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Wolf Richter: Cesspool Of Greek-German Corruption

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By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Testosterone Pit.

Apparently, it has been impossible to sell Greece any weapons at all, not even a water pistol, without bribing officials at the Defense Ministry. Corruption is so pandemic that Transparency International awarded Greece once again the dubious honor of being the most corrupt country in the EU. For 2013, Greece ended up in 80th place of the 177 countries in the survey, same as China. But it takes two to tango.

And in holier-than-thou Germany, where exporting at any price is a state religion (with chart) regardless of who runs the show, the defense industry was allegedly eager to dance with Greece – supplying tanks, submarines, and other equipment that broke Greece didn’t need and couldn’t afford and that pushed it deeper into the hole.

Now there’s a confession. After four days of grilling, investigating magistrates in Athens extracted it from Antonios Kantas, General Secretary for Procurement at the Defense Ministry between 1996 and 2002. He’d been arrested in mid-December after authorities found nearly €14 million in various accounts. In his 30-page testimony, elements of which have been leaked, he admitted having pocketed €15 million in bribes since 1989 – just this one guy!

But it was a community effort that stretched across party lines. He named names, euros, and dollars, implicating 17 Greek politicians and businessmen. They include former head of procurement Yiannis Sbokos, former Defense Minister Akis Tsochatzopoulos – who, along with Sbokos, has already been condemned to years in the hoosegow for laundering the kickbacks he’d received in various arms deals – and his worthy successor, former Defense Minister Yiannos Papantoniou. And Kantas named the coddled weapons manufacturers in Germany.

There was the multi-billion euro deal for 170 “Leopard 2” tanks, manufactured by Krauss-Maffei Wegmann (KMW), as the Süddeutsche Zeitung “learned.” The tanks have all been delivered and paid for except for a few tens of millions of euros. For his diligent work, Kantas received €1.7 million in several payments, including €600,000 that a middleman “forgot” in Kantas’ office as payment for not raising objections to the purchase.

KMW denied everything when the Süddeutsche started prying. It had never paid, or authorized others to pay bribes, neither to Kantas nor to anyone else, the company said. Further, it required all employees and business partners to observe the laws. The order from Greece, dated March 2003, had been carefully monitored. Kantas didn’t represent Greece, etc., etc.

KMW has built over 5,000 Leopard tanks, much of it for export to savory and unsavory countries since domestic purchases after the collapse of the Soviet Union shriveled to nearly nothing. Selling tanks is already a hot-button issue in Germany. It was triggered once again when Chancellor Angela Merkel went to Indonesia last July, accompanied by plane loads of executives. The Indonesian government wanted to make a deal for 100 used “Leopard 2” tanks from the German military – though Merkel’s spokesman had denied it a few days earlier, claiming that it was “not on the agenda.”

It must have ended up on the agenda anyway. Embarrassingly, Indonesian President Susilo Bambang Yudhoyono confirmed after his talk with Merkel, albeit indirectly, that his government had requested the tanks. He had to modernize the army, he said. “Everything that we cannot produce ourselves we have to buy from friendly states,” he said, “and now Germany.”

The controversy erupted in Germany because Indonesia is an island nation. Why would it need tanks to defend itself? From whom, exactly? From tanks and infantry rolling in waves across the ocean? Or did the government, which has been accused of human rights violations and crimes in repressing internal conflicts, want the tanks to use against its own people?

Apparently. The tanks Indonesia was interested in buying would be modified versions designed to fight terrorists and revolts, according to industry insiders. German defense contractor Rheinmetall, which is doing the modification work, and the German government remained assiduously silent on the topic. But the Indonesian government has been talking about it, with Yudhoyono explaining to an incredulous world that “we have never used tanks and helicopters or other weapons against our population.”

Indonesia also asked the Netherlands to sell them their old Leopards, but the Dutch parliament nixed the deal. In Germany, the Bundestag doesn’t get involved in arms deals. It’s up to the government. And Merkel wants those exports, rumored to be worth €3.3 billion. Exports at any price.

Then Greece bought German submarines, a process that was a cesspool of corruption. They were built by Howaldtswerke-Deutsche Werft (HDW) in Kiel, a subsidiary of conglomerate ThyssenKrupp. The submarines were equipped by Rheinmetall-Defence-Electronics and Atlas Elektronik, a German maker of naval electronics, integrated sonar systems for submarines, and torpedoes, now controlled by Thyssen-Krupp. Ferrostaal GmbH, a German industrial company, marketed the submarines to politicians. Kantas claimed to have been paid between €500,000 and €600,000 by a representative of Atlas Elektronik to get that deal done.

This summer, the Prosecutor’s Office in Bremen started investigating Atlas and Rheinmetall for tax fraud and bribery in connection with the sale. They’re alleged to have paid €9 million in bribes. So Kantas only got a small fraction. In August, authorities raided the offices of the two companies. Turns out, they’d made the payments to a British mailbox company owned by a Greek company, but the payments stopped in 2007. Greek authorities raided Rheinmetall’s office in Athens – and that’s how they found out about Kantas’ involvement in all these deals.

As always, Rheinmetall rejected the accusation, claiming that it was “baseless,” that it had made “no direct or indirect payments to Greek officials,” and that any improper payments were “not known to us.”

However, the Prosecutor’s Office in Munich, after investigating Ferrostaal’s role in the deal, prevailed in 2011 in court. The judge condemned two employees of Ferrostaal to, well, probation (to the sounds of wrists being gently slapped) and Ferrostaal to a €149 million fine.

Then there was the sale to Greece of “Asrad,” a vehicle-mounted short-range anti-aircraft system, designed by Rheinmetall and Swedish arms supplier, Saab Bofors Dynamics. Kantas claimed he’d received €1.5 million for the deal. He also pocketed €750,000 for KMW’s artillery system.

But non-German arms suppliers contributed to his hard-earned wealth as well. He received $3 million for the purchase of Russian anti-tank missiles, including $700,000 in cash, of which $500,000 were handed to two bankers to deposit overseas; $1.7 million for a Russian anti-aircraft missile system; €250,000 for equipment from Brazilian company Embraer; €240,000 for radar systems from Saab; €800,000 for Mirage fighter jets made by French arms maker Dassault; $1 million for a deal to update US-made M48 tanks; and €400,000 for the purchase of anti-ship missile Exocet made by MBDA, which is owned jointly by BAE systems, EADS (Airbus), and Finmeccanica of Italy. The latter is entangled in the helicopters-for-India corruption scandal that saw the CEO get arrested in Italy. And so on.

Who knows how long the list actually is! For example, in September, a Greek magistrate brought charges of bribery and money laundering against Kantas for having accepted a bribe of €500,000 paid to a Swiss bank account in his name, for a deal that awarded German industrial conglomerate Siemens a contract to modernize the military’s telecom system.

It’s convenient to blame the culture of corruption in Greece for the putrefaction seeping from every pore of the economy. The scourge has infected Greek institutions to their roots and is in part responsible for the current economic fiasco. But bribery requires a willing partner. In white-glove Germany, the state religion of exports at any price, come hell or high water, has encouraged authorities to close their eyes when companies spend a little extra to get deals done.

Greece didn’t need the weapons, couldn’t afford them, and had to pile on debt to buy them… debt that has suffocated the country and has become subject to high and tight haircuts and massive bailouts, funded largely by grumbling German taxpayers. And therein lies a twisted, ironic injustice: German taxpayers have to transfer once again their wealth indirectly and unwittingly to the coddled German export sector.

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22 comments

  1. American Slave

    Europe might be feeding on itself for the time being but now that France is trying to re-colonize Africa there might be a change of business plans.

    I guess it all depends on what China, Russia and India do especially that Russia has had those recent suicide bombings in Volgograd (formerly know as Stalingrad) which is just what the doctor ordered to rally the nation behind the cause as that is what the world has become.

    Never let a crisis go to waste.

    1. gepay

      Those suicide bombings – didn’t Bandar Bush promise to Putin these kinds of things would happen, especially around Sochi as the Olympics come if he didn’t go along with Saudi Arabia and Israel and the US plans for regime change in Syria. From mind programmed couriers to mind programmed sexual honeypots to moles who don’t remember they’re moles to assassination patsies to actual competent assassins to suicide bombers – whatever will “they” think of next

      1. American Slave

        “Those suicide bombings – didn’t Bandar Bush promise to Putin these kinds of things would happen”

        That is what some people are saying but I doubt from there point of view that bombings will help there cause as they will most likely bring Russia together towards Putin especially the scientists who sometimes have doubts about inventing new weapons as we saw with Kalashnikov, just like any bombings in America would bring people closer to the government unless they do things like lock down the country and oppress the innocent so its all about how they handle it.

        1. gepay

          The new bombings in Russia have the international Olympic audience in mind. “They” don’t care if they cause the Russian people to grow closer to the Putin regime as “they” know they don’t have a chance in hell for regime change in Russia, “They” had their chance with Yeltsin and the benefactors of regime change were too greedy. “They” being the same people (elements of the US, Israeli, and Saudi Arabian covert intelligence) that ran 911.
          Say what you will about Putin, he is for Russian interests in an old style nationalistic way. Something you can’t say about most American and European politicians who seem to be working for the world elites.

  2. John Jones

    It be nice if Greece didn’t need the weapons and not have to spend money on them especially sending money to such an industry and especially when it could be spent in better areas in the country. But it is not true that Greece does not need them. It does.

  3. Giacomo

    The bailouts are being funded by all eurozone countries not just by Germany.
    This is a very good deal for Germany. Keep the profits, share the losses.

    1. Synopticist

      Yup.
      Plus they continue to sit on their moral high horse, lecturing other countries about honest officials and the need to prioritise exports.

  4. jzac

    Thanks Yves, my takeaway is that financial repression is morphing in its next logical stage–political repression (oppression). Countries with the inability to diffuse this or deflect blame elsewhere, such as Indonesia, will inevitably turn their attention( and tanks )unto its own people. While the likes of France and the US will continue to tend to their neocolonial aspirations.

  5. from Mexico

    Wolf Richter said:

    “In his 30-page testimony, elements of which have been leaked, he admitted having pocketed €15 million in bribes since 1989 – just this one guy!”

    That’s chicken feed.

    In “La República Marihuanera” one of the mid-level guys in the La Familia cartel of the Mexican state of Michoacán talks about how much they pay a lowly U.S. border guard to get their drugs into the United States. In just a few minutes, a U.S. border guard can earn $50,000 or $60,000. If he does that only once a month, we’re talking $600,000 or $720,000 per year. Over 24 years, his take would equal or exceed that of the much higher-up offical in the Grecian governmnet.

    http://www.m-x.com.mx/2011-08-07/republica-marihuanera-2/

    Can you imagine what it cost to bribe someone higher up in the U.S? And we can deduce this happens, because the drugs move and are marketed so efficiently in the United States, almost effortlessly and with few impediments. None of this can happen without organization and structure, and license. Somebody has to be paid to look the other way.

    George R. Brown, co-founder of Brown and Root, which is now a part of Halliburton (his grandaughter used to be my next-door neighbor), used to talk openly about the price it cost to buy a U.S. senator.

    In some ways, I long for a return to those days of greater honesty.

  6. David Mills

    So… would it be reasonable to describe much of Greece’s debt as the odious type (unnecessary armaments and bank bailouts) ? (Sarc On) Papandreou’s mother only had 550m Euro in that account. Come on, people gotta eat. (Sarc off)

  7. Ishmael

    I do not know if the Greeks need the weapons or not. They were ruled by the Ottoman Empire for close to 400 years and that just ended in the late 1800′s and the country has been very unstable ever since. It was ruled by a military junta from the 50′s to the late 70′s.

    With that said there is no justification for kickbacks. Of course such action has ran rampant since Greece joined the EU and in every area. There was probably millions of Euros of kickbacks for European contractors to build the Olympic facilities. Probably in truth the Olympics just exists any more so that various groups of people in each selected country can line their pockets building venues and leaving the people with the debt.

    When Greece became a part of the EU loans poured in, some was skimmed off to pay the Greek upper crust and then the money turned around to pay various European companies leaving the upper crust with bulging pockets and the people with the debt. To stay in power the upper crust through the people a few crumbs who then vote for the same people who are robbing them blind. Wash and repeat!

    1. Ishmael

      When I say whether or not Greece needs the weapons I think you should look around the area. Very politically unstable and it has been that way for 3,000 years. There is Iran, Turkey, and even Russia is not that far away. That is the larger powers and there are a number of smaller countries who also have their sights on expansion. Let us not forget that 100 years ago, that WW 1 was started in this area. Greece is right smack in the middle of where the Great Game has been played for the last 100 years.

      1. aguest

        Iran is some 2000 Km away from Greece.
        This cannot be construed as “in the region” in any way, and is barely within range of the newest long-range Iranian missiles — if Iran launched them right from its border with Iraq and would be satisfied with seeing them fall on Greek beaches.

  8. American Slave

    As far as Greece needing weapons or at least heavy weapons I doubt they need them as they are a member of NATO so I am not sure who would or could invade them and get away with it.

    As far as there economy even ignoring the horrendous corruption one has to take a more material look at how it operates and what there options are as far as what do they have or what could they make that the rest of the world would want to buy or trade so that they could import what they need.

    Some of those things are tourism, maybe fish and probably solar/wind and wave/tidal power that they could export electricity. And it probably doesnt help that they are importing oil so that someone can drive to work at a store that sells imported junk vs if they imported oil to power fishing vessels or at least if the car were electric powered by solar power thereby eliminating the need to import oil for ultimately non productive uses.

    The other timeless option in a mixed economy is for the government to build industry since at first it would run at a loss but reduce the import of the more expensive manufactured items, unfortunately that is not an option in the E.U. so I guess Greece will just go to hell and that will be that.

    1. John Jones

      Well Turkey invaded Cyprus and got away with it and they are also a NATO member. They also continue do fly overs of Greek territory with their air force and cruise in Greek waters with their navy ships. And that is only part of it.

      1. American Slave

        But can Greece really afford a military that can take on Turkey which is a medium sized country on most counts?

        1. John Jones

          I am not sure. But they can make it difficult for them
          and not easy and some sort of a deterrent.

          And the other thing is they can’t rely on know one else as Ismael says.

    2. John Jones

      “The other timeless option in a mixed economy is for the government to build industry since at first it would run at a loss but reduce the import of the more expensive manufactured items, unfortunately that is not an option in the E.U. so I guess Greece will just go to hell and that will be that.”

      Before joining the E.U Greece had the beginnings of many of these industries. After it joined the E.U they all died out and the eurozone finished the country off.

    3. Ishmael

      When you rely on others then you limit your options. What if NATO fell apart. Besides Europe has been very slow to get involved in conflicts. Let’s look at Serbia as an example. The only way that Greece can remain in control of its fate is have a strong military.

  9. RBHoughton

    In 1798, when America was a new country, it sent Pinckney, Gerry and another as representatives to Paris, its fellow Republic, to reclaim the value of American shipping taken in prize by France. Talleyrand was the French foreign minister with whom they negotiated. The Yanks learned that all European diplomacy is facilitated by bribery. On that occasion, their shipping claims could be considered after payment of a loan to France by USA.

    This was and is how the world of diplomacy works. It is one of the things we ordinary people need to tackle along with the defective representation, privacy, education policy, healthcare and the rest of the bad deal we presently get.

  10. Simon A.Rawicz

    15 years of state sponsored corruption have been widespread within the Health sector alone, recently whilst exposing the CDC and the Greek ACTUP has shown an unbelievable of malpractice, corruption and fraud whereby staff employed by the state, run their own NGO’s whereby the board of Directors illegally pretend to be Doctors and coordinate non legal and unsafe projects whereby they gain access to the highly sensitive medical data of HIV & Aids patients for their own gain, when confronted by this 5 years ago the CDC offered the President an extended contract to secure his job and then proceeded to try and cover this up. Read all about it for an insight into what really is going on :

    http://fckdupathens.wordpress.com/2013/05/01/lies-cover-ups-and-censoring-the-truth-welcome-to-the-greek-hivaids-sector/

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