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Sat, Feb 18, 2017

Austrian Ministry Of Defense Files Suit Against Airbus

Alleges Fraud Connected To Eurofighter Jet Order In 2003

The Austrian Federal Ministry of Defense and Sports (FMDS) has filed a criminal complaint with the Vienna Office of Public Prosecutions today against Airbus Defense and Space GmbH (formerly EADS Deutschland GmbH) and Eurofighter Jagdflugzeug GmbH based on suspected willful and fraudulent deception. The Republic of Austria represented by the Finanzprokuratur (lawyer and legal advisor of the Republic of Austria) has joined the proceedings against the two Airbus companies as a private party.

The statement of facts presented in the criminal proceedings, joined by the private party, are based on the investigations of the "Task Force Eurofighter" led by Major General Hans Hamberger. The Task Force was formed by FMDS in 2012.

Based on the findings of the Task Force Eurofighter investigations, the FMDS assumes in the criminal complaint that the two accused Airbus companies have willfully and fraudulently been deceiving the Republic of Austria since 2002, both with regards to the true purchase price as well as to the true ability to deliver and true specifications of the Eurofighter interceptor planes.

"The report that I have received clearly states: Without the fraudulent and deceitful actions of Airbus Defense and Space GmbH and the Eurofighter Jadgflugzeug GmbH, the Republic of Austria would not have decided in favor of the Eurofighter in 2003," said Hans Peter Doskozil, Federal Minister of Defense and Sports. "Furthermore, the settlement in 2007 would not have been agreed. As Federal Minister of Defense, I see it as my duty to report criminal matters that come to my attention and to demand compensation for the damages inflicted on the Austrian taxpayers. This is what we have done today.

"My concern is the full and final settling of the Eurofighter purchase, which has been subject to corruption allegation for 15 years. I want complete clarification of the case. Taxpayers must be confident that we are careful with their money. Only then they will continue to be prepared to accept investments in the security of our country," said the Federal Minister of Defense.

"The Republic of Austria has today joined the criminal proceedings against Airbus Defense and Space GmbH and Eurofighter Jagdflugzeug GmbH with regards to damages, causality, illegality and culpability," said Wolfgang Peschorn, President of the Finanzprokuratur. "The accused companies will have to compensate the damages."

The financial damages to the Republic of Austria are the sum of the paid purchase price for 15 Eurofighters plus the difference between the operating costs of the Eurofighter incurred to date and the hypothetical operating costs of an alternative aircraft minus the current value of the 15 Austrian Eurofighters. Based on current knowledge, the damages can therefore amount to up to EUR 1.1 billion. They are definitely at least EUR 183.4 million. In addition, there are damages due to the additional operating costs of the more expensive Eurofighter, which cannot yet be quantified.

The Austrian Ministry of Defense said in a news release that the statement of facts proves that the two accused Airbus companies never informed the Republic of Austria that the purchase price of EUR 1.959 billion included almost 10 per cent (exactly EUR 183.4 million) of costs for offset transactions. This, despite the fact that the Republic of Austria clearly requested, in the first bidding documents of 2001, that costs for the realization of the requested offset transactions are to be shown separately.

The Republic of Austria always had to assume that the purchase price according to the purchase contract of July 1, 2003 represented the true value and quality of the ordered interceptor planes and that the realization of the requested offset transactions would not have a financial impact. In reality, the EUR 183.4 million which were fraudulently included in the purchase price were used to cover not just legal but also illegal costs for offset transactions. The public prosecution offices in Munich and Vienna have already been investigating in this context for some time.

The evidence provided by the Task Force Eurofighter suggests that, since 2002, the two accused Airbus companies promised and entered into an agreement to deliver an object of purchase, despite being in no position and having no intention to deliver the agreed object of purchase. The settlement reached in 2007 between the Republic of Austria and the Airbus companies does not alter the culpability of such fraudulent deceit. Peschorn: "We assume that the Republic of Austria would not have signed the first purchase agreement in 2003 nor the settlement in 2007 with the terms agreed if such facts had been known."

The rights of the Republic of Austria are clearly safeguarded, given the comprehensive statement of facts presented in the criminal proceedings, joined by the private party, and therefore the statute of limitation is suspended.

Irrespective of the legal proceedings dealing with the past, his primary and most important duty as Federal Minister of Defense is to guarantee the security of the country. Doskozil: "Air surveillance by the Austrian Air Force remains uncompromised. Our air force and our pilots do a fantastic job. They also need effective interceptors. I declare my 100% support for Austrian Armed Forces' air surveillance duties." However, according to Doskozil, the operating costs of the first tranche of Eurofighters are very high. "This year, the operating cost for the Eurofighter will be about EUR 80 million. We also need to replace our Saab 105 OE by 2020. We need to come up with new solutions. For this reason, I have set up a special commission in the Ministry of Defense, under the leadership of the Commander of the Air Force, Brigadier Karl Gruber. It has until the end of June 2017 to examine all the options available to us for ensuring the continued effective safeguarding of our air space at today's levels, but on a more cost-effective basis."

Airbus responded with a statement posted to its website saying the charges were unfounded.

"Airbus is surprised by today’s press conference by the Austrian Federal Ministry of Defense raising criminal allegations (“Strafanzeige”) against Airbus Defence and Space GmbH, a division of Airbus, and Eurofighter Jagdflugzeug GmbH, alleging willful deception and fraud linked to the order for Eurofighter jets back in 2003," the company stated.

"As the Austrian Federal Ministry of Defense did not discuss the matter with Airbus prior to the announcement, the company learned about the allegations from the media today and is lacking substantial information. We cannot see any foundation in particular for the allegations of bad faith and fraud.

"Airbus asserts that the company is continuing its policy of actively supporting the authorities in investigating concrete suspicions."

(Source: Austrian Ministry of Defense and Airbus news releases. Images from file)

FMI: www.bundesheer.at, www.airbus.com

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