Khalid Class - The Karachi Affair
Former Defense Minister of France Charles Millon has said that kickbacks were involved in defense sales to the Pakistan. He said that after looking at the reports and analysis of the ministry of defense he is sure that there were kickbacks involved in the defense deals with Pakistan. He was speaking in front of the judge that is investigating the killings of 11 French engineers in the bombing in Pakistan.
The Pakistan Government decided to purchase French Agosta submarines against the recommendation of the Pakistan Navy, the then Naval Chief Admiral (retired) Saeed Muhammad Khan, during whose tenure the controversial deal was struck, revealed in October 2011 in a defamation suit filed against a television channel.
"The plaintiff (Admiral Saeed) in his capacity as Chief of Naval Staff did not recommend the French Agosta 90 B Class submarines for acquisition by the Government of Pakistan and had in fact recommended, based on the technical and other investigations carried out by Pakistan Navy prior to 1994, the UK manufactured Upholder submarines... The reason for the recommendation was based primarily on the fact that the UK submarines were readily available and had been tested at sea whereas the French Agosta 90 B Class of submarines were yet to be manufactured being prototypes and would have taken years to be delivered. Furthermore, the Pakistan Navy had been offered five and possibly 6 UK Upholder submarines compared to three Agosta 90 B class of submarines for a lesser price..."
French police claimed that a firm Marleton Business Inc. which was set up by Zardari was paid around 5.5 million francs (approximately 838,000 euros) in October 1994 “of which 70% goes to Monsieur Asif Ali Zardari (AAZ) and 30% to Monsieur Lodhi (AL).” A second installment of kickbacks of 59.48 million francs (approximately 9.06 million euros) were paid in in December which were“divided into 41.636 million [francs] for Monsieur Zardari and 17.844 million for Monsieur Lodhi”.
The 1994 contract included provisions for about $111 million in commissions, which were legal at that time, to be paid to Pakistani and French intermediaries. Due to the technology involved with the construction of the vessels, and the technical difficulties encountered by the Karachi Shipyards, the presence of 80 French engineers and technicians was deemed necessary. On May 8, 2002, 14 people including 11 French citizens providing assistance to the Karachi Dockyard were killed when their bus was hit by a car filled with explosives. The recall of French nationals working on the Agosta submarine project in Karachi after the blast was a setback to Pakistan's submarine modernisation project The French engineers and technicians were conducting final checks on the second of the three Agosta 90-B submarines contracted for by Pakistan.
Suspicion initially fell on Al Qaeda but a French government report in 2002 suggested that the attack was provoked by the decision in 1995 by French President Chirac to halt the payments of commissions for the defense sales. In 2011, the French investigators and the judge in the case, known as “the Karachi Affair,” asked the French Defence Ministry to reveal documents which allegedly attributed the murders to a former minister in Benazir government and others. At that time the French government headed by Jacques Chirac had outlawed the payment of commissions. The key accusation is that money from kickbacks for submarine sales to Pakistan were diverted to the campaign fund of 1995 presidential candidate, Edouard Balladur, for whom Mr Sarkozy was the spokesman. Sarkozy angrily denied involvement in the so-called Karachi Affair after two men who have been close to him were questioned in a judicial investigation. Martine Aubry, a candidate for the Socialist Party’s nomination for president, described the Karachi Affair as “certainly one of the most serious in the Fifth Republic.”
Former prime minister Edouard Balladur, 91, joined a long list of senior French politicians pursued for alleged financial wrongdoing, including former presidents Jacques Chirac and Nicolas Sarkozy. Balladur was accused of funnelling illicit commissions from arms deals to his unsuccessful presidential campaign in 1995. The conservative former prime minister was tried by the Court of Justice of the Republic, a special tribunal dedicated to hearing cases of ministerial misconduct. Also in the dock was his former defence minister Francois Léotard, 78, though his presence at the trial's opening was uncertain because of illness. Balladur's former campaign manager Nicolas Bazire was given a three-year sentence by the same court, as was Léotard's adviser Renaud Donnedieu de Vabres. Thierry Gaubert, an adviser to Sarkozy at the finance ministry, and a former executive at state-owned naval contractor DCN (since renamed Naval Group), got two-year sentences. All appealed the rulings.
The two men were charged in 2017 with "complicity in the misuse of corporate assets" over the sale of submarines to Pakistan and frigates to Saudi Arabia between 1993 and 1995, when Balladur was prime minister in the final years of François Mitterrand's presidency. The kickbacks are estimated at 13 million francs, now worth some €2.8 million ($3.3 million). The sum is believed to have included a cash injection of about 10 million francs to Balladur's unsuccessful presidential campaign in 1995, which saw him lose to conservative rival Chirac. Balladur, who is also accused of seeking to conceal the crimes, denied any wrongdoing, saying the 10 million francs came from the sale of T-shirts and other items at campaign rallies.
Léotard was accused of having created an "opaque network" of intermediaries for the contracts signed with Pakistan and Saudi Arabia. The ex-premier was also being charged with instructing the budget ministry – led at the time by Sarkozy – to approve state guarantees for "deficient or underfunded" contracts, because of the alleged kickbacks.
Investigators said that cash deposits in Balladur's campaign fund coincided with trips to Switzerland by Ziad Takieddine, a Lebanese-French intermediary who has long been active in French right-wing circles. Takieddine fled to Lebanon last June after a Paris court sentenced him and another middleman, Abdul Rahman el-Assir, to five years in prison over their role in the Karachi affair kickbacks. Takieddine told judges in 2013 that he participated in the secret financing of Balladur's campaign after being asked by Bazire and Gaubert, though he retracted the claim six years later.
The French court on 04 March 2021 acquitted former prime minister Edouard Balladur on corruption charges after he was accused of using kickbacks from an arms deal but handed a suspended jail term to his former defence minister. The verdict by the Law Court of the Republic (CJR), which sits to try serving and former ministers for alleged violations committed in office, came just days after ex-president Nicolas Sarkozy was convicted for corruption. His former defence minister Francois Leotard, 78, was however convicted of complicity in the misuse of assets and handed a suspended two-year prison term and a fine of 100,000 euros ($120,000).
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