Posted on January 31, 2013by 

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By Robert Beckhusen, Wired

31 January 13

he combination of tons of cash from advanced military projects and excessive secrecy is a dangerous one – it fuels corruption and graft in defense industries around the world. This week, Transparency International released its summary of corruption in the defense world, and broke down which countries scored an “F” on the watchdog’s rankings for openness. The group has also been going after specific vendors of death and destruction that haven’t been upfront about measures to stop corruption.

To come to its conclusions, the watchdog group surveyed companies using several criteria: whether the companies have anti-corruption programs in place, whether the companies require ethics training for employees, whether firms keep an eye on graft by their suppliers and contractors, and whether the firms prohibit – or at least regulate – political contributions and influence-buying from employees, among many other questions.

Here are seven of the worst offenders.

Above:

General Atomics

General Atomics got its start, per its name, in the nuclear industry. But the company’s MQ-1 Predator drone has vaulted it to the forefront of defense firms involved in fighting the war on terror. It’s also the most prominent American company to score at the bottom of Transparency International’s rankings, as General Atomics did not provide information on its anti-corruption polices to the watchdog. General Atomics has also been adept at greasing its political wheels, having contributed more than $600,000 on trips for key congressional legislators during the Predator’s nascent years.

For the watchdog’s analysis of the U.S. defense industry as a whole, it comes off looking okay, but not great. (The U.S. gets a “B.”) “The [U.S.] has extensive legislation in place to regulate defence procurement,” the watchdog notes. Now wait for it: “evidence suggests that defence acquisition decisions are often political in nature.” Big surprise.

Photo: Air Force

Aviation Industry Corporation of China

For a sense of where China is moving ahead with aviation, a good start would be keeping up with the massive state-run Aviation Industry Corporation of China, or AVIC. It’s only one of the largest defense firms in China by employees. The company makes missiles, heavy-lift helicopters, and is developing the J-20 stealth fighter. Even AVIC’s planes are huge: the AVIC-built long-range military transport plane, the Y-20, recently flew for the first time.

The company is also getting into the drone business, with subsidiary Chengdu Aircraft Industry Corporation developing a drone called the Pterodactyl, which closely resembles the U.S. MQ-9 Reaper. The company also makes a whole slew of commercial airplanes and parts, and has partnerships with many of the world’s leading aircraft firms. AVIC hasn’t been so great, however, at revealing what it does to stop corruption. Transparency International has not only listed AVIC at the bottom of its list for transparency for refusing to participate in the watchdog’s surveys, the group also published findings that labeled China’s defense sector to be at “high-risk” for corruption, owing to military purchases being made with little (if any) independent oversight along with “almost no scrutiny and little transparency.”

Navantia

¡Ay no! The pride of Spanish shipbuilding is in the red for transparency, keeping its anti-corruption policies secret. Navantia, which built the Spanish aircraft carrier Principe de Asturiasand the Royal Thai Navy carrier Chakri Naurebet, has also been the focus of corruption allegations in recent years. In September, allegations surfaced in the Spanish press that Navantia paid $55 million in kickbacks to Spanish and Venezuelan officials. The reason: to win a $1.5 billion shipbuilding contract for eight patrol vessels wanted by Hugo Chavez.

County-wide, though, the Spanish defense industry fares better. The defense budget is “largely transparent” and the military stays out of the private sector. “However, whistle-blowing is not recognized to be actively encouraged,” the watchdog reports.

Pakistan Ordnance Factories

This is the big daddy of the Pakistani small arms, ammunition and artillery industry. If there’s one of these types of weapons produced in Pakistan and used by the Pakistani military or around the world, odds are that Pakistan Ordnance Factories (POF) produced it. But POF doesn’t give outside observers much reason to believe it’s not involved in a corrupt game with its military clients, avoiding questions about what it does to stop graft.

POF has also been targeted by Taliban militants. On Aug. 21, 2008, the gates to the company’s sprawling main factory complex in the city of Wah was attacked by a pair of suicide bombers during a shift change. At least 70 people were killed and more than 100 injured in the worst attack by the Taliban at that point. (It’s since been eclipsed.)

POF aside, Pakistan’s defense industry altogether is at serious risk for corruption. According to Transparency International, “high levels of secrecy surround defence policy and budgets.” Auditing of the military budget is low to nonexistent, prosecutions for corruption are rarely revealed, and investigations into corruption involving the defense trade are made “with little de facto civilian oversight.”

Kawasaki Heavy Industries

Popularly known around the world for its sport bikes, Kawasaki is also a major player in global shipbuilding and aerospace, designing everything from the Soryu-class diesel submarines in service with the Japan Maritime Self-Defense Forces, to maritime patrol aircraft and missiles. Unfortunately, Kawasaki ranks low in terms of transparency, having declined to answer questions about its anti-corruption policies. Kawasaki isn’t the only Japanese firm involved in defense to score badly (it just scores the worst). Mitsubishi ranks low on Transparency International’s list, although Fujitsu ranks quite well.

Japan’s defense industry as a whole also has several problems. Close ties “between the defence sector and organized crime” is a barrier to stopping corruption. And although “strict policies and mechanisms for oversight are in place,” few defense spending scandals have reached the courts.

Avibras Industria Aeroespacial

Better days may be behind Avibras, a Brazilian firm which focuses largely on making missiles and artillery guns. During the Cold War, its ASTROS multiple-launch rocket launcher was one of Brazil’s most successful military exports. (Saddam Hussein used them in the Iran-Iraq War and the Persian Gulf War.) But the company was forced into bankruptcy protection in the early 1990s with declining sales. Avibras is now starting to bounce back, as the Brazilian government has embarked in recent years on improving its military, while seeking to revive Avibras with several contracts for new missile launchers. But the government should probably be careful about doing business with Avibras, as the company declined to participate in Transparency International’s monitoring surveys.

The way the Brazilian government goes about buying weapons gets a passing grade from the watchdog, though. But only barely. “There are few requirements” on defense firms, the watchdog notes, “to show that they have anti-corruption mechanisms in place.” The good news is that Brazil is pretty hard-line about stopping no-bid contracts for weapons, which can otherwise reflect cronyism between defense lobbyists and politicians.

Damen Schelde Naval Shipbuilding

The good news is that The Netherlands is one of the most transparent countries in the world, according to assessments by Transparency International. The bad news is that Dutch shipbuilderDamen Schelde doesn’t answer questions about what it does to stop corruption on the inside. Damen Schelde is also a major player in the world’s naval industry, building frigates, tankers and the Dutch navy’s new generation of ocean-going patrol vessels. Damen Schelde is also a major exporter: with several recent warship sales to Indonesia and Morocco. Oddly, Leiden, Netherlands-based European defense firm EADS, which makes the Eurocopter, scores much better.