Andy: the Arms Trade and Tax Avoidance Meet in Ireland

Why would a company based in Drumcondra, which has no employees and almost no money of its own, be acting as a sales agent for one of the world’s largest arms companies? The question arises as a result of the Panama Papers revelations, and, in particular, Colm Keena’s analysis of them in the Irish Times.

Finmeccanica is an Italian arms company which is 30-percent owned by the Italian government. It sells products such as military aircraft, torpedoes and equipment for electronic warfare to governments around the world. Just last week it signed a contract worth billions of dollars to supply fighter aircraft to Kuwait.

But also just last week, its former chief executive was jailed for four and a half years for corruption that took place in 2010 when Indian officials were paid tens of millions of dollars to facilitate the sale of helicopters to the Indian government.

Bribes of this sort are usually channeled through offshore companies, and Intertrade Project Consultants Limited (IPCL), with an address on Botanic Avenue, has negotiated agreements with several such companies for the purposes of sharing commission payments on Finmeccanica’s sales contracts.

One such contract, also relating to arms sales to India, was signed in 2002 with an Indian national called Nanak Kohli and involved commission payments of 4 percent to 15 percent. In the mid-2000s, the Kohli family was found to have bribed a UN procurement official to secure lucrative UN contracts. The official was jailed for eight years in 2006.

Finmeccanica is also embroiled in a controversy surrounding a $250-million 2010 arms deal with the Panamanian government. Ramon Fonseca, co-head of the Panamanian law firm at the centre of last week’s leaks, advised Panama’s President Ricardo Martinelli on the deal.

A Finmeccanica director and another Italian businessman are facing charges of corruption in this affair, amidst claims that the beneficial owners of a shell company that received a 10-percent commission ($25 million) included President Martinelli himself. Martinelli has been charged with corruption in relation to other matters, but not, as yet, for this case.

IPCL Ireland has not been accused of corruption. But Keena notes that non-transparent agreements with offshore entities are “considered controversial in the arms sector because of their potential to facilitate bribery”.

Matters are not helped by the fact that we don’t know who owns IPCL – which has been registered with a trust in Niue, a tiny South Pacific tax haven – or the various offshore firms with which the commissions are shared under secret agreements.

IPCL’s sister firm in Panama has been strongly criticized in the Indian media for pocketing commissions of up to 17 percent on Finmeccanica arms deals with the Indian government between 1997 and 2004.

The Wire of India notes that “high commissions being paid for the purchase of defence equipment . . . in the guise of project consultancy seems like a fit case for a criminal investigation”.

Ireland’s involvement in the international arms trade has long been controversial.

As far back as 1996, the NGO Action from Ireland (Afri, of which I am a director) published a report that documented the sale from Ireland of products of military use (including gun-turret components) to countries including Turkey and Saudi Arabia.

A 2007 report by Amnesty International found Irish companies and individuals to be involved in selling components for helicopters deployed in the Palestinian Occupied Territories and supplying armoured vehicles to paramilitary forces in Iraq.

In 2011, the comedian Mark Thomas made a Channel 4 documentary that showed how easy it was to broker arms deals in and through Ireland. And in 2014, independent.ie/business/world/news-focus-war-is-still-very-good-for-business-30336660.html”>a report in the Irish Independent found Irish companies to be selling component parts for Apache helicopters, military drones and much else besides.

What the Panama revelations now demonstrate is that participation in the arms trade has been merged with Ireland’s well-documented reputation for hosting opaque financial institutions that funnel dodgy money around the world. It is bad enough that this facilitates tax avoidance, but it is even worse that it facilitates the business of death.