Excellent Connections [Der Spiegel, 2006-07-03]

Publication	Der Spiegel
Date	2006-07-03
Reporter	Georg Bonisch, Markus Dettmer

The office of the public prosecutor in Düsseldorf is investigating an arms deal with South Africa involving a German shipbuilding consortium. It is possible that a 30 million Mark bribe may be involved.

When the deal was signed and sealed, the shipyard Blohm+Voss in Hamburg issued a press release: "This is one of the biggest international successes for German naval shipyard."

On this day, the 3rd of December 1999, the government of South Africa signed the contract for the purchase of four Corvettes, a medium-sized warship. For the approximately 700 million Mark, the European-South African Corvette consortium ESACC, which on the German side consists of, besides Blohm+Voss, Howaldtswerke-Deutsche Werft (HDW) and Thyssen Rheinstahl Technik, were to deliver four ships of the type MEKO A 200 to the South African navy,

Not enough: On the same day the South African government also ordered three submarines from the German GSC-consortium of HDW, the Thyssen subsidiary Nordseewerke and MAN Ferrostall - contract value approximately 1,6 billion Mark.

For several years the European bidders had vied for the contract, the heads of government of Great Britain, France and Spain lobbied their companies in South Africa. Already in March 1995 the previous Chancellor Helmut Kohl asked the South African president Nelson Mandela in a letter to seriously consider the German bid

It was therefore no wonder that Blohm+Voss celebrated the closing of the deal and itself. "For us this is the culmination of a five years negotiation period, during which time we have formed excellent ties with South African industry as well as with the responsible government officials."

It is however possible that not only "the excellent ties" contributed to the success, but also a lot of money. The German public prosecutor's suspect that in the Corvette deal alone, more than 30 million Mark in bribes may have flowed in the direction of South Africa. The have secretly been investigating the suspicion of tax evasion and bribery for a long time.

ThyssenKrupp is convinced that "the suspicion of improper payment of commissions will not be confirmed in the course of further investigations".

In a combined operation on the 19th of June detectives searched the head offices of Blohm+Voss in Hamburg, HDW in Kiel, Thyssen Rheinstahl Technik and a resident project management company in Düsseldorf. They carted away of documentation by the box load, which currently were then evaluated by the public auditors, forensic specialists from the provincial state office for criminal investigation of Nordrheinwestfalen and the tax authorities of Düsseldorf . MAN Ferrostaal confirmed that the investigators seized documents in Essen "in connection with investigations into another company".

The arms deal with South Africa is only the beginning, it could turn out to be one of the biggest affairs in recent years with internal and external political implications, which cannot currently be determined. And it could possible solve a puzzle in recent German political history - namely the question of what is behind the mysterious payments amounting to millions, which the FDP big shot Jürgen Möllemann, who died in 2003, received from Lichtenstein and Monaco.

The investigators know that in the sale of the Corvettes so-called NE's: Under the acronym NE ("necessary expenses") payments of bribes by German companies in foreign countries were set off against tax liability, until this practice became illegal under German law. However, they still don't know for sure who authorized them.

The exact point of departure of the investigations cannot be determined. They are not founded on a single suspicion but on various processes, which played out independently of one another and over several years. It is still a complicated puzzle, which stems from the delayed consequences of the tank affair of the Kohl government, through the allegations against Möllemann and a court case in France involving suspicious transfers of players for the premier league club, Olympia Marseilles.

In the sale of "Fuchs" wheeled tanks to Saudi Arabia in 1991, Thyssen set off 220 million Mark of "necessary expenses" against taxes, a portion of the bribe went via a Panamanian post box company which the investigators credit to a Möllemann-supporter - the businessman from Düsseldorf Rolf Wegner.

When the story came to the boil at about the turn of the century, forensic tax investigators audited the other Thyssen subsidiaries. The are said to have discovered, that the company also included such payments for the Corvette deal in the financial statements. Already in the year 2001, the public prosecutor in Düsseldorf received a letter from South Africa, which contained the allegation, which has not been proved to date, that a top South African politician received a multi million amount via Switzerland for his involvement in the deal during 1999.

During the investigations into an insolvency fraud, which had nothing to do with the arms deal, the investigators are said to have come across strange payments by Thyssen by chance.

In the end a legal advice from Monaco in June of 2005 showed the investigators that in there a suspicion of money laundering against Wegener was being investigated in the small state.

Not only that: It was discovered that Wegener received a million from not only Thyssen but also from Ferrostaal. Wegener's defence: He was after all an "export consultant" for Thyssen and "Möllemann worked for him as a consultant".

The knowledge of the transfers obviously originates from documents, which were acquired in the course of the football affair. Wegener's Cologne lawyer Christian Richter said that his client had decided "not to comment" because the relationship between him and Möllemann was constantly being mystified.

The story of the Corvette deal begins in April 1994 with the victory of Mandela and the end of apartheid. Although the country, after years of embargoes, was short of just about everything, the military succeeded in its wish to acquire four Corvettes for its ailing navy - for the defence of the 2 800 kilometre long coastline.

The German consortium was amongst the bidders for the contract, but at the end of December 1994 appeared to be out of the running. At that point in time the South Africans announced that the shortlist of suppliers had been reduced from five to two - Great Britain and Spain.

The decision did not hold for more than four weeks. On his trip to Germany in January 1995 the former Mandela representative and current President Thabo Mbeki surprisingly announced to foreign minister Klaus Kinkel and the members of the German consortium that "the race was still open".

It still took two years before the Germans got their second chance. Instead of ordering four Corvettes the South African government decided to equip its complete armed forces with new submarines, helicopters and aeroplanes, divided into five lots. In a complicated process it was requested that all the European companies hand in their bids.

The intention was made palatable for the population by a promise by the state that each supplier must involve South African companies and invest in the country. At the end of 1999 there was an economic miracle *1: South Africa bought 10 billion Mark of weapons in Europe, the companies promising investments to the value of 30 billion Mark as a trade-off.

Although very little of the trade-off investment has been realised to date, the arms deal has for years has been sinking into a morass of corruption. At the centre stands the South African partners of the ESACC-consortium, African Defence Systems (ADS) the French arms dealer Thales and a South African group of companies with close political ties. In the past year the ADS CEO Schabir Shaik - whose brother was the chief buyer for the South African army in the deal - has been handed a sentence of 15 years for corruption and other criminal offences, he is currently on appeal.

The deal with the ships begs further questions. Already in 2001 an investigation report of the anti-corruption authorities, the court and the prosecutor general in South Africa came to the conclusion that the German shipbuilding consortium should not even have survived the first round of bidding. There were several specifications, which the Germans did not fulfil - and they still received the contract in the end.

Why Germany? Did the 30 million play a roll? In South Africa the investigations are not over by a long shot. During this month a high level politician must go to court - Jacob Zuma, until a year ago the Deputy President. The prosecutors are accusing him of bribery: He is to have obstructed the investigations into the arms deal - for 1,2 million Rand.