Everything was meant to get better.
When Dutch engineering services company Imtech published its report to shareholders on June 18, 2013, detailing the extent of corruption in its Germany operations, it read like a break with the past and a pledge to to clean up its act.
From now on, Imtech promised, the company would provide total transparency. There would never be a repeat of the fraudulent business practices described in the report. Imtech would adhere to the highest ethical standards in future.
Imtech, which has since filed for insolvency, was a main contractor for Berlin’s scandal-plagued new international airport, which is years and billions of euros over budget.
“We will end this dark chapter and begin rebuilding the reputation of our company,” the executives wrote in their report.
Despite the promises, an Imtech subsidiary, Radio Holland, supplied products to Iran, Myanmar, Syria and Sudan in deals that may have broken U.N. arms embargoes.
Radio Holland was one of the jewels in Imtech’s crown.
The Radio Holland deals covered navigation equipment and marine telecommunications, as well as service contracts for satellite communications, among other things.
All the equipment and services are listed in an internal audit report obtained by Handelsblatt and Dutch newspaper De Telegraaf in a joint investigation.
Founded in 1916 by Dutch shipping companies, the company offered solutions for improved communication and navigation at sea. In 1919, it set up a unit in the Caribbean and after 1945 expanded to the United Sates, the Middle East and Africa.
In 2006, Imtech bought Radio Holland for €47 million, or $51 million, with a workforce of around 2,400.
Radio Holland was one of the jewels in Imtech’s crown. The Dutch group had enjoyed rapid, acquisition-led growth and in 2013, at the height of its expansion, had more than 30,000 employees and sales of €5 billion. The marine division, which included Radio Holland, was a boutique operation, technologically advanced and profitable.
The marine division was largely unscathed by the crisis that engulfed Imtech in early 2013. That year, the company sacked and then sued its management teams in Germany and Poland. State prosecutors offices in three jurisdictions launched investigations.
Then, in 2014, Imtech Deutschland’s reputation was further damaged by its involvement in an anti-cartel investigation for allegedly conspiring to overcharge utility RWE to build a power plant.
In 2015, bribes paid at Berlin’s new international airport, which has yet to be completed, came to light. Imtech Deutschland is one of the biggest contractors on the airport project.
This summer, Imtech filed for protection from its creditors. But the marine divisions swiftly found two buyers. Trading company Pon Holdings and financial investors Parcom Capital immediately signalled interest in purchasing the marine business.
The sale contract was signed soon after. In a joint statement, the new owners said they wanted to restore calm and security for the workforce, the customers and suppliers.
But those plans appear to have been wishful thinking. The internal audit Imtech suggests that investors Pon Holdings and Parcom Capital had unwittingly purchased not a pearl but a time bomb.
The report lists the dubious customers with whom Radio Holland did business.
Imtech’s management launched an internal investigation in 2013 when it noticed a possible problem. But the probe found more trouble than feared.
Radio Holland had revenue of some €270 million in 2014, some 40 percent of which was generated by subsidiaries that directly or indirectly supplied equipment to rogue states.
Imtech sacked and then sued its management teams in Germany and Poland.
There is no outright ban on doing business with Libya or Sudan. But the equipment supplied by Imtech fell under the so-called “dual-use” category of goods that could be put to civilian or military use and fall under international arms embargoes.
Companies like Radio Holland usually use special software that helps them determine if an order from a country like Iran can legally be delivered.
“Radio Holland didn’t have that,” said one insider at Imtech. “It seems as though it was delivered on a wing and a prayer, and with a focus on making profit.”
The auditors completed a preliminary report in March 2015. Weeks passed before Imtech presented its earnings. The company said just a few cases had been found on a possible breach of sanctions. Then it sold the marine division with Radio Holland.
Did the new investors buy a time bomb?
Sources close to investors said the risk had been factored into the purchase price. Imtech said it made all required checks and informed U.S. authorities. But the voluntary declaration made no mention of 198 possible sanctions breaches — just four.
Imtech said the final report was checked by independent experts.
Now the ball is in the hands of U.S. authorities. “The U.S., in particular, takes breaches of export sanctions very seriously,” said Ep Hannema, a lawyer with Norton Rose Fulbright who has experience in handling such cases. “In the past there have been fines of €250.000 per transaction.”
A company only has to be active in the United States or settle its deals in U.S. dollars to be subject to investigation. Both applied to Radio Holland. And there’s an additional element of uncertainty: Imtech’s own audit only covered the period 2010 to 2014. No one has asked yet what went on before that.
Sönke Iwersen leads Handelsblatt’s investigative team of reporters. To contact the author: email@example.com