Prosecutors in the northern city of Bremen have launched an investigation into possible corruption against German industrial group ThyssenKrupp, Handelsblatt has learned.
The investigation is a blow to ThyssenKrupp which thought it had rooted out corruption in its ranks. Heinrich Hiesinger took over as chief executive in 2011 and imposed a zero tolerance policy towards illegal activity, declaring repeatedly he would prefer to lose business rather than risk breaking the law.
But the new investigation suggests the group may not have entirely broken with its past.
According to information obtained by Handelsblatt from sources closes to the investigation, employees at ThyssenKrupp’s defense subsidiary Atlas Elektronik paid millions of euros to dubious consultants until 2014. The Bremen state prosecutors office believes the money paid may have been used to bribe Turkish officials, according to prosecution documents obtained by Handelsblatt.
The suspicion comes at a critical time for ThyssenKrupp because it is on the midst of a restructuring which includes a merger of its steel division with Tata Steel, a deal that has just become a whole lot more complicated because Britain’s vote to leave the E.U. will force Tata to hold on to its loss-making steel plants in Britain.
The investigation into Atlas, in which plane-maker Airbus also holds a stake, could also block the planned sale of shipbuilding unit ThyssenKrupp Marine Systems, which had used the same consultants as Atlas in the sale of submarines to Turkey. Company lawyers are now checking whether bribes were paid.
The investigation is a setback for ThyssenKrupp and its chief executive, Mr. Hiesinger, who has been trying to draw a line under past corruption cases.
Atlas Elektronik is alleged to have paid bribes in business deals with Turkey, and company lawyers are suspected of having failed to stop the corruption despite having known about it. Prosecutors believe that suspicious payments were made until 2014.They are basing the allegations on documents confiscated in searches. Handelsblatt has seen excerpts of those documents.
Investigators have had their eye on Atlas for some time. The company, which is 50/50 owned by ThyssenKrupp and Airbus, allegedly resorted to bribes to ease the sale of torpedoes and sonar equipment to Greece and Turkey.
The deal with Turkey is particularly delicate. In their searches, prosecutors came across compromising notes made by company lawyers which show that two cash checks totaling $525,000 were sent by courier to Switzerland and handed to a consultant. The consultant then paid the money into the account of a senior member of the Turkish military, according to the note of a conversation dated April 23, 2007.
The note was written by an employee of the Airbus compliance department who together with colleagues at ThyssenKrupp had checked conspicuous aspects of the defense deal with Turkey. The colleagues convened again a few days later and according to the notes of the meeting, the staff member referred to the payment to the military officer as “bribery.”
But despite this clear conclusion, nothing happened. This can’t have been due to any ignorance of the law. As members of the compliance department, they were experts in the field. In addition, the heads of the department were informed, according to prosecutors. At the time, that was Thomas Kremer at ThyssenKrupp. It’s virtually impossible that he wasn’t informed of what was discussed with the Airbus colleagues, prosecutors suspect. They believe this has been proven by emails they have obtained.
Mr. Kremer was legal affairs head at ThyssenKrupp from 2003 until June 2012. He moved to phone giant Deutsche Telekom in June 2012, where he took the same job: management board member in charge of legal affairs. His contract expires in mid-2017 and was to have been extended at a Deutsche Telekom supervisory board meeting at the end of June. But that didn’t happen. Some members of the board doubt whether it ever will.
The internal investigation at ThyssenKrupp is believed to have been stopped without any action being taken. An external law firm brought in to provide advice recommended reporting the case to prosecutors. But documents showed the compliance staff had argued against that in their meetings, on the grounds that the resulting investigation would hurt ThyssenKrupp’s business ties with other countries.
State prosecutors have been investigating the case for months and have had access to ample insider information. Its documents list 19 suspects including sales staff, Turkish consultants and employees of the compliance departments of ThyssenKrupp and Atlas.
They are accused of bribery and abetment to tax evasion. Mr. Kremer and the other lawyers may have made themselves culpable because they took no action — that, at least, is what prosecutors allege. Mr. Kremer has vehemently denied that accusation.
In the years following the meetings in mid-2007, further money was paid to the consultancy firms. A company called Bayma in February 2011 received €5 million, or $5.54 million, to dissolve a consultancy contract. And Atlas transferred further millions of euros to a firm called Tetico up until 2014. Prosecutors believe the money was used to bribe members of the Turkish military.
In fact, all the payments were bribes, the prosecutors’ documents allege. And the cases are too recent to be covered by the statute of limitations.
The investigation is a setback for ThyssenKrupp and its chief executive, Mr. Hiesinger, who has been trying to draw a line under past corruption cases. The company has repeatedly made headlines by being involved in cartels and bribery cases. It had to pay some €103 million in 2012 for participating in the price-fixing of railway tracks. The European Commission fined it more than €300 million for price collusion in the elevator business in the years up to 2004. And the shipbuilding division has repeatedly come under suspicion of securing contracts with bribes.
Mr. Hiesinger has returned ThyssenKrupp to profit with the sale of its stainless steel unit and through spending cuts. This success will be endangered if the prosecutors’ allegations are confirmed. To make matters worse, some of the consultancy firms used by Atlas were also used by subsidiary HDW in a deal in which ThyssenKrupp sold the Turkish navy six submarines worth €2.1 billion.
Documents about the deal contain peculiarities that could point to bribery. Money was transferred to consultants via offshore accounts, and the commissions paid were unusually high at 3 percent. Two people involved told Handelsblatt that bribery payments were discussed in the run-up to the contracts being arranged.
ThyssenKrupp doesn’t see a link between the two cases. The company said it took the accusations very seriously. “That’s why we will investigate them ourselves and also continue to support the Bremen state prosecutors’ office in its investigations,” the company said in a statement. The prosecutors and Airbus declined to comment on the matter.
Martin Murphy specializes in the automotive, defense and steel industries.To contact: [email protected]