Bombardier doled out millions to Tunisian for lucrative contract: report

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Bombardier Inc. paid $35-million (U.S.) to a shadowy Tunisian middleman as part of its successful efforts to obtain a contract for a multibillion-dollar railway project, a South African newspaper says.

The newspaper says it has obtained a copy of a draft agreement between Bombardier and the Tunisian middleman, Youssef Zarrouk, that envisioned a 6 per cent commission or success fee if Bombardier won the contract for the South African train project. The amount was later reduced to $35-million, the report says.

A spokesman for Bombardier Transportation confirmed today that Mr. Zarrouk had been an "appointed company representative." But he denied any unethical conduct in the South African contract, and he insisted that its payments to agents such as Mr. Zarrouk are based on market rates and industry norms.

The head of the Gautrain Management Agency, in which Bombardier is a partner through the Bombela consortium, said he is asking Bombardier for an explanation of the agreement with Mr. Zarrouk and whether any payments have been made.

The Mail and Guardian, a respected South African weekly newspaper with an investigative journalism unit, described Mr. Zarrouk as "an international arms and projects fixer" who was influential in the toppled regime of former Tunisian dictator Zine El Abidine Ben Ali.

Bombardier is earning about $2-billion from its construction and maintenance work on the Gautrain, a high-speed railway line that connects Johannesburg, Pretoria, and the international airport near the two cities. The company and its consortium partners were awarded the contract in 2005 after a three-year campaign.

The Mail and Guardian said it had obtained a 2004 memorandum to Bombardier warning that its bid was "much higher than the competition." The memorandum, written by the well-connected French lobbyist Jean-Marc Pizano, proposed a broad campaign of lobbying in the South African government to help Bombardier obtain the contract.

Mr. Pizano had a long history of involvement in South African arms projects, and one of his partners, Richard Charter, had received multimillion-dollar payments from a British arms supplier that had won a massive South African contract for military jets in 1999, the Mail and Guardian said.

It quoted South African court documents in which a politically connected South African businessman said he had been promised a $7-million commission from Bombardier if it won the Gautrain contract. The businessman, Peter-Paul Ngwenya, claimed he was promised the payment through the company's agents: Mr. Zarrouk, Mr. Pizano and Mr. Charter. He said he only received $450,000 and demanded the remainder of the $7-million, the newspaper said.

Mr. Ngwenya was a political prisoner during apartheid because of his activities for the African National Congress, and he was close to ANC politicians at the time when the Gautrain contract was awarded, the newspaper said.

It quoted Mr. Zarrouk as confirming that he had paid Mr. Ngwenya in connection with the Gautrain contract.

Jack van der Merwe, chief executive officer of the Gautrain Management Agency, said he was unaware of the reported agreement between Bombardier and Mr. Zarrouk's company.

"I have referred the copy of the 'representative agreement' to Bombardier for an explanation and to indicate what the status of this 'representative agreement' is, and if any payments have in fact taken place," he said in a statement.

He said the agreement between the Bombela consortium and the provincial government is "very specific on bribery and corruption."

A spokesman for Bombardier said the company will "respond immediately" as soon as it receives the copy of the agreement from Mr. van der Merwe.

In a separate statement, Bombardier denied any involvement in bribery or unethical conduct in connection with the Gautrain project.

"We do not condone making any payments to win contracts," the company said.

"Such initiatives are totally against our ethics and we condemn any such behaviour. Bombardier maintains and will continue to maintain the highest standards of ethical behaviour in all of our dealings worldwide."

The company said it never had a contract for services with Mr. Ngwenya, but it said it could not comment further because of the current litigation.

On the question of the "representatives" that it hired, the company said: "It is a common practice in many industries for companies to hire representatives and agents to promote products and services, to assist in evaluating customer requirements, and provide insights into potential competition in countries where they wish to develop business. The selection, retention and compensation of agents is done in accordance with international standards and regulations and follows a rigorous process including due diligence that complies with all applicable local and international laws and regulations."