A special court in Spain is investigating executives at a state-owned defense company that allegedly paid millions in bribes to win weapons contracts with Saudi Arabia spanning two decades.
Audiencia Nacional, the Spanish court, is investigating five deals between Defex and Riyadh from 1992 to 2004.
Defex’s former president, vice-president, and chairman are under investigation for “a systematic criminal behavior pattern,” Judge José de la Mata said.
Spanish officials have frozen four Swiss bank accounts linked to the Saudi deals and are working with Switzerland on the investigation.
According to the Swiss, a “complex constellation” of shell companies was allegedly used to pay bribes.
Swiss investigators found one transaction involving a $7.6 million payment to a Saudi company but for which there are no records of any services rendered.
Defex allegedly used a Cayman-headquartered shell company, Peninsula Inc Ltd, to pay around $69 million in connection with arms deals in Saudi Arabia, according to investigators.
The investigation into Defex began in 2014 when investigators uncovered inflated invoices in a deal involving the sale of equipment to police in Angola. The proceeds from the doctored invoices were allegedly split between Angolan officials and Defex execs.
The investigation spread and is now focused on the defense contractor’s business in Saudi Arabia.
Defex is a public-private partnership that’s 51 percent owned by the Spanish government. Its status as a government-linked company allowed it to obtain the permits required to export weapons and ammunition.
Harry Cassin is the managing editor of the FCPA Blog.