Chilean ‘frigate gate’ is just a rumour for Dutch MoD

It often takes ages for major corruption cases to evolve from rumours and allegations into investigations, court cases and finally convictions – if they ever get there. Secrecy and political sensitivities are major obstacles to get cases to court.

The most infamous of all cases is the 1980s British-Saudi Al Yamamah deal, where a £50 billion oil-for-weapons programme was sweetened with some £60 million. Despite years of allegations, it took until 2004 before the Serious Fraud Office started investigating the deal. But it closed the case in late 2006 after then Prime Minister Blair had “warned that Britain's relationship with Saudi Arabia could be damaged by the investigation, with consequences for national security - allegedly help in the "war on terror" - and policy objectives in the Middle East“.

Moreover, BAE Systems was to lose a new deal for Eurofighter Tornado’s, had the SFO not dropped the case. But it damaged Tony Blair, whose government once came to power pursuing an ‘ethical foreign policy’.

The Organisation for Economic Cooperation and Development, or OECD, which has a reputation of developing international anti-corruption policies, condemned the Government's decision to abandon the fraud inquiry. It said it had "serious concerns as to whether the decision was consistent with the OECD anti-bribery convention" and warned that the convention's credibility depended on industrialised nations demonstrating the "political will" to abide by it.

Most Dutch people consider their country pretty much free of corruption – as is reflected by Transparency International’s Corruption Perceptions Index, which measures perceived levels of public sector corruption. The Netherlands proudly features at the 9th spot, only behind super-clean Scandinavia, Finland, New Zealand, Australia, Switzerland and Singapore.

While our public sector may be among the cleaner ones, Dutch business certainly is not. As a trading nationpur sang the Dutch have generally never objected to sweetening their business. And of course the same holds for the arms trade – one of the industries most connected to corruption generally. It is estimated that corruption in the arms trade contributes roughly 40 per cent to all corruption in global transactions.

Also the Dutch government has a reputation of being soft on tackling corruption cases involving Dutch companies. Earlier this month the OECD released a damning report on how the Netherlands had implemented its anti-corruption policies since it ratified the ‘Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments’ in 2001.

According to the OECD, "the Netherlands is failing to vigorously pursue foreign bribery allegations and must do more to enforce its foreign bribery laws. Fourteen out of 22 foreign bribery allegations have not triggered the opening of an investigation, calling into question the Netherlands’ ability and proactivity in investigating and prosecuting this crime.“

Arms deals with Chile have a special place here.

Already in 1998 the sale of 202 ex-Dutch Army Leopard tanks to Santiago by Dutch businessman Joep van den Nieuwenhuyzen was sweetened with major payments to two Chilean ex-army officers, who were jailed for pocketing a 600,000 dollar bribe each.

Then last weekend, daily newspaper De Volkskrant ran a major story on another trial in Chile, where three people have been indicted for corruption relating to the sale of four ex-Royal Netherlands Navy frigates in 2004.

One of the them was Guillermo Ibieta - a Chilean middleman also involved in the Leopard case - who operated for Dutch Damen Schelde Naval Shipbuilding in order to win an overhaul contract for the warships. Ibieta, who recently died, received US$ 1.2 million – 10% of the overhaul deal - from the yard, of which he paid US$ 800,000 to two top-ranking Chilean (former) naval officers, who are also indicted.

The Chilean judge says that there is no evidence that Damen Schelde knew about Ibieta paying bribes. But would the Dutch yard really have been interested in knowing how he spent his budget?

It makes one wonder whether and how the company has worked with middlemen in Indonesia and Morocco, to sell its new-built frigates to militaries with at least a similar reputation of being corrupt. And it makes you wonder what happened to the sale of ex-Royal Netherlands Air Force F-16 fighter aircraft to Chile, a few years ago.

In Chile the current corruption case is hot news since 2011 and has become known as caso fragatas: frigate gate. The trial is due to start in the second half of this year.

Typically, a spokesman for the Dutch minister of Defence declared to De Volkskrant that “we have noted rumours in Chile, but they can not relate to the sale of these ships. We have sold them directly to the Chilean government”.

Despite crystal clear OECD criticism of the Dutch corruption approach, the government rather buries its head in the sand.

 

[FS, 25 Jan 2013]