Fraport pulled tricks in Uzbekistan, Peru

The noose is tightening on top managers of Fraport AG. German authorities have unearthed evidence of international bribery by Europe’s biggest airport operator. The money trail pointed to Uzbekistan and Peru, just as an earlier investigation in 2001 led to Manila.

Going by newspaper reports in Frankfurt, the bribery was meant to bag airport service monopolies in the Central Asian and South American nations. Bagfuls of deutschmarks changed hands at about the same time that Fraport, in partnership with Piatco, wangled a monopoly to operate the Ninoy Aquino International Airport-Terminal 3 (NAIA-3).

The Uzbek affair consisted of almost half-a-million DM. Koblenz district attorneys accidentally discovered it while investigating the bankruptcy in 2001 of an airfreight company in a small municipality in Hunsrück. The transaction was reflected in the firm’s 2000 books, but with no receipts. All the investigators found were two contracts, two invoices, and cash payment entries.

It was a classic case of a bogus transaction. Digging deeper, the state lawyers traced the money to Fraport AG, a listed company partly owned by the city of Frankfurt, the state of Hesse, and the federal government. District attoryneys in Frankfurt joined the probe. They found out that Fraport first tapped the small Karsten Kroll as expediter of its effort to win a contract to refurbish the airport in the Uzbek capital of Tashkent. Fraport eventually got the contract, but not before paying off one of the richest men in the former Soviet republic, Arslan Rusmetow, then head of the national flag carrier and all Uzbekistan airports.

Rusmetow didn’t get the entire DM478,000 that was booked to Kroll. Der Spiegel reported in a recent issue (44/2003) that the transaction was initiated in June 2000 by Fraport’s top man in Tashkent, Bernd F., from a contract signed by a Dieter C. Three days later Kroll billed Fraport, which paid the amount in July. In Sept., Bernd F. picked up DM113,000 from Kroll, converted it to US dollars, then delivered it to Rusmetow. As expediter, Kroll kept at least 12 percent of the total. Yet despite its easy work, it went bankrupt the following year.

Such bakshisk, Uzbek for "gift", was usual from German firms trying to bag deals in Asia, Latin America and Africa. Without the so-called "useful expenditures," nothing gets done in most governments in those continents. German authorities would usually look the other way, so long as no German official is a recipient.

But not after 1999. That year, parliament passed a law criminalizing bribery of foreign governments as well. The Usbek affair started in 2000 and the Tashkent airport contract went on through 2001.

By 2002, German investigators had gathered enough evidence to prosecute. Fraport suddenly terminated its Tahkent contract. "We’d rather relinquish a transaction," rued the company spokesman, "than pay bribe".

In truth, however, Fraport chairman Roland Koch was at the time running for reelection as prime minister of the state of Hesse. He didn’t want a prolonged investigation ruining his chances. Fraport made it look like the bribery in Tashkent was an unauthorized decision of employees with no clearance from management. Bernd F. and Dieter C. were fired.

The investigators couldn’t believe that mere employees would mess around with DM478,000 without orders from the top. In Nov. 2002, they searched Fraport’s offices for more evidence. They returned last month to arrest 11 managers, including one lawyer, for complicity.

Apparently it was that event, as well as investigations of operations in Lima and Manila, that nudged Fraport to sue Philippine officials before the World Bank. It’s a smokescreen. Since 2001 chairman-prime minister Koch has been under fire from Fraport shareholders and Hesse voters for wasting corporate funds in the Piatco deal and apparent continuing of "useful expenditures." He had wriggled out of the mess by writing off the $450-million investment in Piatco. But now comes new proof of unrepentant international bribery. So Koch is making it look before the World Bank – and most especially the German public – that it was the Philippine government which tried to extort $3 million.

In truth, three separate branches of the Philippine government had declared the Piatco contract flawed. The Senate, Malacañang and the Supreme Court saw in it, among other things, monopolism that violates the Constitution and trade laws.

Fraport’s lucrative operation of the Jorge Chavez International Airport in Lima, Peru, is in danger of similar voiding.

Fraport bagged the contract through Lima Airport Partners (LAP) with two Peruvian firms. Like in the NAIA-3, the initial concession was to provide principal airport services: aircraft landing, takeoff, parking and navigation support; safety, rescue and fire-fighting; security and closed-circuit TV; air bridges. Any international airport is a virtual monopoly since it is the only authorized entrance and exit by air in the locale. Concessionaires are thus limited to such principal services.

About the same time that Piatco wangled one-sided revisions of its contract, LAP also proposed to the Peruvian government an amendment of the one in Lima. Like in the Frankfurt international airport, it wanted control of secondary services: catering, fuel, aircraft maintenance, ground handling, cargo, executive aviation, car rental, VIP lounges, porterage, communications systems, duty-free shops, car parks, restaurants and canteens, airline desks, ticketing booths, passenger and luggage check-in, and dozens of other money-makers already held by small contractors.

German authorities believe that money changed hands too for Fraport to snatch control of some of the secondary services preparatory to full monopoly. Filipino authorities are all too familiar with Fraport’s modus operandi.

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