THE SHADOWY ARMS TRADE: A LOOK BACK AT A QUESTIONABLE TANK DEAL / DER SPIEGEL

The Shadowy Arms Trade

A Look Back at a Questionable Tank Deal

By Sven Becker and Michael Sontheimer

An intermediary received a commission of almost $200 million for the sale of battle tanks to United Arab Emirates. Some of that money, though, may have been used to bribe government officials.

French-made Leclerc tanks in Yemen


The tanks were first deployed in combat three summers ago. In early August 2015, they rolled along Yemen's N1 highway, heading north to Al Anad Air Base. Their orders were to help government troops beat back the rebels.

The battle for the base only lasted a few days, after which the Sunni government declaredvictory over the Houthi rebels. The success came partly due to its foreign backers, most notably the United Arab Emirates. Abu Dhabi had sent a brigade of Leclerc tanks to rout the Houthi rebels from the air force base.

The Emirates once shelled out more than $3 billion (2.6 billion euros) for 436 Leclerc tanks and other armored vehicles. The motors were from Germany, manufactured by the Motoren und Turbinen Union (MTU) in the city of Friedrichshafen on the shores of Lake Constance. The transmissions were from a company called Renk AG in Augsburg. The tanks were assembled by Giat, a state-owned enterprise in France that is now a part of the French-German joint venture Nexter.

Abu Dhabi is a party to Yemen's civil war, which has left thousands of people dead. It's unclear how many of those deaths were because of the tanks the Emiratis sent, but it is possible to reconstruct just how the machines found their way to the Arabian Peninsula. The whistleblowing platform WikiLeaks has published a rare document that pulls the curtain back on the international arms trade. DER SPIEGEL, along with the French online investigative journal Mediapart and the Italian newspaper La Repubblica, were given early access to this document.

It describes an arms deal of immense proportions: The commission alone amounted to a whopping $235 million. Of that, $195 million flowed from Giat, through a letterbox company in the British Virgin Islands, and on to the enigmatic Arab businessman Abbas Ibrahim Yousef Al Yousef.

Bribes in Germany?

He is considered one of the Emirates' richest men. There are some indications that Yousef didn't keep all the money from the commission for himself, but that he passed some of it on to Arab officials. The documents also raise the question of whether bribes were paid to anyone in Germany to ensure the export of the motors and the transmissions went smoothly. In 2009, Yousef said: "I undertook the lobbying of the German authorities and was instrumental in ensuring that the necessary approval or waiver was obtained."

That's according to a ruling handed down by one of the International Chamber of Commerce's arbitration courts, which met secretly in Paris. When a deal was reached on the sale of Leclerc tanks to the UAE, Giat and Yousef agreed on a commission of 6.5 percent, the equivalent of $235 million. The managers of the French state-owned company sent regular payments to Yousef until March 2000, but they stopped after about $195 million. This didn't sit well with the businessman. He turned to the arbitration court and demanded he be paid the remaining $40 million. While pleading his case, he included some highly sensitive details. These are reflected in the ruling handed down by the arbitration court, which was anonymously provided to WikiLeaks.

Arms deals tend to have a long lifecycle. Fighter jets, battleships and tanks are ordered and delivered over a period of several years and must be kept in good repair. The beginning of the billion-dollar deal with the Leclerc tanks can be traced back to an era in which the French socialist Francois Mitterrand was in charge in France and Helmut Kohl, a Christian Democrat, was chancellor of Germany.

In the 1980s, French generals dreamed of a modern battle tank. The main gun -- a 120-millimeter caliber weapon -- should automatically reload itself, they thought, making it possible for a three-man crew to operate the tank, rather than the conventional four. The tank should be lighter, smaller and nimbler than the German Leopard or the American M1 Abrams.

The high cost of development drove Giat to look beyond France for potential buyers. That's how Yousef, the arms dealer, got involved. The Emirati businessman had apparently been an intermediary for Giat and the UAE since 1989.

Like most people in the secretive world of international arms sales, Yousef rarely makes public appearances. He is ostensibly from the same village as Sheikh Zayed bin Sultan Al Nahyan, the UAE's founding father and a former president. Yousef's contacts within the family of the current Emirati president are said to be good as well. As a young man, Yousef flew fighter jets manufactured by the French company Dassault. A once-powerful manager in France described him as being very Western-oriented. Yousef worked as a middleman for many French weapons manufacturers in the UAE, the manager said.

But business wasn't always kosher. Last year, Yousef was identified as perhaps having been involved in a possible corruption affair at Airbus. The German-French aerospace giant had paid 19 million euros to another company called Avinco, which bought and sold used airplanes and helicopters, and had used a sham firm to cover its tracks. Yousef appears to have been behind Avinco. The businessman allegedly shifted the lion's share of the payments from Airbus to another company in Panama. What happened to the money after that is unclear. Yousef was not available for comment. When asked, Airbus said the case would be investigated.

Complications

As a businessman, Yousef hasn't limited himself to weapons deals. He invested a portion of his profits into the Munich-based organic supermarket chain Basic AG. Today, his son sits on the company's advisory board.

Some strands of the tank deal lead back to Germany. The Emirati arms buyers were smitten with the Leclerc. But Sheikh Zayed bin Sultan Al Nahyan wanted his new tanks to have similar motors as the German Leopard 2, a 12-cylinder model from MTU in Friedrichshafen with transmissions from Renk in Augsburg. The Emiratis had their hearts so set on the German motor that they even offered to cover the additional development costs of 60 million francs, or roughly 9 million euros. Yousef proudly told the arbitration court: "The idea was tochoose the best parts of the competitive products and pull them together to make the best tanks in the world."

But the German motors complicated the deal. In Germany, exports of war machinery are subject to the War Weapons Control Act. A special body known as the Federal Security Council controls the export of military weapons and war machinery. At the time of the deal, the council was made up of Chancellor Kohl and seven ministers from his coalition government.

Normally, the council signs off on weapons exports to France without issue. But there was an additional consideration this time around, namely that the buyer was located in a crisis region.

The Iraqi dictator Saddam Hussein had recently invaded neighboring Kuwait, which had prompted the United States and 30 other countries to come to Kuwait's defense. One of those countries was the UAE, which had provided 1,000 soldiers.

The Federal Security Council's decisions are secret and it's rare for details to trickle out. In the case of the Leclerc tanks, however, the German newsmagazine Focus reported in February 1993 that the council had signed off on the deal. Most recently, the Federal Security Council has proven itself to be "rather rigid," such as during deliberations about exporting arms to Thailand, but back when it was considering the tank deal, it was "less picky" and approved the delivery of motors on Dec. 8, 1992.

And with that, the deal was sealed. To this day, it remains the only time Germany has ever exported Leclerc tanks. The Emiratis ordered 388 battle tanks, 46 armored recovery vehicles, two driver training vehicles plus accessories for $3.6 billion. A significant chunk of that money flowed to Germany. MTU delivered 473 motors for 300 million deutsche marks, worth about 150 million euros today. There were also the transmissions from Renk.

Following the Money

When contacted for comment, MTU said it knew nothing about any cooperation with an Arab middleman. "According to our records," a company spokesman said, there was "neither a cooperation with lobbyists nor did a Mr. Abbas Ibrahim Yousef Al Yousef appear."

Giat, however, acknowledged knowing Yousef. The French state-owned company admitted Yousef had received a commission of 6.5 percent of the total price of the deal. The final sum came out to $234,875,369.40. One stipulation of the deal was secrecy: No one besides those directly involved should know about it. The money didn't go to Yousef directly, instead flowing to his shell company Kenoza Industrial Consulting & Management, located in the British Virgin Islands.

The Caribbean tax haven is notorious for keeping secret the names of people who stash their money there. Yousef also used accounts in Gibraltar and Liechtenstein. From his Kenoza account, the money was transferred to Yousef's holding company, according to Yousef's wealth manager, who revealed the money trail to the arbitration court in Paris. Yousef was trying to cover up where the money had come from.

But one question remains: Who profited from the payments from France? Only Yousef? Or were government employees or other officials bribed with a portion of Yousef's commission?

The judges in Paris wanted to know this too. They called upon Yousef and Giat to explain their business relationship more closely. Only then would they be able to assess whether Yousef had a right to the remaining $40 million. During oral proceedings, the judges' follow-up questions caused scenes that likely would not have happened had the case been heard in a public court.

Representatives from Giat openly admitted that parts of the commission had been used to pay bribes. The "real intention was to facilitate the conclusion of the UAE contract by offering civil servants or other officials from the United Arab Emirates part of its commission," they said.

The contract, they added, was "consequently both contrary to morality and public policy."

They went on to say that Kenoza planned and actually carried out acts of corruption. But the weapons manufacturer couldn't say who Yousef had actually bribed. The business relationship between Yousef and Giat apparently had not left a trace, the company's representatives said.

Investigations and Prison Sentences

For a long time in France, and in Germany, it was not illegal to bribe a foreign official. But then in 2000, France implemented a guideline from the Organization for Economic Co-operation and Development aimed at fighting corruption. Now bribes would be met with investigations and prison sentences. From then on, Giat managers told the arbitration court, the payments to Yousef were no longer viewed as permissible, and that's why they stopped them. Nexter, Giat's legal successor, declined to answer questions from DER SPIEGEL, citing confidentiality clauses.

Yousef denied all corruption charges in front of the arbitration court. The commissions he received "were not used to pay UAE officials," he said. Instead, he had invested the money in his companies "in various parts of the world."

When the judges wanted to know what Yousef had done to earn his paycheck, he was unable to provide any documents. He had "destroyed his notes in order to protect Giat's confidentiality."

He described his role as follows: "I developed a good working relationship with the GIAT team and spent a considerable amount of time with them advising on the best way to present their products from the point of view of UAE culture, psychology and the business and governmental environment. I relayed to them at each stage what the UAE authorities were thinking." But Yousef preferred not to reveal who his negotiating partner was on the Arab side. At Giat, he was in contact with the chairman of the board and the head of sales.

Yousef also didn't want to talk about his contacts in Germany. Prior to oral testimony, he explained in writing that he had ensured the issuance of an export permit, "a process which involved decision-makers at the highest levels in both France and Germany." When the judges wanted to know more during oral arguments, Yousef clammed up. In response to the question as which German officials he had met with, he answers: "Nobody." No politicians, no officials, allegedly only lobbyists.

Multiple Years for Corruption

Is that true? German politicians in those years had plenty of experience in dealing with arms lobbyists and exports to the crisis regions in the Arab world. The government of Chancellor Helmut Kohl approved the 1991 sale of 26 Fuchs armored reconnaissance vehicles to Saudi Arabia, a deal which ultimately led to the largest corruption affair in postwar German history.

The affair focused on Thyssen Henschel's payment of 220 million deutschmarks into dark channels. A number of public prosecutors launched investigations into high-ranking members of government, including then-Economics Minister Jürgen Möllemann, whose ministry was responsible for the deal. In 2005, the Augsburg District Court convicted Ludwig-Holger Pfahls, a former state secretary in the Defense Ministry, for acceptance of benefits and tax evasion and sentenced him to 27 months in prison. He admitted to having accepted 873,000 deutschmarks in connection with the armored vehicles.

The question as to whether bribe money was paid to Germany in connection with the Leclerc tank order was left open in front of the arbitration court. Clarification can hardly be expected from Germany. Kohl and others who were involved have since passed away. Volker Rühe and Theo Waigel, who were defense minister and finance minister at the time, respectively, both responded to a query by saying they have no memory of the event. Others chose not to respond to requests for comment at all.

It is, however, clear that the German company Renk AG paid a 2.6 million euro "consultation fee" to the Swiss accounts belonging to two shadowy figures from France for the Leclerc contract. In 2005, a Paris court sentenced those men to multiple years in prison for corruption. In the same trial, two German employees of Renk were handed an 18-month suspended sentenced and fined 100,000 euros each.

Yousef could likely provide information about other members of a network of corruption, but he's not inclined to. That is another reason why he lost out in the September 2010 proceedings of the Paris arbitration court. The judges refused to grant him the $40 million he was demanding given that he refused to say what the money was for. In the end, Yousef actually ended up with less money than before. The judges made him pay for the costs of the proceeding: $550,000.