Malaysia denies corruption in submarine sale

Posted at 06/27/2012 11:21 AM

KUALA LUMPUR - Malaysia's government has denied allegations of corruption in its $1.25 billion purchase of two submarines as it responded for the first time to a French investigation into alleged bribery payments in the deal.

Fresh allegations emerging from the French case have been leapt upon by Malaysia's political opposition and are threatening to tarnish Prime Minister Najib Razak ahead of a general election he must call within the next nine months.

Defence Minister Zahid Hamidi told parliament around midnight local time on Tuesday that his ministry had not paid any commissions in the purchase and had followed "established guidelines" to acquire the French Scorpene-class submarines. The government had no knowledge of the alleged sale of classified defence documents, he said.

"The (defence) ministry has never paid any commission either directly or indirectly to any company in the acquisition of Scorpene submarines," he said.

The allegations have emerged in a French investigative case examining whether French shipbuilding giant DCNS paid bribes to Malaysian officials.

Malaysian human rights group SUARAM and its French lawyers have alleged that DCNS bought classified Malaysian defence ministry documents to help its bid for the 1 billion euro contract it won in 2002. They say investigation documents show that about 36 million euros were paid by Thales International, a subsidiary of DCNS, to a company called Terasasi, controlled by a former associate of Najib.

"The defence ministry doesn't have any information on the alleged sale of secret documents by Terasasi to Thint Asia (Thales International) for the alleged sum of 36 million euros," Zahid said.

Najib, who was defence minister at the time, has for years denied allegations of wrongdoing in the purchase of the submarines. There has been no evidence linking him directly to corruption in the deal, and his supporters say his political rivals are behind efforts to revive the issue just ahead of the election, which he must call by March 2013.

His government is under mounting pressure to give a fuller explanation of the transaction after documents in the French case were leaked and run by Malaysia's lively online media.

The documents, including records seized by French prosecutors in a raid on DCNS's offices, detail payments made to two companies set up by former political analyst Razak Baginda, a former associate of Najib who worked on the submarine deal.

Many of the documents were published this week by online news site Asia Sentinel. A French lawyer representing SUARAM in the French case told Reuters the leaked documents were genuine.

Government supporters say that civil prosecutions, such as that brought by SUARAM, are common in France and are no indication that a crime has been committed.

Malaysia's government has acknowledged that a second firm, Perimekar, received 115 million euros for its support services in the deal, but it had not previously commented on the role of Hong Kong-based Terasasi.

The allegations emerging from the French case have helped galvanise Malaysia's opposition as it seeks to topple the ruling coalition for the first time in the upcoming elections. The opposition made shock gains in 2008 that shook the BN's half-century grip on power, although most analysts expect it to fall short of winning a parliamentary majority in the next election.