Police launch investigation of Pandur military vehicle deal

The government's purchase of Pandur military vehicles is hitting rough terrain amid political sniping, allegations of corruption and a police probe after it has emerged the Czechs paid three times more for the armored personnel carriers (APCs) than the Portuguese.

Czech anti-corruption police have launched an investigation into the purchase of the APCs from the Austrian company, Steyr, by the Czech military, police official Roman Skřepek told The Prague Post.

"The police department responsible for uncovering corruption and financial crime has initiated an investigation," Skřepek said.

"We have started collecting all available material. Only after a thorough evaluation will it be decided if further action is needed. For tactical reasons, any further detailed information will not be made available."

Prime Minister Jan Fischer demanded the purchase of the Pandurs be investigated, and Social Democratic Party (ČSSD) leader Jiří Paroubek said he will lodge a criminal complaint for alleged corruption related to the tender.

A major arms dealer, Pavel Musela, whom investigators would like to talk to, was seriously injured in a hunting accident, and has lost his memory, according to reports.

Musela played a key role in helping Steyr win the Pandur tender.

However, Musela suffered serious brain damage in October 2008, a period of intense negotitaions over the Pandur deal.

A colleague who was with Musela at the time of the accident said Musela had fallen from a deer stand and fractured his skull.

Musela is able to communicate and recognizes his family, but he has lost his memory.

"Pavel always used to tell me: 'Pandurs are my brainchild; it is my biggest deal.' What has happened to him is certainly no coincidence," Musela's brother Karel Musela told reporters.

The investigation will center on two main issues: the alleged bribery of politicians and the military's reasons for paying three times more for the Pandur than Portugal, which also purchased the APCs.

The military took delivery of the first batch of 17 out of a total of 107 in September 2009 and will receive the balance from Steyr between now and 2013.

The first operational theater where the vehicles will be deployed will be Afghanistan, with the Provincial Reconstruction Team in Logar province.

Government plans to send an extra 55 troops as part of the Obama administration's surge strategy are in serious doubt due to opposition in Parliament, but, even if the plan is voted through, the government will have purchased twice as many Pandurs as there are surge troops.

The Pandur saga has seen more twists and turns than the rugged landscape the vehicle is meant to operate in.

In 2003, the ČSSD-led coalition government agreed to the purchase of 240 APCs. Steyr won the tender in 2006, and the military then agreed to buy 199 vehicles for 23.5 billion Kč. In 2007, Mirek Topolánek's Civic Democratic Party (ODS) led coalition government withdrew from the contract, saying the Pandurs failed military tests. However, a contract for 107 Pandur II APCs worth 14.4 billion Kč was finally signed with Steyr in March 2009, while Topolánek was still prime minister.

The Czech Republic paid 134 million Kč per vehicle, while Portugal paid the equivalent of 40 million Kč per APC.

Joe Katzman, editor-in-chief of the U.S.-based Defense Industry Daily, said one explanation for the increased price would be if Steyr were to couple the vehicle sale with a research and development investment in the Czech Republic. While the Pandurs are slated to be assembled in the Czech Republic, they will be manufactured in Austria, and added research investment does not seem to apply in this case.

Bribery allegations

Both the main political parties have attempted to dodge the corruption flak amid allegations that Steyr (owned by the parent company General Dynamics), bribed both ČSSD and ODS politicians, according to comments attributed to two former Steyr managers.

Defense Minister Martin Barták claimed the growing controversy over the purchase of the armored personal carriers was nothing but political expediency ahead of the May election.

While Barták admitted signing the controversial contract in March 2009 when he was deputy defense minister, he claimed he did it on the orders of then-Defense Minister Vlasta Parkanová.

The bribery allegations center on reports that Steyr's former chief signed a contract with Czech lobbyist Jan Vlček in 2002 that mandated Vlček would facilitate Steyr's contacts with Czech politicians for an alleged commission worth 7 percent of any order price.

According to reports, the Austrian police have requested secretly recorded statements by two former Steyr managers, Wolfgang Habitzl and Herwig Jedlaucnik, who, allegedly, in a conversation with an undercover reporter, described the system of commissions accompanying the Pandur deal.

The Defense Ministry claims the difference in price for the Czechs is due to added technology that the Portuguese did not request on their vehicles and that, with the Pandurs being assembled in the Czech Republic, the contract will help boost the domestic economy.

Katzman also disputes this account: "Politicians around the world frequently claim the technology benefits for national industry justify these extra costs."

"Most of the time, that's not true in a strict economic sense, though it might be true in a strategic sense; ammunition production is a common example of a nationally strategic capability. But the added technology skills don't usually have major domestic spin-offs and aren't part of a supply chain that results in a lot of new exports."

Allegations of corruption involving politicians and the military are nothing new. In 2005, politicians were allegedly involved in a bribery scandal over the Czech Republic's 19.6 billion Kč lease of 14 Gripen fighter jets from Sweden. The case was reopened in 2007, but no one has been prosecuted.

In October 2009, the anti-corruption unit of the military police was shut down, officially for budgetary purposes.

In January, one of BAE's (a British defense, security and aerospace company) former confidential agents, Alfons Mensdorff-Pouilly, was charged with bribery over arms deals involving the Czech Republic.

Mensdorff-Pouilly, of Austria, was accused of conspiring to make corrupt payments to promote the sale of BAE fighter jets to the governments of the Czech Republic, Hungary and Austria.

He was granted ?1 million bail Feb. 4.

- Petr Cibulka Jr. contributed to this report.

Tom Clifford can be reached at
tclifford@praguepost.com