In December 2009, SUARAM filed an initial suit against X at the Paris court for “active and passive corruption, trading of favours and abuse of corporate assets”. The state prosecutor Jean-Claude Marin then opened a preliminary investigation. At the time, it was suspected that a bribe of 114 million euros had been paid by the company Armaris (a subsidiary of DCNI and Thalès) to the Malaysian Prime Minister Dato’ Sri Mohd Najib Razak and his entourage, through the company Perimekar Sdn Bhd. This company, which was officially established to “coordinate” the sale of the three submarines, had Abdul Razak Baginda’s wife as its majority shareholder. However, in the suit filed in December 2009, the plaintiffs argued, that in light of the way the company operated: “There is no doubt that this legal entity [Perimekar] was created with a single goal: to organise the payment of commission and distribute the amount amongst the different beneficiaries--Malaysian officials and/or Malaysian or foreign intermediaries”. However, this contract was signed after the OECD Convention came into force in France in 2000, which punishes corruption of foreign public officials with ten years’ imprisonment and a 150,000 euro fine. Following this complaint, a preliminary investigation was conducted by French prosecution agencies. Hearings were conducted and searches were made at the premises of DCNS and THALES. Revealed in September 2008, the notebooks of Gérard-Philippe Menayas, former chief financial officer of DCN, who was indicted in the Karachi case (involving the sale of three Agosta 90B SSKs to Pakistan), also confirm the suspicions of hidden commissions. In his memorandum, Menayas mentioned the Malaysian submarine contract as follows: “Since the entry into force of the OECD Convention regarding the fight against corruption in September 2000, only two contracts have been signed; the first with India, and the second with Malaysia in 2002. These two contracts are the result of commercial actions undertaken prior to the OECD Convention’s entry into force. Furthermore, they are both suspected of non-compliance with this Convention. I have evidence to support this”. At the time of the contract’s signature Alain Richard was France’s Minister of Defence, in Lionel Jospin’s government (socialist party). With the Malaysian indictment, and the revival of this case, new items have been contributed to the case by the plaintiffs. First, according to sources cited by the plaintiffs, it was not the company Armaris that paid 114 million euros to Perimekar, but rather the Govt of Malaysia, “with the sole purpose of circumventing the OECD Convention”. This is a true revelation, while the Malaysian Minister of Defence has since ended up ‘confessing’ to the payments made by foreign companies to Perimekar. Where did this money go? Were there retro-commissions to French politicians? Secondly, there does not appear to have been a single commission, but rather three. In addition to that of 114 million euros, there are two further installments:
• one paid by the DCNI to the commercial networks of THALES, for over 30 million euros, corresponding to “commercial fees relating to the negotiation and execution of the contract”;
• the other for 2.5 million euros.
However, according to Gerard Philippe Menayas: “Until the OECD Convention against corruption came into force in France, no contract for the sale of defence equipment to an emerging country could take place without the payment of commissions to policy makers (euphemistically called “commercial fees for exports” or ‘FCE’)”. The second commission was paid by THALES to a recipient, who remains unknown, in order to convince the Malaysian government of the need to conduct additional work. Finally, according to the complaint filed by the firm Bourdon, SUARAM’s lawyer, the company GIFEN, which was established by Jean-Marie Boivin in Malta, intervened in the negotiations “so as to facilitate the money transfers in this case,” and particularly finance the trips of Abdul Razak Baginda and Altantuya Sharribuu. The ‘catch’ is that Jean-Marie Boivin is also cited in the Karachi case... for his role in the system for supplying slush funds to political parties.
Chronology Of Events
June 5, 2002: Malaysian government signed an agreement with French DCNS and Spainish Navantia for the procurement of two (2) Scorpene-class submarines. The procurement contract was through direct negotiation with the manufacturing companies, said to be with the service of Perimekar Sdn Bhd. According to the Government explanation, the contract was divided into two parts:
a. Cost of two Scorpene SSKs together with the package that covers Integrated Logistic Support and training amounted to Euro 969.15 million (however on May 14, 2008, then Defence Minister Dato’ Sri Mohd Najib Tun Razak told the Parliament that this part cost Euro 999.15 million).
b. Payment to Perimekar Sdn Bhd in the name of “coordination services” for a period of six years, the sum was Euro 114.96 million. It is widely believed that payment for the second package was in reality the commission for Najib/Rosmah through Abdul Razak Baginda as the owner of Perimekar. With the exchange rate at the time, the cost was equivalent to:
1) Payment for submarine cost between: RM2.14 billion (Euro=RM3.2 in 2002) – RM5.43 billion (Euro=RM5.6 in 2008) (now Euro=RM4.7)
2) Commissions: probably about RM540 million (exchange rate at the time of payment)
July 26, 2006: The Royal Malaysian Navy (RMN) announced that these vessels will be named after the first and second prime ministers. The first hull will be named KD Tunku Abdul Rahman and the second hull KD Tun Razak.
October 24, 2007: The first vessel, KD Tunku Abdul Rahman, was launched by then Defence Minister Dato’ Sri Mohd Najib on at the DCNS dockyard, Cherbourg, France. (According to Sharribuu, Altantuya was in France with Najib during the launch).
September 3, 2009: The first Scorpene SSK, KD Tunku Abdul Rahman, arrived at a Port Klang naval base after a 54-day voyage from France. The second of the series, KD Tun Razak, was scheduled for delivery in late 2009. However it only arrived in mid-2010.
February 10, 2009: It was reported that KD Tunku Abdul Rahman could not dive due to technical faults. RMN sources admitted that the defect had prevented it from diving for three months. However the Govt of Malaysia claimed that the problem was fixed in early February and it was allowed to undergo tropical water trial since then. As a result, submarine builder DCNS extended the warranty for the submarine, which was supposed to expire on January 25, 2010, until May 2010 so the submarine could complete its trials as the first step to obtaining its Initial Operational Capability (IOC).
May 25, 2010: KD Tunku Abdul Rahman’s warranty expired.
July 2, 2010: KD Tun Razak, the second Scorpene SSK, arrived at the Lumut RMN Base. It was more than six months behind schedule.
July 7, 2010: Marhalim Abas of the Malay Mail again reported that Malaysian submarine crews had remained on dry land since the first arrival due to continuous problems of KD Tunku Abdul Rahman; the crews risked to lose their submarine rating for unable to participate any trial dive. Both submarines are now parked at Sabah’s Sepanggar Bay Naval base, to date neither of them had undergone the necessary tropical water trial dive.
What is the actual cost of the Scorpene submarines?
The agreement signed with DCNS/Navantia cost Malaysian taxpayers Euro 1.08 billion (with Euro 114.96 million commission for Perimekar). Nonetheless, we later found out that the price did not include many items. What are the missing items that need additional payments?
Maintenance services: Malaysian government had awarded a contract to the joint venture company Boustead-DCN Bhd (BDCN) as the services provider for the submarines’ maintenance. Until today the cost has not been finalised. Nonetheless, in June 2009 Boustead Heavy Industries in a statement to Bursa (Stock Exchange) Malaysia informed that the government had expressed an intent to award a contract worth RM600 million to its joint-venture unit for in-service support for submarines.
March 2010: Defence Minister Dr Ahmad Zahid Hamidi clarified that for the first year’s maintenance would cost about RM270 million and the annual maintenance cost will be capped at RM600 million per year for both SSKs.
December 2009: Defence Minister Ahmad Zahid Hamidi announced an additional contract worth Euro37.5 million (about RM150 million) for the supply of Support and Test Equipment (S & TE) for the two Scorpene SSKs.
June 22, 2010: The Defence Minister answered a parliamentary question in which he revealed that the government has paid Euro219.265 million (about RM890 million) for 40 units of Exocet SM-39 missile and 30 units of Black Shark torpedo, to be delivered by 2013.
Infrastructure cost for submarine base in Sabah?
Training for crews, support staff etc?
Grand total (rough estimate):
Hardware: two Scorpene-class SSKs: RM5,430 million
Commissions in the form of services by Perimekar: RM540 million
Package for simulation and training, S & TE: RM150 million
Weapons: 40 SM-39 Exocet missiles and 30 Black Shark torpedoes: RM890 million
Total: RM6.98 billion
Maintenance services (under negotiations): RM270 million (first year)/RM600 million (maximum)
Money spent to date: RM7.3 billion. If RM600 million is added for maintenance, then the total jumps to RM7.58 billion (for 3 years).