The 2004 purchase of two submarines from a German consortium that includied Ferrostaal, was eased through by the payment of €6.4 million in bribes to establishment figures in Portugal.
People linked to the PSD/CDS-PP government and to the Portuguese Navy received €1.6 million each to ‘facilitate business’ with the German submarine consortium.
The submarine scandal goes back to 2004 when the then Defence Minister Paulo Portas* authorised the €900 million deal. 'Der Spiegel' magazine reports that all the 'stakeholders' in the business received the same bribe of €1.6 million.
In addition to the four Portuguese figures there is Jürgen Adolff, the former Honorary Consul of Portugal in Munich, who was convicted in March 2014 and sentenced to a two year suspended sentence.
The bribes were in return for arranging a meeting between a director of Ferrostaal and the then Prime Minister, Barroso.
A statement from a manager of Erbslöh, a subsidiary of Ferrostaal, outlined how the submarine bribery system worked, a system until 2000 that was so open that the company was able to claim the sums paid to foreign government employees as a legitimate business expense when it came to its end-of-year accounts.
After 2000, shell companies were set up and used to conceal and channel the bribes to the right people.
According to the German magazine 'Der Spiegel', searches at Ferrostall’s head office have revealed more than a dozen contracts intended to disguise the payment of kickbacks to “decision makers in the government, in the ministries and in the Portugal Navy."
The Public Prosecutor's Office in Germany continues to investigate suspicions related to the creation of a series of shell companies used for the payment of illegal commissions in the submarine case.
In December 2014, the Portuguese public prosecutor dropped the case, saying that proving the payments were received was too hard a task.
Defendants Helder Battaglia dos Santos, Luis and Miguel Horta e Costa, and Pedro Ferreira Neto walked free as if nothing had happened. This was despite the German authorities already giving suspended sentences and fines to two Ferrostall directors for sending the bribes to the Portuguese decision makers.
According to the Germans, several companies have been identified as being used to handle bribes, as have some of the Portuguese people involved, hopefully all of them.
In 2006, Rear Admiral Rogério d'Oliveira received €1 million via one of these shell companies. D’Oliveira already had retired and was acting as a representative for the German company in Portugal. He was never charged.
In addition to the retired Rear Admiral, people now named as being involved in the financial transactions are Helder Bataglia dos Santos, from Grupo Espírito Santo (GES), Luis Horta e Costa, the former president of ESCOM, the GES company that advised the German consortium, Miguel Horta e Costa, the former president of PT, and the lawyer Vasco Vieira de Almeida.
The German authorities now are able to describe and name the series of fictitious companies which handled the bribes including GES, both in the UK and in the US Virgin Islands. This is good progress indeed and a big embarrassment to the Portuguese prosecution service which simply gave up.
Portugal’s filing of 18 volumes of evidence covering eight years of work containing interviews, diagrams, a complete chronology of the facts, references to ministers’ council resolutions, emails between the parties, contract terms and memos was a sad reflection on a highly politicised legal system that ensured the correct result was arrived at.
The Germans have proved that bribes were paid: the Portuguese failed to find out which of its citizens received the money. Only due to the continuing efforts of the German prosecutors are the facts being revealed and the Portuguese names about to be revealed.
Whether proof of receiving bribes will be enough to reopen the shelved case in Portugal remains to be seen but the public interest must be served and those who profited from the overpriced sale of German submarines must be held to account.
* Paulo Portas has never properly explained how and why officials at the national headquarters of the CDS-PP in December 2004 went to a Banco Espírito Santo branch in Lisbon and paid in €1,060,000 in cash into the party’s account.
In just four days, 105 cash deposits were made for amounts always less than the anti-corruption alert limit.
Those amounts were justified as ‘donations collected at parties and dinners which had been stored in the vaults of the national headquarters.’
There were 4,216 receipts which noted only the amount and the donor's name, a list that the Judicial Police said was clearly fictitious.
For the case background, see: