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Thales and French Government to Share in Fine for Taiwanese Bribes

A French court ruled this week that the French defense contractor, Thales (HO:PA), along with the French government must pay a fine in relation to charges that bribes had been paid to the Taiwanese government to secure a large naval ship order. The deal was originally signed with Thomson-CSF and the government owned shipyard DCN. Thomson-CSF is now part of Thales.

The fine of 630 million euros, which is almost a billion dollars, will be split roughly 70/30 between the government and Thales. As part of the agreement with the court the government will not appeal the decision allowing Thales to get on with business without facing any more potential penalties or bad publicity. Thales says that the money has already been accounted for in preparation for paying the fine. The money will be returned to Taiwan.

Thales stock price has been little affected by the news.

This is the largest corruption case in French history and rivals the payouts that BAE Systems (BAE:LSE) has had to give to the U.K. and U.S. governments over its deals with Saudi Arabia. These totaled almost $500 million to the U.S. and $450 million in the U.K. The U.S. has especially been harsh on companies that used bribes and corrupt acts to win contracts overseas.

Historically bribes and payments have been a part of the international arms trade. Many countries required these kind of payments or the use of middle men to facilitate deals. This practice has been accepted by governments more interested in winning the contract for their own domestic companies like this deal then in ethical practices. These kind of actions cheat the customer because they may not get the best system or deal for their money as well as the other potential bidders as they do not get a fair selection process.

Thales also illustrates the situation where mergers and acquisitions lead to a company inheriting the problems of another. Even though potentially no Thales employees were involved the company is responsible due to acquiring Thomson-CSF. Hopefully more decisions and cases like this will help eradicate this problem from the defense trade.

Photo from Lordcolus’ Flickr photostream.

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One Response to “Thales and French Government to Share in Fine for Taiwanese Bribes”

  1. Two Foreign Arms Deals for Boeing to Cushion Future U.S. Defense Cuts | Defense Procurement News on June 13th, 2011 2:30 am

    […] this support may get too ambitious and enthusiastic leading to situations like in France where Thales and the government now owe millions in fines for paying bribes to Taiwanese officials to secure a new naval vessel program. Boeing will probably […]

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