Polish Internal Security Agency probes arms supplier

The Internal Security Agency (ABW) is probing Polish Defense Holding, the biggest Polish arms producer and supplier, in cooperation with the District Prosecution Office in Warsaw,  in connection with the company’s USD 275 mln contract with the Indian army from 2012, as reported by Puls Biznesu daily April 2.

“A notice of a possible offence was received by our prosecution office and was included in an already ongoing ABW investigation,” said Renata Mazurska, a spokesperson of the District Prosecution Office in Warsaw, as cited by the daily.

In January 2012 Polish Defense Holding signed a contract with the Indian army for delivery of 204 armored recovery vehicles, which was reported as big success. Although the contract was valued at USD 275 mln, Polish Defense Holding would receive only USD 190 mln, as the rest of the money was due to stay in India, where the vehicles would be assembled.

Polish Defense Holding announced recently that the contract will not be fulfilled, as it is not profitable for the company, and reported possible irregularities with Warsaw’s prosecution office several weeks ago, the paper said.

The company’s current management questioned a brokerage/intermediary agreement from 2011 signed with a Hong Kong-registered entity, Nobletime, controlled by an arms broker with British passport, David D. According to the brokerage agreement, Nobletime was due to receive 18 percent of the total value of the contract, which equals to USD 32 mln.

At the same time, however, the exclusive broker of PHO on the Indian market is an entity that is controlled by another arms trading intermediary, Chetan S., as reported by the daily.

In accordance with an intermediary agreement, Chetan S. was also entitled to 18 percent of the total value of the Indian contract. This indicates that PHO would have to pay 36 percent of the total value of the Indian contract, or ca. USD 65 mln, for intermediary services to the arms brokers. The reasoning behind the additional intermediary agreement with David D. is the subject of the ABW investigation.

ABW is currently attempting to find the final beneficiaries of the Hong Kong’s entity Nobletime.

“It is not an easy task,” said anonymous ABW office, as cited by the daily. “The company’s final beneficiaries are invisible.”

According to the ABW, Nobletime is controlled not only by David D., but possibly also by two other Polish nationals.

“We are currently conducting operational activities with an aim to reveal their names [names of the two Polish nationals],” said the ABW officer, as cited by the paper.

Dariusz Kapitan, a legal representative of Nobletime, countered saying that according to his knowledge there is no mystery connected with beneficiaries of Nobletime and the intermediary contract between the parties from 2012 is binding.

“According to the company’s registration documents, everything is clear,” said Kapitan, as cited by Puls Biznesu. “I did not participate during the conclusion of this intermediary contract, and I can only confirm that it is no different from other intermediary contracts of that type.”

In 2013, Kapitan filed a lawsuit on behalf of Nobletime for the retrieval of the USD 32 mln brokerage fee from Polish Defense Holding. The case is ongoing in the Court of Arbitration at the Polish Chamber of Commerce in Warsaw. Polish Defense Holding, however, stated that it has no knowledge of such proceedings taking place.

“Polish Defense Holding has no knowledge about any lawsuit being submitted in the Court of Arbitration by David D.,” said Monika Koniecko from the arms supplier’s press office, as cited by the daily.

The Indian contract and the intermediary agreement with Nobletime were both signed by a former Polish Defense Holding’s president, Edward Nowak, who stated that in his opinion the Indian contract was extremely profitable for the company.

“They’ve been hunting me for a long time now and trying to get a hold on me,” said Nowak, as cited by the paper. “Unfortunately, my successors blocked the Indian contract. In my opinion this is acting to the detriment of the company.”