Bombardier Inc. executives discussed how millions of dollars worth of contracts in Russia, Ukraine and Azerbaijan were routed through a network of shell companies, and how to redirect those millions after Swedish prosecutors and The Globe and Mail started asking questions, according to wiretaps that will be presented as evidence at a bribery trial that begins in Sweden next week.
In a transcript of one of the recordings, Laurent Troger, the head of Bombardier's rail arm, Bombardier Transportation, asks in an April 2, 2017, phone call that a contract be re-written to make it "bulletproof" against a World Bank audit while still satisfying the interests of Russian partners that are alleged to have skimmed tens of millions of dollars off a controversial project in Azerbaijan.
Also recorded were phone calls from senior figures at Bombardier's Montreal headquarters as they came to grips with a spreading police investigation and growing media pressure. "Everybody is very nervous and it's taking proportion here that you cannot think of," Sylvie Bourdon, Bombardier's vice-president of group governance and general counsel, says in a conference call on Dec. 19, 2016, with colleagues in Sweden that was recorded by police here.
Sweden's National Anti-Corruption Unit has charged Bombardier employee Evgeny Pavlov with "aggravated bribery" in connection with the awarding of a $340-million (U.S.) contract to install train signalling technology along a rail line in the former Soviet republic of Azerbaijan. The contract was 85 per cent funded by the World Bank.
Mr. Pavlov, who could face up to six years in prison, will be alone on trial next week in Stockholm. But the 3,163 pages of evidence presented to the court last week – and made public on Friday after a Bombardier legal battle resulted in some redactions – point to far more than just the allegations against him.
Some of the evidence was provided to Swedish prosecutors by World Bank auditors. If Bombardier is found to have used corrupt practices to win the Azerbaijan deal, it would automatically be barred from competing for future World Bank contracts, cutting the financially struggling company off from lucrative infrastructure contracts across the developing world.
In its submission to the court, the National Anti-Corruption Unit names six employees of Bombardier Transportation Sweden as suspects in its ongoing investigation, including Mr. Pavlov and Peter Cedervall, the president of Bombardier's Stockholm-based Rail Control Solutions unit.
Bombardier suspended Mr. Pavlov and Mr. Cedervall pending an internal review.
At the centre of the allegations 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.
Bombardier has in the past refused to answer questions about who was the beneficial owner of Multiserv Overseas. However, in a transcript of a phone call recorded by Swedish police, Mr. Cedervall states that the company is controlled by Alexey Krapivin, a top associate of former Russian Railways boss Vladimir Yakunin. Multiserv Overseas was founded in 2010 by Yuriy Obodovskiy, another associate of Mr. Yakunin's who also serves on the board of directors of a joint venture between Bombardier and Russian Railways.
Mr. Krapivin and Mr. Obodovskiy are repeatedly referred to by the Bombardier executives as "The Partners" throughout the extensive evidence.
Mr. Yakunin, himself a long-time confidante of Russian President Vladimir Putin, resigned in 2015 amid allegations of massive corruption. Bombardier has said it lobbied the Canadian government to keep Mr. Yakunin off the list of Russian individuals sanctioned over Moscow's 2014 seizure and annexation of the Crimean Peninsula.
In one of the phone calls recorded by Swedish police, Mr. Troger – who as president of Bombardier's Berlin-headquartered rail unit is one of the most senior executives in the entire organization – and Mr. Cedervall are heard discussing how to restructure the Azerbaijan deal so that the increasingly sensitive Multiserv Overseas would no longer be part of it.
Mr. Cedervall says: "The Partners" are willing to restructure the contract, "as long as we are, let's say, taking care of their interests in the short term."
"Okay, okay," Mr. Troger replies. "But tell me what it means in terms of where we are today, and where we need to go in an acceptable way. And how this could, how this can be bulletproof, versus any external audit from the World Bank."
In another part of the same April 2, 2017, exchange, Mr. Troger asks how much Multiserv Overseas has been paid, and how much it still needs to be paid. "The balance to go with Multiserv is $50-million, I asked the question today," Mr. Cedervall replies.
"We have paid them already 54?" Mr. Troger asks. Mr. Cedervall answers: "Yes."
(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 Bombardier's local partner, a company called Trans-Signal-Rabita, for $104-million.)
On Friday, Bombardier denied the National Anti-Corruption Unit's allegations in an e-mail to The Globe and Mail.
"Bombardier denies any allegations that it acted improperly," company spokesman Simon Letendre wrote. "We take these allegations very seriously as they assert conduct that does not reflect our values or the high standards we set for ourselves. We are carefully reviewing the legal filings and support a complete accounting of all the facts and circumstances surrounding this project. As the legal proceedings are ongoing, we cannot and will not comment any further at this stage."
In June, Bombardier stated it had suspended its relationship with Multiserv Overseas after six years. The phone transcripts entered into Swedish court suggest that even as that decision was being made, Mr. Cedervall and his colleagues were trying to find another way to maintain the company's relationship with Mr. Krapivin and Mr. Obodovskiy.
Among the documents is a preliminary report by the World Bank's Integrity Vice Presidency, a unit that is auditing the 2013 Azerbaijan deal over suspicions that Bombardier won the contract through corruption and collusion.
"According to the information [the Integrity Vice Presidency] received, Bombardier colluded with Azerbaijan Railways officials early in the procurement stage…. E-mail correspondence of Bombardier employees indicates that Bombardier had access to confidential documents of Azerbaijan Railways and influenced its decision," reads the preliminary World Bank report, which was written in August, 2016, and is labelled as strictly confidential.
The World Bank report also states that Bombardier's Azeri partner on the project – the previously unheard of Trans-Signal-Rabita – was unqualified to win the tender, and served primarily as a vessel through which bribes appear to have been paid to government officials.
"The evidence indicates that Bombardier may have funnelled bribe payments to Azerbaijan Railways officials through Trans-Signal-Rabita. The actions of Bombardier could constitute corrupt practices and would be sanctionable under the World Bank Procurement Guidelines," the report says.
In its interim report, the Integrity Vice Presidency said five Bombardier employees – including Mr. Cedervall and Mr. Pavlov, as well as Konstantin Khromushkin, head of the Moscow office of Bombardier Transportation – "appear to be directly involved in the collusive and corrupt arrangements."
If the auditors conclude Bombardier engaged in any corruption, it would be forced out of the Azerbaijan project and barred, under World Bank rules, from participating in "any other project financed, in whole or in part, by the bank."
Such a ban would be a huge blow for Bombardier, and specifically its rail unit, Bombardier Transportation. In 2015, the World Bank spent $1.5-billion subsidizing railway-building projects around the globe, many of them in developing markets such as China, India and Brazil, that are crucial to the rail unit's growth strategy.
The legal troubles could also complicate talks to combine the rail unit with that of German rival Siemens AG. Bombardier said last month that it is exploring "multiple options" for the rail unit.
While the World Bank audit is not expected to be completed until 2018 at the earliest, Mr. Pavlov's trial could be a harbinger of its outcome.
The evidence suggests that even as Bombardier moved to end its relationship with Multiserv Overseas, Mr. Troger and other executives were looking for a way to continue the relationship with "The Partners."
In other phone conversations, Mr. Cedervall and other executives discuss contracts in Russia, Ukraine, Kazakhstan and Mongolia that are also related to "The Partners" and their companies.
"How, how, how are we going to change the… the agreement so that we, we can continue to do business in Russia?" Mr. Troger asks Mr. Cedervall in a March, 2017, phone conversation.
"The alternative is that we don't work with [The Partners], but then, then we will lose a lot of business of course," Mr. Cedervall replies.
Import records show 125 transactions into Russia that involved Multiserv Overseas and Bombardier-related entities (including the Bombardier-Russian Railways joint venture Elteza, of which Mr. Krapivin and Mr. Obodovskiy own 37 per cent via another network of shell companies).
The case against Mr. Pavlov is more narrowly focused on the formation of Trans-Signal-Rabita, Bombardier's local partner in the bid that won the 2013 Azerbaijan contract.
Drawing heavily on Bombardier internal e-mails, the prosecution will argue that Trans-Signal-Rabita was created through collusion between Mr. Pavlov and an Azeri rail official for the specific purpose of winning the deal. Prosecutors say the company lacked the history and finances to qualify for the contract.
Bombardier and Trans-Signal Rabita won the bid despite offering only the fifth-best price among eight competitors. That fact drew the ire of another bidder, the Czech company AZD Praha, which wrote to the World Bank demanding an investigation of how the contract was awarded.
Global Affairs Canada, the federal government department that provides services to Canadian companies doing business abroad, said on Friday evening that it is following developments in the case and would not comment on any future actions.
With a report from Steven Chase in Ottawa