An investigation by the Spanish High Court, Audiencia Nacional, into the sale of defense equipment to Saudi Arabia has confirmed the payment of bribes and illegal commissions by the public company Defex in 11 contracts signed between 2005 and 2013 worth a combined €48 million.
Execs are under scrutiny for keeping up “a systematic criminal behavior pattern” for over two decades
Eight of those deals were for different types of ammunition, while the other three involved the delivery of replacement parts for the Saudi army’s AMX-30 battle tanks. Five more suspect contracts signed between 1992 and 2004 have been left out of the investigation because they are past the statute of limitations.
Defex, which is 51% state-owned through the holding company SEPI (the other 49% is controlled by private arms companies), has been under scrutiny since 2014, when the Civil Guard uncovered a suspect sale of police equipment to Angola involving heavily padded invoices; the extra money was allegedly shared out among government workers in the African country, Spanish company execs and their intermediaries.
The scandal brought down Defex, which is currently in liquidation. Its top officials – the former president José Ignacio Encinas and ex-chief of operations Ángel María Larumbe – are under investigation for keeping up “a systematic criminal behavior pattern” for over two decades, according to Judge José de la Mata.
Digging deeper, investigators found irregularities in the sale of defense equipment to other countries, including Saudi Arabia. As a public company, Defex was able to secure the necessary permits to export arms and ammunition. Later, through the creation of a “complex constellation” of companies – as defined by Swiss authorities who were queried for information by the High Court – Defex paid illegal commissions in exchange for no apparent commercial service to individuals with good connections to Saudi authorities, and also to Defex executives.
This web of companies was allegedly created in Luxembourg by Beatriz García Paesa, niece of Francisco Paesa, a notorious former spy who did jail time in Switzerland for fraud in the late 1970s.
The Saudi Arabia probe began in 2015 and first targeted 16 operations made between 1992 and 2014, Spanish and Swiss legal documents show. The first five were ruled out because of the statute of limitations, and the Civil Guard focused on the remaining transactions (see box below).
Judge De la Mata has nearly concluded his inquiry, and is awaiting the last reports from the Civil Guard. The investigation has shed light, among other things, on a company based in the Cayman Islands and a payment of €7.6 million through Swiss accounts to a Saudi company for fake services. Swiss authorities have blocked at least four bank accounts in connection with these financial transactions.
Other individuals under investigation include former Defex executive Álvaro Cervera and a businessman named Charles Ques.
English version by Susana Urra.