Latest on Lafayette

AFP carried an article today saying that French prosecutors will be dropping the investigation into allegations of kickbacks related to the sale of six Lafayette frigates to the Taiwan Navy:

Paris prosecutors said yesterday they have called for a seven-year probe into alleged kickbacks paid for the multi-billion-dollar sale of French warships to Taiwan in 1991 to be dismissed without trial.

The office of state prosecutor Jean-Claude Marin confirmed a report in Le Figaro newspaper saying he had requested the case, France's biggest corruption probe in 50 years, to be dismissed for lack of evidence.

French judges wrapped up a five-year investigation in 2005 into alleged kickbacks paid on the sidelines of the deal, but were repeatedly denied access by the government to top-secret defense files at the heart of the case.

The inquiry centers on accusations that a substantial chunk of the US$2.8 billion paid by Taiwan for six French-made frigates went on commissions to middlemen, politicians and military officers in Taiwan, China and France.

Taiwan's highest anti-corruption body has said as much as US$400 million might have been paid in bribes for the warships built by French defense company Thomson-CSF (now called Thales).
Allegations of backhanders emerged after the body of the officer who ran the Taiwanese navy's weapons acquisitions office was found floating in the sea off the island's east coast in 1993. Further suspicions arose when Swiss courts discovered 520 million dollars in accounts held by the businessman Andrew Wang (汪傳浦), the main suspect in the case, who was allegedly tasked with convincing Taiwan to buy the ships.

Taiwan is seeking damages of close to one billion euros from France before an international court of arbitration. It has also sought the return of the US$520 million held on Wang's Swiss accounts, but Switzerland in April rejected the request.

In Taiwan, eight people including Wang have been charged in relation to the scandal. Thirteen officers and 15 arms dealers have already been imprisoned.

The Taiwan frigates affair was also at the origin of a political dirty tricks scandal, known as the Clearstream affair, in which top figures including French President Nicolas Sarkozy - then interior minister - were wrongly accused of receiving kickbacks from the sale.

There's alot more to the story than meets the eye, and it's not clear if the whole story will ever be told. It seems hard to prove guilt with so many rice bowls that could be broken, possible links to campaign financing, and other programs that could be dragged in to the controversy. What's often forgotten is that there were at least three other European-sourced programs going on at the same time - Italian survey ships, German minesweepers, and French Mirage fighters.

The damage from the Lafayette case transcends whatever illegal activity may have taken place. The greatest tragedy was the loss of life. Beyond that, many in Taiwan's defense establishment have become risk-averse, almost to a fault.