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Alvis bribery allegations

Campaign Against Arms Trade statement - December 10, 2004

CAAT warmly welcomes the decision by Mr Justice Park to allow the Guardian access to the court file of the case Chan U Seek vs Alvis Vehicles Limited.

Former Alvis agent, Singapore businessman Chan U Seek, had sued Alvis over the sale of Scorpion tanks and Stormer Armoured Personnel Carriers to Indonesia in the mid-1990s, claiming he was entitled to commission worth 6 million pounds. The disclosure of the case documents has struck an important blow for the public interest against "commercial confidentiality" and has shed more light on the inner workings of the UK arms industry than anything since the Scott Report.

According to the witness statements Alvis employed a company called PTSK, run by the daughter and two sons of a Brigadier General in the Indonesian Army to secure the sale of around 100 armoured vehicles to Indonesia in the mid-1990s. By Rini Soewondho's account her ability to secure the support of Suharto's "inner circle" enabled the Indonesian Army to gain the funds it needed to purchase the Scorpions and Stormers.

The witness statements of Lionel Steele (Alvis's International Sales Manager) and Nick Prest (former Chairman and Chief Executive of Alvis and former DESO employee) show that a company owned by Suharto's daughter "Tutut", called Global Select, convinced the "inner circle" to buy Alvis. The Guardian has alleged that Global Select collected around 10% (16.5 million pounds) of the sale price.

By Nick Prest's own account Alvis's hiring of PTSK and Global Select was "crucial" in enabling it to secure the 1995 and 1996 contracts for armoured vehicles. From the published documents it appears that Chan U Seek was involved in attempting to sell Alvis vehicles to Indonesia in the 1980s but had been released by Alvis following his failure.

CAAT is unsurprised by these allegations. Allegations of corruption have previously surrounded arms deals to Indonesia. On Tuesday the Governor of Aceh, Indonesia, was arrested over allegations he personally profited from the purchase of a Russian Mi-2 military helicopter. In early 2004 allegations were made of corrupt practices over the purchase of four Russian Mi-17 military helicopters for the Indonesian Army. Current Indonesian Defence Minister Juwono Sudarsono has previously admitted that up to 30% of the money for equipment purchases is skimmed off the top by those involved.

The allegations against Alvis raise important questions:

• What did the Major Government, which licensed the deals, know about the alleged payments to relatives of the Suharto family and senior Indonesian military officers that were allegedly part of the deal? This is particularly pertinent given the deal was underwritten at the time by the Export Credits Guarantee Department (ECGD). Indonesia subsequently defaulted on the deal, potentially passing the bill to the UK taxpayer. CAAT believes an urgent enquiry into Government knowledge of the financing of the deal needs to be undertaken by the National Audit Office (NAO) or the Public Accounts Committee (PAC) in Parliament to examine this.

• Both Rini Soewondho and Nick Prest refer to the 1996 contract being secured despite the competition from Daewoo of South Korea "who were offering a competitive vehicle on generous credit terms" (Prest). An enquiry by the NAO or PAC needs to establish whether ECGD cover was offered to Alvis with the purpose of enabling Alvis to secure the deal and, if so, whether this represents good value for money for the taxpayer.

• The other main UK arms deal to Indonesia in the 1990s was the then British Aerospace's sale of Hawk aircraft to Indonesia in 1993 and 1996. These two deals were for 40 Hawk ground attack aircraft and the deals were worth around #700 million. BAE Systems is no stranger to corruption allegations; currently the Serious Fraud Office is investigating allegations of slush funds surrounding its dealings with Saudi Arabia. Were Global Select, Basque or other companies around Suharto's "inner circle" involved in taking money from the Hawk deals? If so, what did the UK Government know about it at the time?

• Rini Soewondho's statement highlights the fact that from 1978 "the purchase of all defense equipment from foreign companies must be made through agencies owned by Indonesian citizens. These companies have to be owned by retired Indonesian military personnel (or a member of his family)". She confirms that her family's company was an agent for UK firms up until the 1990s, and from the statement of Nick Prest we know one of these firms was Royal Ordnance. What other companies had dealings with PTSK? And what, if any, payments were made to agents or Suharto's "inner circle" to secure contracts? CAAT believes that this shows the need for a more wide ranging investigation into all sales of military equipment to Indonesia during this period.