Brazilian company Embraer is best known as a leading producer of regional civil aircraft, but also builds and successfully exports military trainer/light combat and surveillance planes. The company’s global presence includes a U.S. subsidiary and the licensed production of the Embraer Super Tucano in the United States, from where sales are made to the U.S. government and export customers. The U.S. subsidiary was used in the 2000s to engage in bribery of foreign officials around the world, helping to secure sales of both civil and military aircraft. An investigation into this practice resulted in a USD 205 million settlement with U.S. and Brazilian authorities in 2016, and a USD 7 million settlement in the Dominican Republic.
While high-value military hardware procurement programs feature most prominently as vehicles for corruption in this compendium, less visible but equally critical contracts are also susceptible to graft. A now-four-year scandal stemming from corrupt port services contracts has rocked the U.S. Navy’s Pacific operations, implicating officers and civilians up and down the ranks. Prosecutors determined that a contractor based in Singapore, Glenn Defense Marine Asia Pte. Ltd. (GDMA), which provided everything from meals to tugboat services to the U.S. 7th Fleet, had bribed more than two dozen officers, enlisted, and civilian employees to not only provide confidential information on ship movements, but to steer Navy ships toward harbors that offered a higher profit margin to GDMA. The bribes also netted the company information about its competitors’ bids and favorable recommendations within the contracting process. As a result, GDMA was able to overcharge the U.S. Navy and maintain a competitive edge in contract tenders across East Asia.
Like most submarine sales in recent years, the planned sale by German shipbuilders ThyssenKrupp of three Dolphin-2 submarines to Israel, possibly intended to carry nuclear weapons, appears to have involved substantial bribes. In this case, the suspected recipients are close associates of Israeli Prime Minister Binyamin Netanyahu. The sale was provisionally agreed late in 2016, against the wishes of senior military commanders and without a competition. Suspicions of corruption emerged almost immediately, and an Israeli police investigation has led to numerous arrests, with at least one key suspect becoming a state witness. The planned contract has been halted by Germany as the investigation proceeds.
South Korea has been a consistent customer of Kiel-based Howaldtswerke-Deutsche Werft (HDW), the German submarine manufacturer, for over thirty years, buying new boats from the shipyard in 1987, 1989, 1994, 2000, and 2008. In July 2015, South Korean investigators arrested Chung Eui-sung, the man responsible for brokering each of these deals and pocketing millions of U.S. dollars in the process. At the time of his arrest, Chung was suspected of moving USD 89 million to offshore bank accounts. One of Chung’s colleagues, a reserve navy admiral, was also charged for lobbying officials on the submarine deals. As yet, however, no Korean officials involved in the decision to purchase the submarines has been identified or charged as the ultimate recipients of the bribes.
The economic and fiscal crisis that struck Greece in 2009 has also led to widespread corruption investigations, unearthing vast corruption by politicians and others across Greek industry that is widely seen as one of the factors behind the crisis. The military sector is certainly no exception, and whistleblowers have suggested that virtually all arms contracts signed by Greece in the 1990s and early 2000s were subject to commissions, or bribes. Former Defence Minister Akis Tsohatzopoulos is one of those who has been imprisoned as a result of the scandals (see German submarine sales to Greece).
Operation Car Wash (“Lava Jato”), the sprawling investigation into public-sector corruption that brought down Brazilian President Dilma Rousseff, is also threatening to tarnish a submarine contract signed in 2009 with French state-controlled shipbuilder DCNS. In addition to agreeing to provide four Scorpène diesel-powered attack submarines, the French company committed to help the Brazilian military build a new submarine construction facility and develop its first nuclear-powered submarine—the object of long-standingambitions. Since 2015, however, Brazilian authorities have been investigating the construction firm Odebrecht S.A., DCNS’ local partner on the submarine contract, for potential corruption related to the 2009 deal. French investigators launched a parallel inquiry into DCNS’ conduct in the fall of 2016.
The multi-jurisdiction investigation into Rolls-Royce’s extensive history of paying bribes, prompted by a whistleblower’s allegations in 2012, included one major defense deal. According to investigations in India and the United Kingdom, the British engine-manufacturing company used a series of agents to secure a contract in India for trainer-aircraft jet engines. The GBP 200 million (USD 310 million) contract, finalized in 2010, was backed by more than USD 17 million in bribes paid through arms broker Sudhir Choudhrie and a consultancy, Aashmore Private Ltd. Likely due to India’s long history of cooperation with Rolls-Royce on jet engines, Prime Minister Narendra Modi’s government has not blacklisted the firm.
This series of posts by World Peace Foundation details 35 cases of corruption in the international arms trade and broader military sector. It forms part of WPF’s ongoing program on the Global Arms Trade and Corruption.
The cases are also displayed on an interactive map, designed by Tufts GIS Data Lab.
The global arms business—especially the international arms trade, but also domestic military procurement—is widely seen as one of the areas of legal business that is most subject to corruption. Researcher and former oil industry executive Joe Roeber, in Parallel Markets (2005), estimated that 40% of corruption in international trade was related to the arms trade. This was based on a detailed survey of materials not in the public domain, relating to complaints of corrupt activities in international trade, to which he had access. Among recent works documenting the ubiquitous corruption that characterizes the arms business are Andrew Feinstein’s The Shadow World (2011), Nick Gilby’s Deception in High Places (2014), focusing on the UK, and Jean Guisnel’s Armes de Corruption Massive (2011), focusing on France.
The Al Yamamah series of arms deals with Saudi Arabia was, and remains, Britain’s biggest arms deal ever concluded, earning the prime contractor, BAE Systems, at least GBP 43 billion in revenue between 1985 and 2007, with further deals still ongoing. In 1985, the UK and Saudi governments signed an initial Memorandum of Understanding, that led to a series of contracts for combat aircraft and a variety of other military equipment and support services over the period 1985-93. A major follow-up deal, Al Salam, was concluded in 2003. Allegations of corruption surfaced almost immediately, but investigations were thwarted until a large cache of documents was leaked in the early 2000s. An investigation by the UK government’s Serious Fraud Office (SFO) uncovered ‘commission’ payments, or bribes, totaling as much as GBP 6 billion paid by BAE Systems to members of the Saudi royal family and others. A key recipient of these payments, including over GBP 1 billion, was Prince Bandar bin Sultan, son of the Saudi Crown Prince. However, the SFO investigation was shut down by the British government in 2006, under heavy pressure from the Saudis.
The Angolagate scandal rocked the French political world when it came to light in 1999. It revealed a plot t, involving several senior French political figures to covertly supply arms to the Angolan government for use in its renewed war against UNITA rebels, circumventing an arms embargo. Beyond the illegality of the arms sales themselves, the Angolagate deals involved both bribery of Angolan political and military figures, and reverse kickbacks allegedly in support of French political campaign funds. A French court convicted 36 individuals in 2008 in connection with the scandal on a variety of charges, but some of these convictions were overturned on appeal in 2011.