Bombardier faces anxious wait as Swedish corruption trial starts

11 September 2017 8:11pm

31 August 2017. By Martin Coyle and Ben Lucas.

Bombardier is in the spotlight with the start of a trial in Sweden against a former senior executive, accused of bribing Azerbaijani officials to secure a $340 million rail project.

The trial will air uncomfortable details about the transportation company's dealings, but Sweden's patchy record in taking action against companies involved in bribery abroad means the risk of prosecution isn't certain.

Swedish prosecutors have already said they would consider action against the Canadian manufacturer if the trial of Evgeny Pavlov, a former head of business development, ends with a conviction.

Fines for companies that fall foul of Sweden's corruption laws are also relatively low, capped at $1.25 million.

Pavlov is accused of conspiring with other Bombardier employees to bribe Rafik Gulmaliuevf, an Azerbaijan Railways official, to win a bid designed to improve the country's rail system.

Pavlov is on trial for a month at Stockholm's District Court, and could face up to six years in jail. He denies the charges.

Transparency International rates Sweden as one of the most bribe-free countries in the world, but to date the country hasn't taken much action against companies for offenses abroad.

In 2014, the Organization for Economic Cooperation and Development's working group on bribery concluded that Sweden still needed to make "substantial progress" to punish rogue companies.

Under Swedish law, companies can face fines for failing to prevent corruption, or if senior executives take part in corrupt schemes. The OECD experts have criticized the modest penalties allowed by the law.

Evidence for the trial

Regardless of the likelihood of prosecution, Pavlov's trial could dent Bombardier's public image.

Swedish prosecutors are aiming to call up to six current and former Bombardier executives to testify against Pavlov, documents obtained by MLex reveal.

Prosecutors will present a 2016 e-mail written by Frederik Hellander, a former Bombardier executive, who voiced "serious concerns" about the Azerbaijan deal, and pointed to "financial irregularities" in the project.

Hellander also warned that a UK-registered company, called Multiserv Overseas, had "extracted" $89 million from Bombardier to complete the deal. He added that the company had no website, no telephone number and no physical address, and that its owners were unknown.

Prosecutors believe that Multiserv Overseas paid millions of dollars in bribes on behalf of Bombardier.

Prosecutors will also use evidence gathered from secretly recorded telephone conversations between Bombardier executives, as well as intercepted e-mails and thousands of documents.

Petr Žatecký, an executive at Czech company AZD Praha, which lost out on the Azerbaijan deal, will also take the stand. AZD Praha complained to the World Bank, which funded the deal, after losing out, even though it offered the most competitive price.

A Bombardier spokeswoman denied allegations that the company has acted improperly.

"We take these allegations very seriously, as they assert conduct that does not reflect our values or the high standards we set for ourselves, our employees and our partners," she said.

The Stockholm court rejected Bombardier's request to hear part of the evidence in private.

World Bank report

The Azerbaijan deal was partly funded via a loan from the World Bank. In a report seen by MLex, the development bank concluded that the allegations against Bombardier and its employees were "credible."

Bombardier senior management "reportedly colluded" with Azerbaijan officials during the procurement process to outmaneuver other bidders and maximize its chance of success, according to the World Bank's interim report on its own investigation.

This could be "sanctionable" under World Bank guidelines, the report said.

The banks named five senior Bombardier executives, including Pavlov, as being "directly involved" in the corrupt arrangements.

Peter Cedervall, president of the company's Rail Control Solutions in Sweden, gave the "green light" to the corrupt arrangements, the report said. Cedervall hasn't been charged, but the company has suspended him.

Bombardier could lose the right to bid for other projects funded by the World Bank. That would arguably be a bigger blow for the company than a fine for breaching Swedish corruption laws.

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