How German steel giant got embroiled in an investigation that raises questions about SA President

Senior ANC officials sympathetic to Mbeki suggest he is the victim of a smear campaign. The news of the German inquiry coincided with Mbeki’s visit to Germany

IN THE SPOTLIGHT: President Thabo Mbeki at a press conference with German Chancellor Angela Merkel in the Berlin Chancellery last week. The two leaders met while Mbeki was visiting Germany for the handover ceremony of the soccer World Cup, which South Africa will host in 2010 .

Düsseldorf is famous for its crooked buildings.

On the main stretch of the Rhine, visitors do a double take at the twisted steeple of the 13th century Lambertus Basilica ­ caused by wet timber laid by medieval artisans ­ and then another at the weird, odd angles of the Gehry building at the new harbour.

Even more warped is a sci-fi-style apartment building next door, clad in shimmering stainless steel provided by Düsseldorf’s signature company: steel giant ThyssenKrupp.

But this week citizens were coming to terms with the idea that the massive Thyssen headquarters itself ­ resembling an austere convention centre ­ might just be the most crooked of the lot.

On June 19, with no warning, staff of the century-old company ­ the seventh-largest firm in Germany ­ watched in disbelief as detectives and investigators swarmed through their offices on quiet Hans-Günther-Sohl-Strasse.

Employees at the BMW headquarters, over the road, goggled at the sight of boxes of documents being carted into the street.

And then word filtered through that the same had happened at Thyssen’s subsidiary company in Hamburg. And at its former partner company in Essen.

The investigators’ mission, their search warrants stated, was to find proof that ThyssenKrupp paid a R130-million bribe to win the contract to supply four warships to South Africa.

But in their wake, they left only questions without answers ­ and a growing cloud over President Thabo Mbeki and his involvement in South Africa’s biggest arms deal, which has been dogged by claims of corruption.

Official questions about the award of the R7-billion corvettes contract to the German steel giant have been raised for three reasons.

First ­ having been dismissed as viable bidders in favour of British and Spanish companies ­ Thyssen suddenly stormed back as a leading bidder after Mbeki visited Germany in 1995 and announced the race was still open.

Second, tax authorities in Düsseldorf found that Thyssen had noted R130-million on its balance sheet in “useful expenses” in securing the deal.

And, third, a South African businessman wrote to the Düsseldorf prosecutors in 2001 to claim that, at a 1999 meeting in Geneva, a Thyssen middleman had paid over a similar amount to a person representing a senior ANC politician.

It is not the first time Mbeki’s role in the arms deal has come under scrutiny. Mbeki has been under fire lately for his alleged meetings with top executives of the French defence company Thomson-CSF.

Thomson-CSF, now known as Thint, is linked to the German company under investigation because it and its African Defence Systems (ADS) were part of the German Frigate Consortium that won the corvette contract. Thyssen led the consortium.

Thint also faces corruption charges in the Pietermaritzburg High Court alongside former Deputy President Jacob Zuma.

Thint and ADS initially became the focus of investigations because of the conflict of interest involving the most influential figure in the arms deal process, Department of Defence acquisitions chief Shamim (sic - Shamin) (Chippy” Shaik and his brother Schabir, who was a director and shareholder in ADS.

Schabir Shaik, also former financial adviser to Zuma, has since been found guilty of fraud and corruption. Details of Mbeki’s role and his alleged meetings with French arms dealers were revealed for the first time during Shaik’s trial.

The documents seized by the Scorpions during their investigation show that the French were convinced that it was important to secure political support through the selection of empowerment partners approved by the political decision-makers, including Mbeki.

Mbeki was then deputy president and chairman of the Cabinet committee that oversaw the arms acquisition process.

The documents showed that as early as 1997, a year before the formal Cabinet decision on the preferred bidders for the main contracts, Mbeki was entangled with the French.

An encrypted fax, dated November 11 1997, written by a Thomson-CSF official, Pierre Moynot, to his superiors in France, showed that the French believed that they needed to lobby Mbeki.

In the fax, Moynot records that a key individual involved in the short-listing of bidders “had obtained assurance from the Deputy President [Mbeki] that we [Thomson] would be awarded the combat system and the sensors”.

In the final contract Thint and ADS were awarded the R1.6-billion tender to fit the combat suite for the new corvettes.

The same fax also records Moynot suggesting that if his company wished to secure the contract “a visit by JPP [Jean-Paul Perrier, the head of Thales International] to the Deputy President [Mbeki] should be arranged as soon as possible and should be used as an opportunity for him to meet with Jacob Zuma”.

The meeting is mentioned in a letter from Bernard de Bollardiere, the company’s senior vice-president, to South Africa’s then ambassador to France, Barbara Masekela.

In the same document is a note of “Questions to put to Mr T Mbeki”, including whether ADS was still the nominated combat suite supplier and whether Shaik’s Nkobi Group was “still a good choice”.

Other documents indicate another meeting with Mbeki on February 10 1999.

On December 18 1998, De Bollardiere wrote a letter directly to Mbeki asking if he could meet him in South Africa at the beginning of 1999 to discuss the company’s BEE structure.

Bollardiere informed Mbeki that his company was already “discussing with Futuristic Business Solutions [FBS]”. FBS is owed by relatives of the late Defence Minister Joe Modise.

Thomson subsequently chose Shaik’s Nkobi Holdings and FBS as its BEE partners. A handwritten note, believed to be written by Alain Thetard, former head of Thint, records information obtained on June 9 1998 from the “Ministry” in Paris.

It says: “Mr Thabo Mbeki thought to be ill disposed towards Thomson-CSF: reasons: 1) fight with S. SHAIK/ZUMA on the inclusion of new partners in ADS.
2) THABO MBEKI is not friendly with the tailor (tailor > Mandela) *1.”

Thetard suggested that Perrier should meet Mbeki “without any intermediaries” *2 and “find out who would be a good partner” for Thomson.

During Shaik’s corruption trial Moynot conceded that political connections and informal channels ­ two concepts the prosecution argued were part of a pattern of corruption between Shaik and Zuma ­ were critical to success *3 in the arms industry.

Moynot testified that his company believed in dealing with “people at the highest political level who will take the decisions”.

The Scorpions unit said last week that there was no evidence suggesting that Mbeki was involved in any wrongdoing.

Senior ANC officials sympathetic to Mbeki suggest the ANC leader is the victim of a smear campaign. The news of the German inquiry coincided with Mbeki's visit to Germany for a handover ceremony for the 2010 World Cup.

But for the corruption watchdog Transparency International, the biggest question this week was: why have South African investigators not been asked to investigate their side of the alleged bribe, or at least co-operate?

But German prosecutors insist it is a strictly German inquiry. *4

This week, Thyssen spoke out for the first time in an interview with the Sunday Times ­ and claimed it was so shocked and confused by the allegation that it had launched an internal investigation just to discover what prosecutors “are talking about”.

“Already in 1999 there was this talk of bribery with the frigates ­ why then only now, in 2006, are we being investigated?” asked Thyssen spokesman Gerhard Sperling this week.

“No one has said to us before: you have being bribing South African politicians. Suddenly now I am being asked [by reporters] questions about Mr Mbeki. I know nothing of these things.*5 So we want to know what’s going on as much as anyone.”

He added: “But we are sure we are not guilty in any way.”

Caspar von Hauenschild, a board member of Transparency International, said he believed the German investigation had been triggered by a new law that compels tax authorities to report evidence of non-tax-related offences they discover.

The German news magazine Der Spiegel believes it is another law, which bans the practice of tax write-offs for foreign bribes, which is behind the investigation.

One of the men who knows isn’t saying.

All Peter Lichtenberg, senior public prosecutor, will say is that answers will be provided after an “extensive” investigation, which ­ judging by a previous bribery investigation ­ could last as long as seven years.

Some of the answers could, according to anti-corruption experts, already be in the hands of the German authorities ­ in a box somewhere inside the baroque prosecutions building, a little further up the banks of the Rhine.

Local tax authorities have had access to Thyssen’s 1999 books for years, according to Der Spiegel. Offering bribes ­ entered by accountants as nützliche Aufwendungen (useful expenses) ­ to overseas officials was not only legal, but a common tax-deduction scheme for German companies before 1999.

For Sperling, this is the crux of the matter: “Of course you need people who can open doors for you; you can call it lobbying. Why else are some companies successful in foreign countries and others not? But it is not bribery. *5”

With acknowledgements to Rowan Philp, Wisani wa ka Ngobeni and Sunday Times.