EADS and Eurofighter Investigated Over Alleged Bribes to Secure Typhoon Sale to Austria

 - November 16, 2012, 3:15 PM
Austrian air force chief Maj. Gen. Erich Wolf (center) with Eurofighter officials and a full-scale model of the aircraft at Zeltweg airbase in 2005. Wolf later resigned following allegations that his wife was connected to a lobbyist in Austria for EADS. (Photo: Chris Pocock)

German police raided offices belonging to EADS and Eurofighter in the Munich area on November 7, in connection with the long-controversial sale of Eurofighter jets to Austria. A public prosecutor said that the raids were prompted by information from Austria. Last September, an Austrian magazine reported that government prosecutors in Vienna suspected that EADS had made up to €100 million available to lobbyists there. The magazine quoted court documents alleging that a complex network of companies had been set up to bribe businesses and civil servants.

EADS CEO Tom Enders said: “I take these allegations very seriously and EADS is fully cooperating with the public prosecutors.” He urged against a “rush into conclusions” on “what seems to be a very complex matter.”

Austria was the first export customer for the four-nation Eurofighter consortium, signing a $2.7 billion contract for 18 aircraft in mid-2002. The opposition Social Democrat party (SPO) did not support the purchase, and after it entered the coalition government following elections in 2006, the contract was renegotiated to 15 aircraft, saving a supposed $500 million.

Meanwhile, a parliamentary committee that probed the deal in 2006 and 2007 alleged that a lobbyist for EADS had made a relatively small payment for vaguely defined services to a company owned by the wife of the Austrian air force chief, Maj. Gen. Erich Wolf. As a result, Wolf was suspended from duty, and he later resigned. At the time, EADS denied any impropriety.

The first aircraft arrived in July 2007 and operational capability was achieved a year later, albeit only in the “air policing” role armed with Iris-T infrared-guided missiles and the 27-mm internal cannon, all provisions for longer-range air-to-air weaponry and any multirole capability having been deleted from the contract.

In 2008 the Austrian government oversight office criticized the revised contract and challenged the Defence Ministry’s calculation of Eurofighter running costs. It was subsequently reported that the cost of infrastructure improvements to support the Eurofighters at Zeltweg airbase had increased from €49 million to €160 million.

This week EADS commissioned an external audit of its entire compliance system, which is based on a code of ethics. The move was prompted not only by the Austrian allegations, but also by a UK Serious Fraud Office (SFO) investigation into GPT Special Project Management Ltd. GPT was acquired by a subsidiary of EADS’s Astrium division in 2007. The SFO is probing GPT’s activities in support of a UK government contract with Saudi Arabia for communications equipment and services.