Greek Land Forces and German Bribery

Introduction

Greece maintains the second-largest armored corps among European NATO countries, trailing only its neighbor and rival Turkey. Over the last three decades, the Hellenic Army has acquired 353 German Leopard 2 tanks, including 140 assembled in Greece. It also received approximately 500 older second-hand Leopard 1 tanks of various configurations, sometimes as offsets associated with other deals. At the same time, the army expanded its artillery and anti-air capabilities. From December 2013 onward, a senior procurement official, Antonis Kantas, began providing evidence of a massive armaments corruption scandal. While companies from numerous countries, including Sweden and Russia, were implicated, it was German firms which accounted for most of the corrupt army deals. Kantas’ evidence detailed extensive bribery during his tenure around the turn of the millennium involving, in addition to a 2003 deal for Leopard 2 main battle tanks, two other land forces procurement projects. These were the 2000 purchase of ASRAD mobile surface-to-air (SAM) missile systems, and a 2001 deal for PzH-2000 self-propelled howitzers. Prosecutions in Greece and Germany have secured convictions of numerous individuals involved in the deals, as well as fines for the two German firms involved, Rheinmetall and Krauss-Maffei Wegmann (KMW).

For related cases, please see The Greek Submarine Scandal and Ericsson’s Sale of Radar Systems to Greece.

Key Facts

Buyer: Greece

Sellers: KMW, Rheinmetall (Germany)

Years of Deals: 2000, 2001, 2003

Equipment Sold:

54 ASRAD Mobile SAM systems (Rheinmetall)

170 Leopard 2HEL main battle tanks (KMW and Rheinmetall)

24 PzH-2000 self-propelled howitzers (KMW and Rheinmetall)

Value of Deal:

USD 134 million (ASRAD SAMs)

EUR 1.7 billion (Leopard tanks)

USD 164 million (howitzers)

Sum Involved in Corruption Allegations:

EUR 3.3 million (ASRAD and Leopard tanks)

EUR 7.9 million (howitzers)

Dramatis Personae

Dimitris Papachristos — representative of KMW in Greece; admitted to paying a bribe to Antonis Kantas.

Panagiotis Efstathiou — representative of STN Atlas (a predecessor of Rheinmetall’s defense electronics division) in Greece; admitted to paying bribes to Antonis Kantas. Sentenced to a nine-year suspended prison term in connection with a separate procurement scandal.

Antonis Kantas — deputy armaments chief at the Greek Ministry of Defense (1997-2002); admitted to receiving bribes totaling USD 13 million in relation to a number of arms deals. In 2019, received a 10-year suspended sentence for his involvement in a separate arms procurement case, on top of a prior 25-year suspended sentence for taking bribes in a military communications procurement scandal.

Olaf E. — vice-president for international marketing at KMW; convicted of abetting tax evasion associated with bribery and given a fifteen-month suspended sentence.

Dagmar Luuk and Heinz-Alfred Steiner — retired German parliamentarians, directors of the “Büro für Südosteuropaberatung” [Bureau for Southeast Europe Consulting], an intermediary firm. Charged with abetting tax evasion associated with bribery.

Manfred Bode — chairman of KMW’s supervisory board; charged with tax evasion associated with bribery, died in October 2018.

The Arms Deals

At least three major arms deals involving the Greek army are connected to a bribery scandal emerging from the 2013 testimony of deputy armaments chief Antonis Kantas against firms, agents, and his ministerial colleagues. The first deal was the 2000 purchase of 54 mobile anti-air systems—a package put together by STN Atlas consisting of Stinger surface-to-air missiles paired with cameras and range-finders, mounted on Greek-built HMMWVs. The package, marketed as the Advanced Short Range Air-Defence System (ASRAD) Hellas, was valued at the time at about USD 134 million.

The second deal, signed in 2001, saw the Hellenic Army purchase 24 PzH-2000 self-propelled howitzers from KMW for USD 164 million. As part of the arrangement, the Bundeswehr also gave its Greek counterpart 114 second-hand M-109A3GEA self-propelled guns as a sweetener.

The third, and by far the largest deal, involved the 2003 sale of 170 Leopard 2 tanks, with 140 assembled in Greece. After the Cold War, most countries in NATO had pared down their heavy ground units assigned to stop a Soviet armored thrust through Central Europe. Greece, in contrast, continued building up its army’s land component through the 1990s and 2000s. Allies saw an opportunity for large cost savings—and even some small profits—in moving surplus hardware out of their inventories, while procurement officials in Greece saw prospects for cut-price sales and co-production offsets. In three deals, signed in 1997, 2003, and 2005, the German army sold or gifted a total of 750 tanks to Athens. The 2003 package—the only one implicated in the corruption scandal—worth EUR 1.7 billion, was accompanied by an offset of 82 additional second-hand Leopard 1A5 tanks, in addition to armored recovery vehicles, bridge layers, training simulators, and spare parts. Both the Leopard 2 and the PzH-2000 are joint projects of KMW and Rheinmetall; the former company integrates the main sub-systems and builds the hulls of the armored vehicles, while the latter supplies the main guns and the fire control system.

Corruption Allegations

In late 2013, a former ministry of defense procurement official named Antonis Kantas began cooperating with Greek anti-corruption investigators. In extensive testimony, Kantas implicated two former ministers and several arms manufacturers in a string of deals stretching from the late 1990s through the mid-2000s. According to Kantas, Panagiotis Efstathiou, a representative of German defense electronics firm STN Atlas—offered him EUR 600,000 to expedite a submarine deal and EUR 1.5 million as part of the ASRAD contract. STN Atlas split in 2003 into Rheinmetall Defense Electronics (land systems), owned by Rheinmetall, and Atlas Elektronik (naval systems), owned by Airbus and ThyssenKrupp Marine Systems. The two new organizations and their owners have each had to take responsibility for the legacy of foreign bribery conducted under the old STN Atlas structure.

Kantas also alleged that a KMW representative, Dimitris Papachristos, paid him 0.5% of the value of the PzH-2000 deal (approximately EUR 820,000), while a third representative, Thomas Liakounakos, left EUR 600,000 on his couch to smooth over his concerns about the Leopard 2 program. Kantas claimed he originally believed the tank program was unnecessary, but Defence Minister Yiannos Papantoniou felt obliged to continue the program because the army demanded parity in re-capitalization spending with the other services.

In the case of the submarine deal, Kantas’ testimony merely confirmed and expanded an investigation that was already several years in the making. With regards to the army’s procurement programs, however, the new evidence opened up multiple avenues of investigation in both Germany and Greece. Prosecutors eventually determined that Rheinmetall Defense Electronics (RDE) had paid out at least EUR 3.3 million in bribes associated with the ASRAD and Leopard 2 deals, while KMW paid as much as EUR 7.9 million to secure the PzH-2000 contract. These figures are both significantly larger than the bribes Kantas has attested to taking, which suggests that other corrupt officials or middlemen also benefited.

Investigation and Outcomes

In Greece, criminal proceedings have led to judgments against the key local agents and officials involved in the corrupt deals, although prison sentences have almost always been suspended. The central procurement official who cooperated extensively with authorities, Antonis Kantas, has been held to account in several trials and received more than 35 years in suspended prison sentences for corruption. The agent Thomas Liakounakos was given a 16-year prison sentence in May 2018 for his part in a separate arms deal involving the sale of Ericsson Airborne Early Warning and Control Systems, but denies involvement in the Leopard deals. Panagiotis Efstathiou, the STN Atlas agent, admitted to paying Kantas bribes and received a nine-year suspended sentence for his part in the submarine deal. Dimitris Papachristos was taken into custody and questioned following Kantas’ revelations, producing evidence against KMW that German prosecutors took up in a subsequent trial.

Both of the defense ministers during the period of the corrupt army deals have served time in jail. Akis Tsochatzopoulos was convicted on corruption charges related to the submarine deal and spent five years in prison before being released for health reasons in 2017. In October 2018, former minister Yiannos Papantoniou was jailed while awaiting trial for taking bribes to support a 2003 contract to upgrade six naval frigates. Neither has been charged in connection with the land systems contracts, however.

In Germany, investigators have followed two main tracks. The first consists of the investigation by the Bremen Public Prosecutor’s Office into offenses committed by RDE and its employees. In December 2014, the prosecutors announced a settlement with RDE under which the firm agree to pay a EUR 37 million fine and back taxes of EUR 6.4 million. The tax offense occurred because Rheinmetall incorrectly declared its bribes as a legitimate expense, thus lowering its taxable profits. Armin Papperger, Rheinmetall’s CEO since 2013, admitted that RDE had paid bribes for the ASRAD contract back when it was part of STN Atlas. Notwithstanding the corporate settlement with Rheinmetall, the Bremen prosecutors decided in February 2017 to charge at least five former employees—including one Greek employee—for personal liability in relation to the corrupt payments. The prosecutor’s office confirmed that the charges implicate a total of EUR 3.3 million in bribes for two separate sales: the ASRAD deal and the Leopard 2 contracts. While KMW was the systems integrator for the tanks, RDE had a stake in the program as the provider of their fire-control systems. It remains unknown whether KMW was responsible for any bribery associated with the Leopard 2 contracts, as originally suspected by the Greek investigators, or whether it was Rheinmetall alone which greased the deal.

The second track consists of the Munich Public Prosecutor’s Office investigations into KMW, which has centered on the firm’s involvement in the EUR 164 million PzH-2000 self-propelled howitzer deal. After Kantas’ revelations, KMW hired Pricewaterhouse Coopers to conduct an internal audit of its Greek sales. In May 2014, a leaked copy of the audit report revealed that two former German Social Democratic Party (SPD) parliamentarians, Dagmar Luuk and Heinz Alfred Steiner, had inexplicably received EUR 5.6 million in payments from KMW during the early 2000s through their consulting firm, called the Büro für Südosteuropaberatung (Bureau for Southeast Europe Consulting). Both Luuk and Steiner had retired from politics by the time the suspicions payments were made. The two are now facing trial for tax offenses on the theory that they collaborated with Akis Tsochatzopoulos, the Greek minister of defense during the late 1990s, to divert funds from the PzH-2000 deal for the co-conspirators’ private benefit.

The PzH-2000 investigation also produced tax evasion charges against KMW itself and one of its managers, identified by press reports as Olaf E., a former vice-president for international marketing. Foreign bribery charges could not be levied against KMW, however, as the statute of limitations had passed. (The same applies in the Rheinmetall investigation discussed above.) According to prosecutors, KMW paid a total of EUR 7.9 million in bribes to secure the PzH-2000 deal, of which Olaf E. diverted EUR 1.15 million into his own pockets and a further EUR 5.6 million flowed through Luuk and Steiner’s Büro für Südosteuropaberatung. In December 2015, Olaf E. was given an 11-month suspended prison sentence, while KMW was fined EUR 175,000 for tax evasion. Prosecutors appealed the sentence and the fine as too lenient, and in May 2017 the Federal Court of Justice in Karlsruhe agreed. The Karlsruhe court ordered a re-trial and instructed judges to impose a fine based on the economic advantage that accrued to KMW. KMW Supervisory Board chairman Manfred Bode was also implicated, but passed away in October 2018. In June 2019, a Munich court ruled that KMW was liable for EUR 500,000 in fines, and confirmed a one year and three months sentence for Olaf E.

Banner Image Credit

Image Caption: Greek soldiers participate in the multinational field training exercise, Eagle Sentinel 17, with their tanks on July 12, 2017, at Novo Selo Training Area, Bulgaria.
Image Source: U.S. Army/Capt. Leslie Reed.