OPEN SECRETS: UNACCOUNTABLE

Thales — how to buy a country

By Open Secrets 20 May 2020

This week Open Secrets publishes the second in a series of profiles on the corporations and middlemen implicated in the multibillion-dollar Arms Deal of the late 1990s. This week we focus on the company at the heart of Zuma’s Arms Deal corruption scandal and the co-accused in their corruption trial, the South African subsidiary of French arms company Thales.

The previous Unaccountable profile detailed Jacob Zuma’s infamous battle with the South African legal system to escape scrutiny for his role in the 1999 Arms Deal. We explored the hard evidence against the former president, from the conviction of his adviser Schabir Shaik to secret code-phrases, encrypted fax messages and million-rand handshakes with a French multinational arms corporation. These actors placed profit over principle and undermined state institutions in an attempt to get away with it.

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Sitting in the dock next to Jacob Zuma is Thales. Unfortunately, local media coverage presents Thales as a sideshow in the long and complex Zuma litigation. It suggests a glaring blind spot which glosses over corporate power to focus only on the elected politicians. But we should not forget that this arms company faces its own charges of fraud, corruption and money laundering, all linked to paying bribes to undermine South Africa’s democratic institutions. The tale of Thales’ involvement in the Arms Deal, and in a series of other corruption scandals, is equally demanding of our attention.

Like Zuma, Thales has spent the last two decades denying any wrongdoing on the part of the company or its employees during or after the Arms Deal. It has vocally challenged court decisions and the conduct of investigative bodies at every turn — essentially, doing all it could to remain unaccountable. It is deeply ironic that it stands accused of bribing Zuma precisely to stave off prosecution, but has relied on delays in the case to try and avoid accountability permanently. This door is now closed after the Constitutional Court dismissed Thales’ latest appeal in early May 2020 to have its charges permanently set aside. Thales, like Zuma, has run out of legal mechanisms to try to avoid accountability and will finally be made to answer these allegations in court. The crème of Europe’s arms trade is finally faced with the prospect of justice on African soil.

Thomson to Thales: New name, same corrupt game

Thales is a Paris-based multinational defence and aerospace corporation with offices and subsidiaries in 68 countries. Originally trading as Thomson-CSF during the Cold War, the company underwent rebranding at the end of 2000 when it sought to reposition its corporate image within the global market. What it also sought to cover with a fresh coat of paint were a number of allegations of fraud and corruption. Thomson-CSF has a murky history in South Africa, and was an important ally to the apartheid state and military. It is implicated in violating the arms embargo that was in place against the apartheid regime.

The company has also been implicated in bribery elsewhere. In 2010, The International Court of Arbitration ruled that Thales (Thomson-CSF) and France — through their foreign Minister Roland Dumas — had breached anti-corruption clauses relating to a 1991 frigate contract they had signed with Taiwan. The bribes to Chinese and Taiwanese officials totalled around US$500-million. Following an appeal by the arms company and the French government, the order was upheld and the parties were fined €630-million — the total amount of bribes that were paid, plus interest — a cost that would be split between the French state (72.5%) and Thales (27.5%). 

Today, Thales is partly owned by the French State which held a quarter of the company’s shares as of December 2019. The company has long had a mutually beneficial relationship with the French government and various politicians, with Thales allegedly being able to call on French presidents and ministers to help secure lucrative international contracts or protect them from international investigations. 

French friends of the apartheid state

Thales has a long history of flouting international laws to profit from its links to South Africa. The company’s official website boasts a 35-year-long relationship with South Africa and its commitment to prioritising development and Black Economic Empowerment. The French arms giant proudly states that its South African subsidiary has a Level 2 BEE status, all while conveniently erasing its much longer history of apartheid-era profiteering and sanctions-busting that continued to keep the apartheid government in power throughout the anti-apartheid struggle, and enabled the violent and systematic oppression of the black majority.

As early as 1969, PW Botha, the South African Defence Minister at the time, played a critical role in establishing and fostering a close relationship with Thomson-CSF executives and French government officials. Declassified military records obtained by Open Secrets reveal that Botha joined Thales’ chairman, P Richard, in France in June 1969 to test the new Cactus missile that Thales had been developing with South Africa. The visit, which included generals and ambassadors from both countries, solidified an already strong military relationship between the two countries which would be maintained throughout the height of global anti-apartheid protests of the 1970s and 80s.

Following the Soweto Uprising in 1976 and the death of Steve Biko in detention in September 1977, the United Nations Security Council (UNSC) imposed a mandatory arms embargo on apartheid South Africa. This had little impact on the willingness of Thomson-CSF to supply the apartheid military.

Military documents show that Thomson-CSF remained one of the most consistent suppliers of military equipment after the embargo became compulsory in 1977. Beyond being one of the largest suppliers of military aircraft, one of the closest areas of collaboration remained the area of missile development that had started with Botha’s visit a decade earlier. As late as 1987 the CEO of Thomson-CSF confirmed it was ready to accept a military delegation to France for a “European high technology scanning mission”. 

When open collaboration was made increasingly difficult, the company engaged in willing subterfuge, including a 1988 three-way negotiation that provided for the provision of updated missile systems (the Cactus) through a clandestine channel in Chile, then under the rule of notorious dictator Augusto Pinochet.

Instead of starving the apartheid regime of the weapons and technology it needed to continue its illegitimate rule, Thomson-CSF and the French state continued to fuel apartheid’s war machine and assisted with the clandestine sanction-busting processes that the countries’ continued partnership required. The role of the French state extended to knowingly allowing Armscor officials to broker illegal arms deals with arms companies and middlemen from inside the South African embassy right in the centre of Paris.

This apartheid-era partnership laid the groundwork for post-apartheid networks of corruption to thrive.

Thales and the 1999 Arms Deal

Arms companies in the UK, France, Italy and Germany all benefited from the 1999 Arms Deal. Upon the signing of the final agreements related to the multi-billion-rand Strategic Defence Procurement Package on 3 December 1999, Thales (then called Thomson-CSF) had managed to win itself a R2.6-billion piece of the pie. Thomson-CSF formed part of a consortium — the German Frigate Consortium (GFC) — that was established to deliver four warships (corvettes) purchased by the South African Navy as part of the deal. Thomson was to supply the “combat suites” for the corvettes — essentially the software or “brain” of the weapons systems on board — but needed a South African partner. 

One of the businessmen who wanted in on this lucrative deal was Schabir Shaik. We know that Thomson-CSF representative Pierre Moynot and Shaik had met for the first time in September of 1995 to discuss potential collaboration, well before the arms deal was confirmed. What makes this date notable is the fact that at that point, public pressure had resulted in the procurement of the warships being taken off of the table. Due to backlash, discussions related to buying these arms were scrapped, with no public information that would suggest that this decision would be reconsidered. So what did Thomson-CSF or Shaik know about the arms acquisition process that others did not? Why would they have planned for a contract that appeared to have been scrapped?

It later emerged that the Arms Deal procurement process was littered with these kinds of inconsistencies, illustrating knowledge of insider secrets and clear conflicts of interest which ensured the selection of certain suppliers over others — something we will continue to explore in upcoming instalments of Unaccountable.

When the time to select a local BEE partner came, Thomson-CSF decided to partner with Altech Defence Systems. It went on to purchase 50% of Altech Defence Systems, before later purchasing the remainder of the shares and renaming the company African Defence Systems (ADS). The initial intent was to give shares in ADS to Nkobi holdings. While Nkobi had little capacity to deliver on any sort of contract — it crucially included Shaik in the deal. However, acting on rumours that Shaik was disliked by Thabo Mbeki, then deputy president and the most senior government official overseeing the Arms Deal, Thomson-CSF initially excluded Nkobi Holdings as a shareholder.

Shaik, upset by this exclusion and determined to be cut in, allegedly called upon both Jacob Zuma and his brother Chippy Shaik, who headed the arms procurement process, to intervene. After all, the courts later determined that this kind of political influence was precisely why Shaik made regular payments to Zuma. Respectively, Zuma and Chippy Shaik met with Thomson-CSF representatives on Schabir Shaik’s behalf. Although details from these meetings are scarce, it is alleged that Chippy informed Thomson representatives that he would make the acquisition process difficult for the French arms company if they did not include Shaik in the contract.

A still trepidatious Thomson-CSF, appearing to cave to the pressure from these meetings, granted Nkobi Holdings shares in ADS. However, perhaps hedging its bets, it chose to also include another local partner, Futuristic Business Solutions (FBS). FBS was owned by relatives of then defence minister, the late Joe Modise. Modise also faced allegations of corruption related to the Arms Deal.

Thales thus engaged in an extensive process of local business acquisitions and buying of political influence by cutting in companies with vast political connectivity in order to ensure its selection in the deal. But that is not all it stands accused of. What then ensued was a cover-up — and the allegation that Thales bribed Zuma to protect it from investigation or prosecution linked to its other conduct. 

Buying impunity — evidence from the Shaik trial

The true extent of the relationship between Schabir Shaik, Thales and Jacob Zuma was relatively unknown until 2004, when the company’s South African subsidiary, then called Thint, was charged as Shaik’s co-accused, in the trial that would come to define post-apartheid politics.

Although charges against Thint would be dropped before proceedings began, details emerged from the trial which implicated Thales and its South African subsidiary in a complex web of corruption aimed specifically at avoiding accountability for allegations related to the Arms Deal acquisition process.

It is alleged that in 1999, amid growing calls for an investigation into allegations of corruption in the Arms Deal, the French arms company and its South African subsidiary sought to protect itself from possible prosecution. Upon advice from Schabir Shaik, a meeting was arranged with the deputy president of South Africa at the time, Jacob Zuma. Thales’ South African representative — Alain Thétard, met with Zuma and Shaik in Durban in March of 2000. This was the meeting in which it was agreed that R500,000 per year would be paid to Zuma by Thales through a network of Shaik’s business accounts, in exchange for Zuma’s political protection and support for future contracts.

During Shaik’s trial, all parties denied that this meeting took place and that any such agreement was made. However, Sue Delique, Thétard’s former secretary, was able to provide evidence in the form of the now-infamous encrypted fax sent by Thétard to Thales’ sales director for Africa. The fax not only confirmed that the meeting had indeed taken place, but also that an agreement had been reached between Thales and Zuma.

In the Shaik trial, Judge Squires concluded that all parties present at this March 2000 meeting knew exactly what it was that they were agreeing to and that this payment was clearly made to ensure the protection of Thales from investigation and prosecution.

Bribe payments pay off?

In the wake of Shaik’s 2005 guilty judgment, the State charged Zuma and Thales for their involvement in the Deal. Yet with the alleged support of Thales, Zuma and his legal team were emboldened in their adoption of their notorious “Stalingrad strategy” to delay legal proceedings at every possible turn.

These delays were crucial in allowing Zuma to continue to pursue his presidential aspirations. Zuma was elected as the president of the ANC in 2007 and subsequently of South Africa in 2009. It was this position of power which enabled him to oversee the disbandment of the Scorpions — an independent agency that had up to then successfully investigated and prosecuted serious organised crime and corruption. To achieve this, Zuma and his backers used the signature of President Kgalema Motlanthe, a cardboard cut-out who was caretaker of the executive while Zuma awaited his election as president.

It was the Scorpions that had indicted Zuma in 2007 and was central to the successful prosecution of Shaik. The Scorpions were replaced by the Hawks, which fell directly under Cabinet control, and would quickly come to terminate its own Arms Deal investigation.

In October 2011, President Zuma, giving into public demands for accountability and pre-empting possible court judgments in this regard, announced a commission of inquiry headed by Judge Willie Seriti to investigate allegations of corruption in the Arms Deal. The commission, which failed to consider key evidence or call important witnesses, produced a white-washed report that exonerated all parties. This report has been used by Zuma and his allies to further bolster their defence and claim their innocence. That is, until just last year, when The North Gauteng High Court found that the commission had fundamentally failed to do its job — finding “a clear failure [by the Seriti Commission and its judges] to test evidence of key witnesses [and] a refusal to take account of documentary evidence which contained the most serious allegations”.

It is also alleged that Zuma used state funding to continue to oppose multiple legal actions that were filed in order to challenge the decision to drop the case against him and Thales. Although Zuma was ultimately unsuccessful in his attempts to have these charges permanently dropped, the long delay has managed to defer justice and created a culture of impunity which has allowed both Zuma and Thales to continue to profit from their allegedly corrupt partnership.

Ajay Sooklal: Thales fixer turned whistleblower?

At the hearings of The People’s Tribunal on Economic Crime in 2018, attorney Ajay Sooklal emerged as a previously unnamed witness in the proceedings. Sooklal was employed by Thales from 2003 to 2009 as a fixer, and alleged that he was told by the Chairperson of Thales International, Jean-Paul Perrier, that they would need to be ready to prevent any indictment that might follow the findings of the Shaik trial.

Some of Sooklal’s submission to The Tribunal had already been public knowledge since transcripts of his ongoing legal battles with his former employer emerged in 2014. These transcripts seemingly confirm the 2000 bribe payment agreement and include allegations that Sooklal facilitated payments, gifts, legal fees and all-expenses-paid international trips for Zuma on behalf of Thales, long after the Arms Deal had been wrapped up.

Sooklal’s testimony went further, implicating former French president Jacques Chirac in a conspiracy by Thales to have investigations shut down. Sooklal alleges, based on information shared with him by Dr Peneull Maduna, the South African minister of justice at the time, that between September and November of 2003, president Thabo Mbeki was approached by president Chirac regarding the ongoing Thales scandal while in France on state business. Chirac allegedly requested that Mbeki use his powers to put an end to the prosecution of Thales. Sooklal claims that Mbeki then tasked Maduna, Kgalema Motlanthe (then Secretary-General of the ANC) and Mendi Msimang (then ANC treasurer) to find a “solution” to the issue.

Sooklal claims that shortly after this meeting in France, he facilitated a series of meetings between Thales representatives and the National Prosecuting Authority. It was during these meetings that it was agreed that Thales would be removed as a co-accused in the Shaik trial if Alain Thétard would confirm, by affidavit, the authenticity of the infamous encrypted fax. This piece of evidence was central in the successful prosecution of Shaik. However, Thétard would later break the terms of this agreement when he was asked to testify in the Shaik trial, and he contradicted his affidavit.

If this testimony is to be believed, it would not be the first time Thales relied on French leaders to avoid accountability and continue its underhanded profiteering.

Is accountability finally possible?

Scandal after scandal, Thales seems to somehow come out on top of it all. In the wake of its Taiwanese frigate fiasco, it was noted that Thales’s stock price was barely affected. With the support of the French government, the company was quickly able to move on from the fine and continue to do business around the world, without any additional checks and balances being put into place.

The Zuma and Thales case, which is scheduled to resume proceedings on 23 June 2020, is an important opportunity for South Africa — using the integrity of its legal system — to hold Thales accountable for the devastation it has wrought on the country and its people. This would send the message to Thales and corporations like it that corruption, the looting of state funds and the buying of political influence will no longer go unpunished. This is a chance for South Africa to challenge impunity and the corrupt networks that it sustains. DM

Open Secrets is a non-profit organisation which exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. Tip-offs for Open Secrets may be submitted here.

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