thaicables – It's Your Right to know the Truth!

06BANGKOK4093 OPPOSITION SEEKING USG SUPPORT IN CORRUPTION INVESTIGATION

leave a comment »

“70876″,”7/11/2006 3:00″,”06BANGKOK4093″,”Embassy Bangkok”,

 

“UNCLASSIFIED//FOR OFFICIAL USE ONLY”,””,”VZCZCXRO4732

PP RUEHCHI

DE RUEHBK #4093/01 1920300

ZNR UUUUU ZZH

P 110300Z JUL 06

FM AMEMBASSY BANGKOK

TO RUEHC/SECSTATE WASHDC PRIORITY 0039

INFO RUEHVI/AMEMBASSY VIENNA PRIORITY 0406

RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 2110

RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY

RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY”,

“UNCLAS SECTION 01 OF 02 BANGKOK 004093

 

SIPDIS

 

SENSITIVE

SIPDIS

 

STATE FOR EAP/MLS AND EB/IFD – PAUL BROWN

COMMERCE FOR 4430/EAP/MAC/OKSA

TREASURY FOR OASIA

JUSTICE FOR MARK MANDELSON

 

E.O. 12958: N/A

TAGS: EIND, ETRD, PGOV, TH

SUBJECT: OPPOSITION SEEKING USG SUPPORT IN CORRUPTION

INVESTIGATION

 

1. (SBU) Summary. The Thai Department of Special

Investigations (DSI, similar to the US Federal Bureau of

Investigation) told us on July 7 that it will soon submit

evidence of corruption to the RTG National Counter Corruption

Commission (NCCC) in the purchase of fire fighting equipment

by the Bangkok city government (BMA). The supplier under the

Bt6.7 billion (US$177 million) contract is Steyr-Daimler-Puch

Spezialfahrezeug GmbH (Steyr) of Austria, a fully-owned

subsidiary of General Dynamics Corporation of the US. The

opposition Democrat Party is urging the RTG Attorney General

to seek US Department of Justice assistance \”to investigate

suspected bribery of American and Austrian executives as well

as Thai officials in the procurement…\” End Summary.

 

US-Owned, Austrian Supplier

—————————-

 

2. (U) On July 30, 2004 an \”Agreement of Understanding\” (AoU)

was executed between The RTG (Ministry of Interior) and the

Government of Austria regarding the purchase by BMA of

firefighting equipment from Steyr. Forming part of the AoU

was a Purchase/Sale Agreement between BMA/Ministry of

Interior and Steyr. Both agreements specified the requirement

for the RTG to open a Letter of Credit in the amount of Euro

133,749,780 for \”European Standard\” equipment. The equipment

specifications form an annex to the Purchase/Sale Agreement.

 

3. (SBU) While the Purchase/Sale Agreement was signed by

then-Bangkok Governor Samak Sundaravej (leader of the

Prachakorn Thai, or Thai People\’s Party), current Governor

Apirak Kosayodhin (a Democrat) opened the Letter of Credit

following his election to replace Samak in August 2004. A

current Democrat Party leader told us that he advised Apirak

not to open the L/C but that Apirak felt pressured by then

Interior Minister Bhokin to do so \”because of the harm to

bilateral Austrian-Thai relations\” if he did not. Because the

Democrats are concerned that the Thai authorities will pursue

this case in a manner most favorable to PM Thaksin and least

favorable to their party, they are seeking US involvement

under the Foreign Corrupt Practices Act., in hope of a more

even-handed investigation.

 

The DSI Investigates

——————–

 

4. (SBU) Police Colonel Tawee Sodsong, Deputy Director

General of DSI and chief investigator of this case told us

that there were several bases for legal proceedings in the

fire fighting equipment purchase and that he was suggesting a

focus on internal Thai activities rather than what foreign

entities may have done. The first issue is a discrepancy

between a Thai cabinet resolution authorizing the AoU and

what the AoU actually contains. This includes an upper limit

of Euro 133 million for the contract to include all expenses

while the final contract excludes Thai VAT and import duties.

Tawee also said that the cabinet approved separate contracts

for foreign-sourced and Thai-sourced equipment and BMA

violated the decision by combining all the purchases under a

single contract.

 

5. (SBU) Earlier this year Tawee visited Europe as part of

his investigation, including a visit to Steyr. He says he

found that Steyr did little manufacturing itself and acted as

a general contractor for the contract, purchasing equipment

from all over Europe and Thailand. Tawee believes that Steyr

significantly padded the prices, citing as an example the

purchase of Thai-made fire boats for Bt14 million which Steyr

then supplied to the BMA for Bt26 million with little or no

value-added. Tawee says he has requested from Steyr, and sent

a corresponding letter to the Austrian Attorney General,

asking for a breakdown of Steyr\’s costs in fulfilling the

contract to see if there are any \”unaccounted for\” expenses.

Tawee has not heard back from the Austrians.

 

Austrians Argue \”It\’s All in the Contract\”

——————————————— —-

 

6. (SBU) We also met with the Austrian Commercial Attach in

Bangkok, Georg Weingartner, who said that the contract was

completely above-board and that arguments that similar

equipment could have been purchased in Europe for much less

cost simply were not based on the specifications as outlined

 

BANGKOK 00004093 002 OF 002

 

in the Purchase/Sale Agreement. Weingartner admitted that the

purpose of the AoU was to use it as a loophole in Thai

procurement regulations to avoid a public tender. However, he

said that items were purchased in Thailand in accordance with

Thai cabinet requirements that procurements maximize Thai

content as much as possible. Weingartner claimed it was

\”nonsense\” that Steyr provided no value-added to the

Thai-made items and that the real issue is that Steyr is

caught in the middle of a Thai political battle. He noted

that he has never seen any of the letters DSI claims it has

sent to the Austrian government seeking assistance and that

DSI has never visited the Austrian Embassy to seek

information about the transaction. Note: Tawee confirmed this

but added that the Austrians have never visited his office

either. End Note.)

 

7. (SBU) Weingartner noted that Steyr and General Dynamics

had conducted their own internal investigation of the

transaction and found everything to be done in accordance

with transparent and correct business practices and that

Steyr had completely fulfilled the terms of the contract. He

also supplied us with a comparison of prices for fire trucks

Steyr supplied to Thailand in 1997 with the 2004 prices;

pointing out that – adjusting for inflation – the prices were

comparable. He also implied that some senior Democrat party

members represent a Spanish firm that is hoping to win a new

contract. He also noted (and we later confirmed) that a

\”technical committee under Apirak had reviewed and OKed\” the

terms of the contract before Apirak opened the L/C. Christian

Suchs, CEO of Steyr, visited Bangkok the week of July 3 in an

effort to convince BMA to take delivery of the 170 fire

trucks currently sitting in a Bangkok warehouse. BMA instead

asked that the contract be cancelled. Steyr is considering

suing the BMA and the RTG for the cost of storing and

insuring the vehicles.

 

8. (SBU) Comment. As an Austrian-Thai, government-to

government business deal, we have tried to keep the US out of

this argument but the fact that Steyr is wholly-owned by

General Dynamics keeps dragging us back into the fray. We

have been in touch with DSI since this issue was raised in

the OECD about six months ago and offered the Thai

investigators our full cooperation, which they have never

sought. We have also had regular contact with the Austrian

Embassy and encouraged them to conduct their own

investigation of the matter. Last week, Colonel Tawee asked

if we could follow-up with the Austrian Attorney General on

their letter requesting information on costing from Steyr and

we responded that we would seriously consider any such

request but that we needed to see a copy of the letter sent

to the Austrians. We have not yet received the promised copy

of the letter. In Thailand, the odds are pretty good that a

no-bid government contract could involve money flowing to

politicians. Whether the foreign suppliers might be party to

any possible corruption is not certain.

ARVIZU

About these ads

Written by thaicables

July 12, 2011 at 5:03 am

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 140 other followers

%d bloggers like this: