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German Submarine Consortium (GSC)

The German Submarine Consortium consists of Thyssen Nordtsee Werke, Howaldtswerke Deutsche Werf (HDW) and Ferrostaal. Ferrostaal's Greek agent was Marine Industrial Enterprises S.A. ("MIE") for the two Greek submarine contracts of the German Submarine Consortium (GSC). The Archimedes contract was signed on 15 February 2000 and had a volume of approximately 1.14 billion, of which approximately 263.2 million represented Ferrostaal's share. Under the contract, the GSC was to deliver material packages for three Type 214 submarines to HSY in Greece, with the fourth submarine to be built at HDW's shipyard in Kie1. The consortium also incurred associated offset obligations in the amount of 1.53 billion. The Neptun II contract involved the modernization of three Type 209 submarines at HSY, with an option for a fourth submarine. The contract was signed on 31 May 2002 and has a volume of approximately 469.4 million, of which approximately 43.8 million is attributable to Ferrostaal. Offset obligations in relation to this contract amounted to 563 million.

Three of the four Type 214 submarines envisaged under Archimedes were to be assembled at HSY; the modernization of the Type 209 submarines under Neptun II was also to take place at HSY. Moreover, as a quasicondition for being awarded the Neptun II contract in May 2002, HDW and Ferrostaal had agreed to purchase the majority ofHSY's shares, signing the purchase agreement on the same day as the contract for Neptun II.

The story emerging from the evidence of the non-transparent third-party payments from Ferrostaal via MIE to the "prayer circle" (Gebetskreiss) -- a mysterious group of allegedly highly influential and well connected consultants and lobbyists - is complex, confusing and at times contradictory. Nearly 70 protocols of witnesses and accused taken by the Munich Prosecutor - including current and former Ferrostaal employees, consultants, former managers of HDW and other business persons - have produced an almost equal number of different theories and explanations of the rationale and justification for the payment arrangements and some of the individual payments, as well as of the roles of the individuals involved. The Greek third-party payments are at the heart of the Munich Prosecutor's investigation against Ferrostaal.

What emerges is the likelihood that at least some of the third party payments were intended for corrupt or other criminal purposes. Notwithstanding claims that the Gebetskreis provided genuine and legitimate consultancy or lobbying services, the extent of obfuscation in diverting more than 55 million to largely unidentified third parties without a documented contractual basis suggests that improper motives may, to a large extent, have been at the root of the payments. In repeated testimony to the Munich Prosecutor, the two protagonists responsible for selecting the recipients and organizing the payments - the former Bereichsvorstand and the former head of Marine - conceded the distinct possibility, and indeed likelihood, that the payments were used, at least in part, for corrupt purposes.

Ferrostaal's March 1998 agreement with MlE, under which MlE would receive a 7% success fee for assisting in the acquisition and execution of the Archimedes contract, thus also encompassed the commissions due to the Gebetskreis entities. Fo1lowing a 4% agreement with MIE in 2002 pertaining to the Neptun II contract and related offset obligations, Ferrostaal managed to reduce the overall commission percentage due under the MIE contracts to 5% pursuant to a final agreement in October 2003 that replaced all prior contracts. In sum, payments from Ferrostaal to MIE totalled 83.97 million between 2000 and 2003, of which approximately 55.1 mi1lion was by MIE to third parties.

Though there is no direct evidence that a portion of the funds paid to the entities and individuals on the list were intended or in fact used as bribes to Greek public officials in connection with the submarine contracts, three recipients were at least closely connected to or affiliated with influential Greek public officials: "YB" (Yannis Beltsios), Inveco and Georgios Agouridis. Beltsios' single most important function, however, appears to have been his longstanding connection to Alds Tsohatzopoulos, the Greek defense minister at the time of the Archimedes award and the minister of development at the time of Neptun II and the privatization of HSY. Beltsios was the person to tell what was wanted from Minister Tsohatzopoulos.

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Page last modified: 16-10-2012 19:12:44 ZULU