Corruption Scandal Investigation into Dubious EADS Austria Deal Intensifies



Part 2: A Disaster for EADS

The government in Vienna, however, has no record of such barter deals. "How are shell corporations supposed to be able to initiate countertrade agreements?" ask the incredulous investigators. They think the companies were actually designed to cover up the flow of money.

So who benefited from the money? Investigators say they have two probable explanations. They contend that one possibility is that these were kick-back payments that allowed money from the big Eurofighter sale to flow back into the pockets of EADS executives. In addition to money laundering, Viennese public prosecutors mentioned possible charges such as breach of trust, bribery and the formation of a criminal organization within EADS.

Another possibility is that these were payoffs to politicians in Austria who had a say at the time in approving the multibillion euro deal. One lead currently being pursued took investigators to a businessman in Linz, and from there to a foundation that financed a large infrastructure project in the Austrian state of Carinthia. The initiator of this technology park was none other than then-Governor Haider, who boasted about this achievement during his election campaign. Millions of euros flowed into this construction project.

Eurofighter Contract Could Be Cancelled

Pilz suspects that "additional secret networks aside from Vector Aerospace" exist. Working together with a lawyer, he is researching additional financial transactions. Cases filled with large amounts of cash were allegedly carried between London and Vienna. Pilz also suspects that the FPÖ, which has consistently denied that it took any bribe money, may not be the only party that benefited financially from the deal.

The revelations that have already come to light are a disaster for EADS. Indeed, in the secret purchasing agreement for the Austrian Eurofighters, the consortium pledges to pay no "incentives as stipulated under Article 304 of the Criminal Code" to officials in charge of awarding the contract.

In plain language, this means that the contract could be terminated if bribes have been paid -- even if the money was transferred via "third parties," in other words, via a network such as the one allegedly surrounding Vector Aerospace.

Pilz believes that the sale agreement may already be a thing of the past by next year. By then, he says the investigations will have been completed. If the suspicions are confirmed, the government has no choice, he argues. "They will have to terminate the contract," says Pilz. And should they fail to do so, he intends to file a lawsuit. If the contract were terminated, the consortium would have to pay out billions of euros -- and the damage to the company's image would be so devastating that it would be difficult to find a new customer.

At Eurofighter headquarters near Munich, officials are still hoping they can convince Switzerland to buy their fighter jets, even if the Defense Ministry in Bern is currently in favor of purchasing a Swedish aircraft. But a decision has not yet been made.

Swiss investigative authorities are also active in the Austrian case because some of the shell corporations were located in Switzerland. The government will have a hard time justifying such a major purchase from a consortium that is being investigated by Swiss authorities. It's a similar situation in India, where the investigations by Viennese authorities are jeopardizing a €20 billion deal.

'The Highest International Standards'

Last Thursday, EADS CEO Enders reacted to the investigative searches by writing a letter to his managers. He said the company wanted to make deals, "but not at any price" because "breaking laws is not an option."

Enders went on to say that over the past few years the consortium has bolstered its compliance department, which is tasked with ensuring that all company-related business transactions remain above board. He said that he would guarantee that this department works "according to the highest international standards."

That sounded good, but in reality it wasn't until very late in the game -- in 2008 -- that the company began to establish such a department. As recent as 2010, an EADS controller, who had reported concrete indications of bribery payments at a subsidiary in Saudi Arabia, complained that he had been completely ignored by the head of the compliance department at the company's Parisian headquarters.

Nobody took him seriously, the man complained in an e-mail. In another, he wrote: "These people at the top are very good at distancing themselves from information."

EADS has declined to comment on either the Saudi case or the current investigation in Austria. It thus remains open whether the company has already launched an internal investigation into the Eurofighter affair. Initial reports that something had gone wrong in Austria surfaced six years ago, but even insiders are unaware of any in-house inquiry.

Comparisons to Siemens Corruption Scandal

Officials in Berlin are already comparing the Austrian affair with the Siemens corruption scandal. At the time, supervisory board chairman Heinrich von Pierer resigned -- although it was never proved that he was directly involved in any illicit payments.

Enders hasn't been linked with the affair, either, but the scandal has edged dangerously close to the EADS CEO. Some of the managers allegedly involved in the scandal are among the young, ambitious team who emerged from the Daimler consortium and EADS' predecessor DaimlerChrysler Aerospace (DASA) and made their way to the executive floors. They all knew each other. And something else poses a risk for Enders, who has a reputation for integrity: the enormous sum of €113.5 million. Such amounts are not usually approved for payment unless they are previously signed off by the board of directors.

Based on the secured documents, the Munich public prosecutor's office is now trying to ascertain who knew about the secret realm surrounding Vector Aerospace. It has purposely maintained a large circle of suspects; otherwise it says that some of the charges may fall under the statute of limitations in late December. Enders is not under investigation.

The CEO has never suffered from a lack of self-confidence. Last week, Enders -- a former paratrooper who is a major in the reserves -- appeared in Berlin as if nothing had happened. He told a group of aviation industrialists that if the government didn't agree with his views, they would just have to look for someone else.


Translated from the German by Paul Cohen


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powermeerkat 11/12/2012
1. And Germans cmplainabout corruption in GREECE!
"The German military, the Bundeswehr, has already been given the go-ahead to purchase 140 Eurofighter jets for €15 billion. The price of these aircraft is bound to increase if one of the current purchasing countries backs out of the deal." Let the record show, that most NATO countries have selected F-35 as their prefered nex-gen fighter. Those who participated most financially in its R&D (e.g. UK) will receive Lockheed planes first. Those from the second tier - 2nd (like Turkey) Etc. Btw. A British investigation into a huge bribery/kick-back scandal involving BAE's multi-billion plane sale to Saudi Arabia has been thwarted by Tony Blair on the ground of "national interests" [if it makes you feel any better]
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