At the end of August 2019 an explosive document landed on the desk of Éric Trappier, boss of high-profile French company Dassault Aviation. It was the report of an inspection carried out the previous year by the Agence Française Anticorruption (AFA), the French watchdog that ensures large companies respect their legal obligations in fighting corruption under the so-called Sapin 2 law of 2017.
The AFA inspectors spent ten months looking into Dassault. The resulting report, seen in full by Mediapart, is quite simply damning for France's flagship aviation company, which manufactures Rafale fighters and Falcon corporate jets.
The agency identified no fewer than 43 problematic issues (called “observations”). Out of the nine obligations set out in the Sapin 2 legislation, Dassault had breached five, which were flagged as “breaches of compliance”. Dassault's anti-corruption measures were found to be deficient on the most sensitive points, including the oversight of payments and checks on intermediaries employed to help export sales, the most at-risk area when it comes to corruption. The AFA made seven “recommendations” which involved a complete overhaul of procedures from top to bottom.
Enlargement : Illustration 1
But the report contained even worse news for Dassault. On top of the issue of respecting proper procedures, the AFA also identified several suspect operations with the intermediary who helped the group win the massive 7.8 billion-euro deal to sell Rafale jets to India. These included the purchase of replica models of the Rafale jets for one million euros, as already revealed by Mediapart. But there were also payments made contrary to the aviation company's own rules, reports of dubious activity, and a contract with an offshore company based in Dubai. All were indications of potential corruption.
Yet the AFA, headed by magistrate Charles Duchaine, decided to spare Dassault. None of the suspect information found in 2018 concerning the Indian contract was flagged to France's prosecution authorities. The affair was thus buried. It was only thanks to the revelations in Mediapart's 'Rafale Papers' investigation, followed by a complaint from the non-governmental organisation Sherpa, that a judicial investigation for “corruption” and “influence peddling” was finally launched in France in July 2021.
In an interview in October 2017 in the magazine Décideurs, however, Charles Duchaine had stated his desire to “punish deviant behaviour”. He told the publication: “Article 40 of the criminal law procedural code obliges any public servant or official to report to the relevant prosecution authorities any offences they notice in the course of their duties. We will fulfil this obligation as soon as we have the material to do so.”
The AFA was equally obliging to Dassault when it came to the issue of the aviation firm's deficient anti-corruption measures. Having received Dassault's responses to its criticism, the agency waited fifteen months before writing its final report. That report did not recommend any sanction, nor even issue a warning. The AFA report simply asked Dassault to comply with the law “by mid-2021 at the latest”, in other words, two-and-a-half years after the breaches were first observed.
When approached by Mediapart, Charles Duchaine and Dassault declined to comment.
Dassault's opaque culture
Dassault Aviation is a high-profile, strategic company used to wielding influence – even tinged with corruption - at the highest levels. Its founder, Marcel Dassault, handed out 500-franc bills and funded political parties. His son Serge, who died in 2018, was convicted of “corruption” and “laundering the proceeds of tax fraud”, and was under investigation for “buying votes”. In 2003 Serge Dassault openly criticised the Organisation for Economic Co-operation and Development (OECD) convention which had just banned corruption in exports. “What's more, we have to be virtuous, we must no longer pay commissions! We've lost three contracts like that,” he declared.
What is the situation with Dassault today? During the inspection carried out in 2018 the chair and CEO Éric Trappier told the AFA that “integrity is a core value of its activity”, underlining that the group's own ethics charter and anti-corruption code extolled a “policy of zero tolerance concerning corruption and influence peddling”.
But according to the AFA report, these lofty values were not matched by deeds. “According to the inspected organisation itself, the human resources dedicated to compliance are insufficient,” wrote the agency inspectors. Members of the internal audit team at Dassault “don't have professional experience in anti-corruption complaints and haven't been trained in that”, the report noted.
The agency's report also said that at the time of the inspection the risk mapping for corruption did not comply with the law, nor was the “training plan aimed at the most exposed managers and personnel”.
Internal controls were insufficient or even non-existent, the report continued. For example, Dassault had not supplied “any information concerning the existence of controls” over gifts given by the company. That information was only provided after the inspection. Similarly, the firm's financial management had “not included in their accounts control procedures any control points specifically aimed at ensuring that its accounting is not used to mask corrupt acts”.
The files on contracts for the sale of Rafale military planes to Egypt and Qatar were not made available to the inspection team, despite repeated requests being made.
Relations between Dassault and the AFA became tense as the inspectors asked for items related to specific cases. In particular, the aircraft manufacturer refused - “despite repeated requests being made” by the agency - to supply “the files on contracts for the sale of Rafale military planes to Egypt and Qatar”. Questioned about the reasons for this refusal, the company did not respond.
Dassault also refused to hand over to the AFA documents relating to Reliance, the main Indian partner company in the Rafale contract, again despite “repeated requests”. Suspected of having been foisted upon Dassault because of the close ties between its boss and the Indian prime minister Narendra Modi, Reliance also funded a film produced by President François Hollande's partner Julie Gayet. It benefited, too, from favourable tax treatment in France, as a possible result of an intervention by Emmanuel Macron at the time.
The aviation manufacturer justified its refusal to hand over the documents relating to Reliance by invoking a loophole in the Sapin 2 law, which provides for an anti-corruption inspection of clients and suppliers but not local partners, even though these local joint enterprises can be a major area of corruption. The AFA accepted this as a valid argument.
When analysing the documents that Dassault did want to give them, the inspectors nonetheless discovered major issues concerning Dassault's most sensitive activity: contracts for the export of military items. While Dassault had itself “identified the high risks” that existed during the “sale of military aircraft”, the group “does not carry out an evaluation of military clients, notably foreign clients … in relation to the risks of corruption and influence peddling” said the report.
'Numerous failings'
The AFA was very critical concerning intermediaries who were hired to help clinch export contracts. After examining Dassault's files on around 20 of these “consultants”, the inspectors said that these had not specifically evaluated the “risk of corruption”. The AFA staff also criticised “numerous failings in the procedures installed by the organisation under inspection, concerning both the entering into relations with certain intermediaries and the updating of information about them”.
The company's files on some intermediaries were “neither documented nor formalised”, the report noted. One American intermediary's company was approved even though it had been convicted of corruption - because Dassault had only carried out research on its boss. Another intermediary was hired even though the investigation carried out by Dassault via an economic intelligence consultancy showed he was under investigation for influence peddling.
The inspectors highlighted the case of the company Alkan Consult, who helped Dassault to win two huge contracts in 2015 with Egypt's air force: the sale of 25 Rafale fighters for 5.2 billion euros and a deal for four private Falcon jets to carry members of the government.
In the evaluation section of the file, Dassault's director of international sales was full of praise for Alkan, which was described as “extremely well-connected with the Egyptian air force, a company made up of former command personnel from the EAF [editor's note, Egyptian Air Force]”. Yet in theory intermediaries are not supposed to exercise any influence on clients.
Dassault had commissioned a suitability study from an economic intelligence consultancy, but this just involved Alkan's boss. No check was made on one of the company's key employees, even though he was a “former colonel in the Egyptian Air Force” who used to run “logistical support for all the French planes in Egypt's air force”.
The aircraft manufacturer assured the AFA that the “consultants selected did not perform the role of intermediary” and that the “principal way of protecting oneself from this … was to ensure that these consultants did not meet the decision makers and didn't benefit from 'success fees' if a contract was signed with the government concerned”.
Yet Dassault broke its own rule with Sushen Gupta, the intermediary hired to help win the Indian Rafale contract, and who is today at the centre of a judicial investigation for “corruption” led by two Paris-based investigating judges.
Enlargement : Illustration 2
In February 2016 Dassault paid Sushen Gupta 500,000 euros as a “bonus for carrying out exceptional acts”. As Mediapart has revealed, Gupta says that he handed out money to people “as necessary” and got hold of confidential documents from India's Ministry of Defence during the negotiations.
On January 16th 2017, four months after the signing of the contract with New Dehli, Sushen Gupta's payments went from 35,000 euros to 85,000 euros a month, and Dassault commissioned from him “four quarterly reports billed at 255,000 euros each (total amount 1.02 million euros)”. Yet in theory the aircraft manufacturer no longer needed him.
The four reports provided by the intermediary in order to justify his payments raised eyebrows among the inspectors. The first three, which were about the market for maritime reconnaissance planes, contained “neither the date nor the name of the consultant”.
The fourth, which concerned the needs of India's air force for trainer aircraft, was “stamped Indian Air Force (on the report's title page and at the foot of the pages in the body of the report)” and contained “one section about the history of pilot training”.
In short, Seshen Gupta seems to have given Dassault a report from the Indian Air Force that he was not supposed to have, and which seemed to be of very limited use to the company. When questioned about this, Sushen Gupta and Dassault did not respond.
Another suspect bonus unearthed by the inspectors was the purchase by Dassault in 2017 of Rafale jet replica models for one million euros from a company called Defsys Solutions. It turns out that this company belongs to Sushen Gupta and his family, something that can easily be checked on the internet. Yet this information did not feature in the AFA report.
The final Indian document found by the inspectors concerned a crucial moment in the deal. In 2012 Dassault had won a tender bid for 126 aircraft, 108 of which were to be built in India, but the negotiations were stalling. This was until the Indian prime minister Narendra Modi announced to general surprise in April 2015 that the tender process had been scrapped and replaced by a contract to purchase 36 aircraft, all of them to be made in France.
The AFA found out that in January 2015, five months before Narendra Modi's surprise announcement, the director of Dassault's international division had been very keen to pay a company linked to Sushen Gupta that was registered in Dubai. An email showed that Dassault's international director then wrote to the compliance service to “accelerate the process” of approving this offshore company. “This case has got urgent for me. Can I place the work orders now?” The AFA report did not say if the money was eventually paid.
On March 26th 2019 Sushen Gupta was placed under investigation in India for “money laundering” in relation to another arms sale. But the AFA did not mention this in its report. And nor did it alert the legal authorities in France.
Was the AFA put under pressure? According to several sources with knowledge of the case, during the inspection the aircraft manufacturer complained that the inspectors were “over meticulous and were asking for too many documents”.
A damning report but no punishment
Despite the many failings noted in Dassault's anti-corruption plan, the AFA did not call for any punishment in its initial report, which was sent to the company on August 26th 2019. The group's CEO, Éric Trappier, indicated his pleasure at this when, two months later, he sent his responses to the AFA's director. “Dassault Aviation … notes with satisfaction that no violation of the law has been raised by the inspectors, that no non-compliance penalty is envisaged, and that the commitment of the managing body to pursue an anti-corruption policy is underlined,” he declared.
This is, to say the least, something of a cheeky argument given that the five “breaches” highlighted by the AFA concerned non-compliance with the group's legal obligations under the Sapin 2 law.
Éric Trappier said that in his view the “terminology of breaches” seemed “inappropriate and a little excessive” and asked the AFA to withdraw this word in the final report. He added that the inspection had taken place just “eight months after the law came into force, and a month and a half after the publication of the AFA's recommendations”. He said that Dassault had implemented anti-corruption measures but had lacked the time to carry out the necessary “adjustments or improvements”.
The AFA took 15 months to send its final report to Dassault in January 2021 – an unusually long delay. The agency rejected Dassault's observations and kept in the reference to the five “breaches”.
In its conclusions, the anti-corruption watchdog underlined that the company needed to be seen to be exemplary, taking into account “the inherent risks in its sector of activity, the eminent position that it occupies and its international exposure”. But the AFA did not recommend any punishment, and was content to ask Dassault to comply with the Sapin 2 law “by mid-2021 at the latest”. That was three years after the start of the inspection and two years after the initial report which had formally reported the “breaches”.
This leniency is even more surprising when one compares the agency's Dassault document with another AFA report, also obtained by Mediapart, on Sonepar, a French company which is the world leader in the distribution of electrical products,
That inspection started at almost the same time as the one into Dassault (four months earlier) and contained similar findings: 51 “observations” and 8 “breaches” for Sonepar, against 43 and 5 for Dassault.
Yet in the case of Sonepar, the AFA wrapped up its final report six months after getting the company's responses, in other words three times as fast as they did with Dassault. The anti-corruption watchdog was also tougher on Sonepar, calling for financial penalties, and alerting the prosecution authorities in Paris before its own report had been written.
When questioned on the different ways the two cases were treated, the AFA boss Charles Duchaine did not respond. In the end, meanwhile, Sonepar was cleared over the financial penalties. This was because under the Sapin 2 law the handing out of sanctions by the AFA is determined not by whether compliance with anti-corruption rules exists at the time when any breaches are observed - but at the time of any subsequent hearing. In other words, much later. This meant Sonepar had time to comply with the rules.
-------------------------
- The original French version of this report can be found here.
English version by Michael Streeter
-------------------------
If you have information of public interest you would like to pass on to Mediapart for investigation you can contact us at this email address: enquete@mediapart.fr. If you wish to send us documents for our scrutiny via our highly secure platform SecureDrop please go to this page.
-------------------------