Germans deducted bribe money as a 'legitimate company expense'

A statement from a manager of  Erbslöh, a subsidiary of Ferrostaal, outlines how the submaine bribery system worked, a system previously so overt 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 taxes.

"When they tell me they did business without resorting to ‘useful applications,’ I do not believe it."

The manager clarified that ‘useful applications’ was the term used for bribes and that such expenses, until 1999 "were tax deductible and viewed with absolute normality."

Heard as a witness in the Germany part of the submarine bribery case, the Erbslöh manager added that after 1999, the company started using ‘consultants’ in order to get the bribe money to the governments of countries that had opened tenders for the procurement of military equipment.

The testimony of the German manager apparently was frequently quoted during the submarine trial in Portugal, a trial never-the-less shelved as an inexperienced prosecution team failed to prove that money has been received by anyone that should not have received it.

The case was archived amid sighs of relief from those on the receiving end of the German's admitted largesse.

The Erbslöh manager explained to prosecutors in Munich, at the earlier trial and successful prosecution of submarine consortium managers, that the company's strategy was to hire consultants, under legitimate contracts, who were to work solely as ‘intermediaries,’ (i.e to provide no added value, expertise or advice.)  

"Of the fees they received, the consultants channelled part of it to the decision makers, eventually to the government," said the witness whose compelling evidence that government employees did in fact take bribes has been ignored in Portugal as being too politically inconvenient.

Ferrostaal paid €27 million in unverifed fees to one consultant; the BES subsidiary Escom, for the sale of the two submarines in 2004.

Of the money received by Escom, €5 million went to members of the high council of the Espírito Santo Group including Ricardo Salgado, while €16 million ended up in the hands of three Escom directors and a consultant of Escom, Miguel Horta e Costa, the brother of Escom director Luis Horta e Costa.

Therefore €6 million is unaccounted for and the €16 million that ended up with Escom also has not fully been accounted for as a secret fund in the Bahamas was set up in order to hide the destination of the money and to confuse tax snoops.

If the Erbslöh evidence is to be believed, some of these millions in 'fees' will have found their way to decision makers in Portugal.

The minister of defence at the time of the deal was the current deputy prime minister Paulo Portas and the prime minister at the time was José Manuel Durão Barroso. Both deny any involvement in accepting money themselves and seem particularly uninterested in finding out who, if anyone, did.

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