Canadian authorities have started to collaborate with their Swedish counterparts in the continuing corruption investigation into Bombardier Inc.'s $340-million (U.S.) contract to sell railway equipment in Azerbaijan, The Globe and Mail has learned.
Sweden's National Anti-Corruption Unit has already charged a Bombardier employee based in Stockholm, Evgeny Pavlov, with "aggravated bribery" in connection with the awarding of the contract to install train-signalling technology along a rail line in the former Soviet republic.
As part of the investigation into the 2013 deal, Swedish police are digging into the inner workings of the Montreal-based company with offices and contracts around the world. The trial of Mr. Pavlov has shed light on a network of shell companies that Bombardier Transportation partners with in Russia and several other countries, raising questions about international business practices at one of Canada's flagship firms.
Besides Mr. Pavlov, Swedish prosecutors have named five other employees of Bombardier Transportation Sweden as suspects in their investigation. A report prepared by the anti-fraud unit of the World Bank, which funded 85 per cent of the Azerbaijan project, additionally names the head of Bombardier's Moscow office.
Swedish officials have recently sought Canadian assistance to seize documents and electronic equipment in Canada, and potentially to conduct interviews in the country, as part of a process known as a Mutual Legal Assistance Request (MLARs), sources familiar with the probe said.
One key piece of evidence the Sweden's National Anti-Corruption Unit is seeking is a laptop belonging to one of the suspects that prosecutors believe was sent from Stockholm to Canada shortly after the investigation began, according to sources.
A spokesman for Justice Canada refused to comment on the request filed as part of the Treaty between the Government of Canada and the Government of Sweden on Mutual Assistance in Criminal Matters.
"Requests for mutual legal assistance are state-to-state requests made on a confidential basis," Justice spokesman Ian McLeod said.
The RCMP also declined to comment.
However, sources in Canada and Europe confirmed the continuing operation on the condition of anonymity, given the confidential nature of the process.
The sources said there has been a back-and-forth between officials in Canada and Sweden as the request is being refined to ensure everything is done in accordance with the complex rules of MLARs. A small number of Mounties have already travelled to meet their Swedish counterparts to discuss the request.
"There is an exchange of information that is ongoing," said one law-enforcement official.
Bombardier did not respond to requests for comment made on Thursday.
The development comes as Bombardier's two main train-making rivals in Europe negotiate a tie-up that could leave the Canadian manufacturer the odd man out.
France's Alstom confirmed Friday it is in talks with Germany's Siemens, but cautioned no final agreement has been reached. A deal, if struck, could leave Bombardier without a partner of its own against an increasingly strong competitor from China, CRRC Corp. Bombardier had been discussing a tie-up of its own with Siemens until recently.
A key matter in the corruption investigation is Multiserv Overseas Ltd., a shell company that was brought in as a third party on the Azerbaijan deal and more than 120 other transactions involving Bombardier. Multiserv's shifting ownership and management structure was revealed by a major Globe and Mail investigation last year.
The company has a London mailing address, a director living in Cyprus and a changing ownership structure involving other shell companies in the Seychelles, Panama and Belize. Bombardier has in the past refused to answer questions about who was the beneficial owner of Multiserv Overseas, though evidence presented in Swedish court show the company to be controlled by two Russian businessmen considered close associates of former Russian Railways boss Vladimir Yakunin.
Multiserv Overseas is not listed as a contractor on Bombardier's formal bid for the 2013 project, despite the World Bank's requirement that bidders name all subcontractors they intend to use. On Bombardier's internal documents describing how the Azerbaijan deal would work, Multiserv Overseas is inserted into the transactions as a middleman between Bombardier Transportation Sweden and the company's local partner, Trans-Signal-Rabita.
In the $340-million Azerbaijan deal, Multiserv Overseas appears to have made an $84-million profit after buying Bombardier train-signalling technology for $20-million before selling the same equipment to Trans-Signal-Rabita for $104-million.
Swedish police raided Bombardier's Stockholm office last fall and wiretapped telephone traffic for six months, recordings conversations between Bombardier executives in Stockholm, Montreal, Berlin and Moscow.
The trial of Mr. Pavlov wrapped up this week, with senior prosecutor Thomas Forsberg asking the Stockholm court to find Mr. Pavlov guilty and to sentence him to five years in prison for his role, which allegedly saw him collude with Azeri officials to ensure Bombardier won the 2013 bid.
Mr. Forsberg described the evidence against the 37-year-old Mr. Pavlov – which also included internal company e-mails, as well as testimony from current and former employees of Bombardier Transportation Sweden – as "rock solid." Mr. Forsberg said that Mr. Pavlov, in his e-mails to colleagues, had "practically written an essay about how they are in collusion" with employees of the state-owned Azerbaijan Railways.
The defence, in its closing argument, claimed Sweden didn't have jurisdiction over the matter, since Mr. Pavlov is a Russian national who was employed by Bombardier Transportation's Russian unit at the time of the alleged crime.
Speaking in his own defence, Mr. Pavlov pleaded innocence. "I have not done anything illegal; I just did my job. I checked everything with the lawyers," he said in court on Wednesday. Mr. Pavlov's defence team have argued that decisions about the Azerbaijan bid were made much higher up at Bombardier than Mr. Pavlov, a regional sales manager.
Mr. Forsberg, in his closing statement, also mentioned Mr. Pavlov's superiors at Bombardier Transportation Sweden.
He said Peter Cedervall, the president of the Bombardier's rail-control solutions division, and Thomas Bimer, a vice-president and director of sales, "made this possible. These people could have pressed the stop-button, but they didn't. They made it possible for the whole thing to proceed."
Mr. Cedervall and Mr. Bimer are among five employees of Bombardier Transportation Sweden, named as additional suspects in the case against Mr. Pavlov. In its own interim report on the affair – also entered as evidence into the Stockholm court – the World Bank's Integrity Vice-Presidency, which investigates allegations of fraud, says top officials at the Stockholm and Moscow offices of Bombardier Transportation "appear to be directly involved in the collusive and corrupt arrangements."
The evidence entered into the court show Bombardier executives beyond Sweden became worried as media, police and auditors began to focus their attention on Multiserv Overseas and the Azerbaijan deal.
"This is very hot, Peter … very, very, very hot," Laurent Troger, the president of Bombardier Transportation and one of the most senior executives in the company, said in a March 11 phone call with Mr. Cedervall that was recorded by Swedish police.
The recording of the conversation was played in court as part of the prosecution's case against Mr. Pavlov.