Austria may try to cancel EADS Eurofighter deal

VIENNA Fri Nov 16, 2012 11:18am EST

Visitors talk near the welcome desk of the EADS booth at the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin on September 13, 2012. REUTERS/Tobias Schwarz

Visitors talk near the welcome desk of the EADS booth at the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin on September 13, 2012.

Credit: Reuters/Tobias Schwarz

VIENNA (Reuters) - Austria may try to cancel its $2 billion contract to buy 15 Eurofighter jets from European aerospace group EADS EAD.PA or seek damages if it finds bribes were paid as part of the deal.

"It depends on the results of the Justice Ministry's investigations. It is a possibility and we should then examine it," Defence Minister Norbert Darabos told Austrian ORF radio.

Authorities said last week they had raided EADS sites in Austria, Germany and Switzerland as part of investigations into suspected bribery, money-laundering and fraud in connection with the 2003 deal.

Austria's economy minister said in an interview published on Thursday that he was convinced the deal had not been clean, and EADS, a Franco-German venture, said it was launching an external review of its anti-corruption rules.

Austria specified at the time of the tender that the supplier would have to guarantee counter-deals that would pour twice the value of the jet contract into the local economy through suppliers, related services or education projects.

Sweden's Saab (SAABb.ST) and U.S. weapons maker Lockheed Martin (LMT.N) were the other bidders.

Allegations soon surfaced that many of the counter-deals promised by EADS had no substance and money was flowing instead into the pockets of politicians, civil servants and private companies.

Questions were asked in parliament about the matter as long ago as 2006, and last year prosecutors began investigations.

"If there is evidence, if there are results of the investigations that would justify an intervention from us, then we will do that," Darabos said.

A spokesman for the Austrian defence ministry said options could be considered ranging from a claim for damages to outright cancellation of the deal.

EADS declined to comment.

Austria, which describes itself as neutral, does not fight wars but does take part in peacekeeping and humanitarian military operations and is obliged to maintain a flight of jets to patrol its airspace.

The Defence Ministry has written to state prosecutors asking what the legal implications would be if bribery were found to have been involved in the Eurofighter deal, and excerpts of the letter were published on Friday by Austria's Der Standard.

The ministry spokesman confirmed the excerpts were accurate and added the Eurofighter purchase contract included a get-out clause in case of bribery.

All 15 jets have been delivered and paid for, although the Austrian government still has 434 million euros of payments outstanding to financing bank BAWAG CCMLPB.UL.

Austria's Economy Ministry, which is responsible for approving the counter-trades, said it was awaiting the results of prosecutors' investigations. It has engaged an external auditor to check all the contracts signed from 2006 onwards.

Peter Pilz, an opposition Green lawmaker who has been pursuing the Eurofighter side deals for years, said he estimated 80-90 percent of them were corrupt.

He told Reuters many of the trails he had followed from an umbrella group set up to organize the counter-deals led to postal box addresses not related to any real company.

($1=0.7817 euros)

(Additional reporting by Jens Hack in Munich; Editing by Dan Lalor and Mark Potter)

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