing the case, a French intelligence agent and a Thomson employee in Taiwan.
In Taiwan, convictions against several naval personnel and middlemen were obtained. But in supposedly free and democratic France the government blocked inquiries by judicial officials who were unable to obtain relevant documents. In October 2008 the judge finally ruled that no one could be prosecuted because of lack of evidence.
Thus the case was finally closed on huge payoffs to high ranking French politicians – and on suggestions that some in Beijing had been induced to mute their criticism in return for an improved bank balance. Roland Dumas, who was foreign minister at the time and changed French policy to allow the frigate sales at the urging of a mistress who was being paid by another French company, has implied that he knows where the money went.

Switzerland was, as so often, the conduit for most of the loot but efforts by the Taiwanese to get back money held in Wang-related accounts have so far yielded a paltry 34 million Swiss francs. Other accounts totaling SF900 million remain frozen pending court decisions. Taiwan is still pursuing Thales for $500 million or so repayment of illegal commissions.

The highest levels of the French state have shown they will stand firm against any legal process which attempts to impose honesty in arms dealing, whether or not its own politicians have directly benefited. That makes it unlikely that they will help bring justice in the Altantuya case by opening up their dossier on the visits of Najib Tun Razak, Razak Baginda and Altantuya to Paris and on the final recipients of the commission to Baginda. And it makes it likely that Andrew Wang, charged with murder and corruption in Taiwan, will remain a free man able to roam the world with whatever travel documents the French secret service has been kind enough to provide.
Asia Sentinel
June 29, 2009

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