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The Associated Press April 28, 2010, 10:59AM ET

Malaysians allege graft in French submarine deal

A Malaysian rights group said Wednesday it filed complaints to French prosecutors that allege shipbuilder DCNS paid kickbacks to a friend of Malaysia's prime minister to aid a $1.2 billion submarine deal.

Malaysia ordered two diesel-electric Scorpene attack submarines in 2002 as part of a naval upgrade. Prime Minister Najib Razak was defense minister at the time.

Local rights group Suaram said it filed two complaints in December 2009 and February this year with French prosecutors. Under the French legal system, prosecutors must first investigate a complaint before the case can proceed.

The complaint centers on a 114 million euro ($150 million) fee paid by DCNS to Malaysian firm Perimekar Sdn. Bhd. to facilitate the deal, said Suaram official Cynthia Gabriel. Perimekar is owned by the wife of Abdul Razak Baginda, a controversial figure who once was Najib's aide and a close friend.

The case could embarrass Najib, who is struggling to consolidate his power a year after taking office. Although the opposition has long accused the government of corruption in the submarine deal, this is the first legal action, albeit in a foreign country.

Joseph Breham, a French lawyer hired by Suaram, said French prosecutors agreed in early March to launch a preliminary inquiry into possible corruption and kickbacks paid by DCNS to Perimekar.

This was based on grounds that Perimekar was formed only a few months before the contract was inked, had no track record in submarine services and didn't have the financial ability to support the contract, he said.

The Paris prosecutor's office confirmed Wednesday it had opened an investigation into the case but would not provide further details.

Gabriel said the fact that French prosecutors have launched an inquiry into the case showed a "lack of transparency and good governance" in Malaysia.

"For far too long, this has been shrouded in secrecy. It looks as if Perimekar was just formed to receive the money. Where did the money go and to whom? We want to know the truth," she told reporters.

She did not say why the complaint was filed only now, eight years after the deal was made.

Najib has denied there was any corruption. Malaysian defense officials have said the fee was paid to Perimekar for coordination and support services.

DCNS spokesman Emmanuel Gaudez declined to comment, and Malaysian defense ministry officials couldn't be reached for comment Wednesday.

Malaysian government officials are not obliged to testify in the French court. Gabriel said Suaram will take legal action against Perimekar and the government in Malaysia if the French court rules there is corruption by DCNS.

Malaysia received its first DCNS submarine last year, with the second vessel due to be delivered this year.

Perimekar's connection with Abdul Razak is controversial in other respects too. He was last year acquitted of abetting in the murder of his ex-mistress, a Mongolian woman. He confessed to having an affair with her and said she was blackmailing him. He now lives in exile in Britain.

Two policemen working in security were convicted and sentenced to death for murdering the Mongolian, although prosecutors failed to show any motive. The woman was shot and her body blown up with military-grade explosives in October 2006.

Breham said if French prosecutors find sufficient evidence, the case will go before a court but it is likely to last years. Similar allegations of corruption have been made against DCNS in Paris for its arms deals in Pakistan and Taiwan, he said.

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