Antinuclear

A car packed with explosives drove into a bus of engineers in Karachi, Pakistan, in 2002, apparently in revenge for unpaid bribes, killing 15 people, including 11 employees of French shipbuilder DCN, now Naval Group.

The French investigation into the bombing – known as the Karachi Affair – began in 2002 and uncovered a web of corruption that by 2010 appeared to involve then French president Nicolas Sarkozy.

In June this year, 18 years later, a Paris court secured the first convictions in the case. Six men were found guilty of charges involving kickbacks on deals signed in 1994 for the sale of submarines to Pakistan and frigates to Saudi Arabia. They include three former French government officials and the former head of the International Division of Naval Group.

Investigations into arms trade corruption take years, often more than a decade, due to multiple countries being involved, layers of offshore shell companies hiding the money trail, and the senior people implicated. Court cases and convictions are rare.

The Karachi Affair resonates in Australia today because despite this high-profile and deadly criminal saga – and two other corruption scandals, in Taiwan and Malaysia, which also involved murder – the company at the centre of all three, Naval Group, was still selected by the Australian government in 2016 to build our new fleet of submarines. A deal heralded as “one of the world’s most lucrative defence contracts”. Naval Group is 62.25% owned by the French government and 35% by French multinational Thales (a global top 10 weapons-maker).

The French case continues. In January, the former French prime minister Edouard Balladur and his defence minister will stand trial. It is alleged the kickbacks helped fund the PM’s failed 1995 presidential bid. Both men deny any wrongdoing.

Meanwhile, in Australia, the submarine deal continues. In February last year, after two years of negotiations, the government signed a ‘strategic partnership agreement’ with Naval Group. The signing took place despite the emergence of two more investigations into Naval, including alleged corruption on a 2009 submarine deal with Brazil and a significant security breach where complete plans of the new Scorpène submarines Naval had provided to India were apparently leaked from within Naval.

Back in 1994, the payment of “commissions” (aka bribes) was legal in France, although kickbacks certainly were not. Commissions were outlawed in 2000 when France signed the OECD’s anti-bribery convention (Australia signed in 1999). President Jacques Chirac stopped the bribe payments to Pakistan, which is thought to have led to the bombing. But clearly the anti-bribery message didn’t get through as Naval’s Malaysian and Brazilian deals were signed after 2000.

Of the corruption generally in global trade, the arms trade accounts for an estimated 40%, even though it represents a fraction (<1%) of global trade. Combating the scourge of corruption in the arms trade requires much stronger action.

Strong anti-corruption measures essential

Vast amounts of Australian taxpayers’ money are being handed to military industrial companies, including Naval Group, in contracts. Yet the perennial lack of transparency in defence procurement, blanket secrecy surrounding Australian weapons exports, and a pervasive “culture of cosiness” between government and industry all continue.

“Big money attracts greedy people and firms,” wrote a 31-year veteran of financial crime investigation for the Australian Federal Police, Christopher Douglas, in 2018. “New defence programs… also attract foreign intelligence interest.” This is already occurring in Australia, and Douglas says there will be more than one country spying. He says there is a “symbiotic relationship” between successful intelligence gathering operations and corruption.

The corruption risk has only compounded since 2018. In June, the federal government further increased its projected military spend, from $195 billion to $270 billion.

Tufts University in America researches arms trade corruption. It says there is an assumption by governments, barely questioned in defence and security circles, “that maintaining an advanced domestic arms industry is an unquestioned good, and essential to national security and influence. In all too many cases, this goal has therefore been placed above anti-corruption objectives.” (Emphasis added.)

In Australia, developing a domestic arms industry is being accorded a high priority, but this should be accompanied by an increase in anti-corruption protections. The facts show nothing could be further from the truth.

‘Perfect bribe vehicles’

Many of the world’s corrupt arms deals involve submarines. “They are perfect bribe vehicles,” says Tufts University, because “submarines are hugely expensive, and not many countries actually need them.”

Australia is in a minority of countries that can argue it needs submarines. But do we need to spend quite so much money? Of the options available, the government selected the most risky one: the largest, most expensive, never-before-built, and thus completely untested, option.

Chris Douglas, now director of Malkara Consulting, has written a report questioning Australia’s anti-corruption due diligence on the Future Submarine program. He has since used Freedom of Information requests to try to find out more about Defence’s anti-corruption framework in the program and has uncovered what appear to be significant gaps, discussed below.

The international standard for anti-bribery measures is ISO 37001. It was introduced in 2016. Anyone serious about managing bribery and corruption requires a system that meets this international standard.

‘Come-from-behind victory’

It was called “a remarkable come-from-behind victory” for DCNS, as Naval Group was then known, as it beat the respected German bid and former prime minister Tony Abbott’s favoured Japanese bid, to win Australia’s huge submarine contract in April 2016.

How did DCNS do it? A history of the procurement is here, but we’ll probably never know the telling background details…………..

The biggest procurement in Australian defence history – a “megaproject by all international standards” in the words of the Defence Department – should never have been conducted in such murky territory.

Message is one of lax standards

The message communicated to the wider community – in Australia and internationally – is that our standards are lax. Grey areas are tolerated. And for certain preferred insiders we will bend the rules, blur the edges, and look the other way…………https://www.michaelwest.com.au/murder-corruption-bombings-the-company-at-centre-of-australias-submarine-deal/