The French judicial investigation into the controversial Scorpene submarines deal would focus on the €146 million that would have ended up in the pockets of Malaysian officials, including Prime Minister Najib Tun Razak.
After two years of police investigation following the complaint filed by human rights group Suaram, an investigation would be conducted by judges Serge Tournaire and Roger Le Loire, who could call witnesses and indict people and companies if strong evidence is found.
The investigation would look into the Scorpene contract, worth €1.2 billion, signed on June 5, 2002. The main goal was to deliver Malaysia’s first submarines and to train its first Royal Navy submariners.
The contract had two components: the sale of two submarines built by the French company DCN and the Spanish one, Izar, for € 920 million, and the delivery of “logistical support” by Perimekar Sdn Bhd for €114 million to train the first 200 Malaysian submariners who arrived in Cherbourg, six months later.
The suspicions involved multiple Malaysian institutions and individuals who allegedly received bribes in the form of commissions and dividends through two companies, Terasasi and Perimekar. Both companies are mainly owned by Abdul Razak Baginda and his family. Razak Baginda is a close confidant of Najib, who was the defence minister when the submarine deal was inked.
Umno, the main beneficiary of the deal
The confidential report was particularly damning. It described in particular the financing of two networks, which had a single destination: Umno and Malaysian officials.
One went through the consulting firm Terasasi, paid through commissions and a fixed sum by Thales International Asia (…). “The beneficiaries of these funds are not difficult to imagine: the family clan and Mr Razak Baginda’s relations. In addition, these funds will find their way to the dominant political party [Umno],” the report noted.
The report also mentioned: “The shareholders will benefit [from] Perimekar dividends… for LTAT and Boustead (each one having 20% of Perimekar). The Malaysian government, armed forces and the dominant political party Umno will directly or indirectly be a major beneficiary.”
In addition, there was an invoice from Terasasi to Thales International Asia, on Aug 28, 2004, for a sum of about €360,000 and an accompanying handwritten note that stated: “Razak (Baginda) asked if SF [supporting fee or commission] can be considered fast enough …”
This fueled suspicion about Najib himself, as “it appears that the management of Thales International Asia has been aware that the amount paid to Terasasi ultimately benefited Najib, the minister of defence, or his adviser Mr Abdul Razak Baginda,” concluded the report.
A sum of €32 million million is believed to have been paid by Thales International Asia to Terasasi.
Perimekar, a provider of what services?
According to other available information, there was a first financial scheme for which Perimekar should have played the role of intermediary in the sales and profit transfers of technology. But this was [initially] rejected in October 2001 by the French Interministerial Commission for the study of export of war materials.
The agreement was finally given only if the sale took place without intermediaries, as the commission doubted the ability of Perimekar to carry out its missions (at this time the company had still no activity).
However, the report said the French defence industry could bypass the French law and OECD Convention against corruption by creating “service providers” that could “increase invoices in order to… take [the] place of the usual commissions”.
Under this scheme, instead of paying the entire agreement with French industrialists, who reportedly would have given their share to Perimekar (via Terasasi), responsible for giving dividends to public enterprises… the Malaysian government paid, on the one side, the French industry (which is also paying legal commissions to Terasasi), and on the other side, Perimekar.
In 2002, the shareholding of Terasasi and Perimekar was accordingly revised: the majority shareholder of both companies is Razak Baginda and his family.
On the French side, several directors and companies (Thales, DCNS, Armaris and DCNI) could also be indicted. DCNS declined when asked to comment.
But Olivier Metzner, lawyer for Thales, told a French newspaper (Le Parisien) that “we have already demonstrated to investigators that there was no corruption in this case. Being a middleman, receiving commissions for this service was not illegal. What is illegal is if this person, through a company… had given a bribe to foreign officials in order to get this market.”
Terasasi and Perimekar had also done some work. Terasasi advised Thales Asia about the needs of the navy and Perimekar had carried out an activity in Malaysia and in France. The judges would have to determine whether this activity was worth the money paid or not.
Celine Boileau is a Paris-based freelance writer.