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NRP Tridente Type 209PN - Scandal

The Portuguese prosecutor's office filed fraud charges 30 September 2009 against seven Portuguese and three Germans involved in the controversial one billion Euro purchase of two German-built diesel submarines for the Portuguese Navy, sparking debate about whether Portugal needs -- or can afford -- the top-of-the-line submarines and raising expectations that the Portuguese government may renegotiate the deal. The prosecutor's office alleged that the German Submarine Consortium conspired with Portuguese companies to include as offsets business that already existed, double-invoiced certain offsets, and in some cases reported costs far above the invoice price, defrauding the Government of Portugal of approximately 34 million Euros.

Although the unfolding scandal was unlikely to derail the purchase this late in the decade-long process -- one of the submarines is undergoing sea trials in 2009 -- the sobering price tag, which came due during a recession, had some government officials second guessing the purchase and finger pointing across the aisle, with the former Speaker of Parliament saying that Portugal "does not need the submarines at all" and "urgently needs to sell" them to acquire more useful weapons. While the submarines were not inconsistent with Portuguese national maritime strategy -- Portugal has had submarines since 1913 -- an enhanced maritime patrol capability, such as surface patrol vessels, would be a more efficient use of Portugal's limited defense budget.

As early as 2007, rumors began to surface that the Portuguese Judiciary Police were investigating a 24M Euro transfer from the German Submarine Consortium to a Portuguese company. On September 30, 2009, following a two-year investigation in Portugal and Germany, the Portuguese prosecutor's office filed charges against seven Portuguese managers and three German representatives from Man Ferostaal, a company belonging to the German Submarine Consortium, for forgery and fraud. The Portuguese prosecutor's office alleged that they improperly benefited from the offsets program. Investigators estimated the Government of Portugal was defrauded of approximately 34 million Euros. The German consortium has denied the charges.

While the prosecutor's office did not initially provide full details, the gist was that the representatives of the German Consortium conspired with Portuguese companies to include as offsets business that already existed, double-invoiced certain offsets, and in some cases reported costs far above invoice. In addition, the offsets appear to have increased the price of the submarines significantly. According to the prosecutor's office, the Government of Portugal paid five to fifteen percent more than necessary for the submarines to generate offsets for Portuguese companies. There were a number of red flags during the process, such as evidence that the German group was informed they had won the bid three weeks before the Portuguese Minister of Defense signed the document making the decision official. The prosecutor's office is expected to file a second complaint, but no government officials were initially charged and there was no immediate indication any were involved in the scandal.

Two former Ferrostaal executives pled guilty and were convicted in a German court in December 2011 of bribing Portuguese and Greek officials in the sell of submarines to these two countries. The Portuguese criminal investigation agency DCIAP said 22 August 2012 that authorities would carry out new investigations into the purchase of the two submarines. The agency said that it would request the cooperation of the current and immediate past defense ministers, adding that “historic” documents related to the submarines’ public tender, contract signing, defense offset agreements, and financing remained “missing”.

The long-awaited submarine trial, involving the Portuguese military and the CGS German Submarine Consortium, will attempt to uncover the depths of bribery and corruption to which the parties plunged. The trial started on 19 November 2012. In the dock were three directors from the German multinational Ferrostaal and seven Portuguese businessmen. The criminal investigative police found that employees of the Christian Democrats [CDS-PP] made cash deposits in the party’s bank account totaling over a million euros over just four days – bags and bags of money, each of them under 12,500 euro, the amount over which banks have to declare the deposits to anti-corruption authorities. The minister of defense at the time of the purchase, Paulo Portas, was Leader of the Democratic and Social Center - People's Party (CDS-PP) from 1998 to 2005. Ferrostaal board members admitted in the German courts to having paid 1.6 million euros as bribes to Portuguese officials.

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