Defence in bribery trial points to higher-ups at Bombardier

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Lawyers for a Bombardier employee charged with bribery in Sweden say their client was not the decision-maker behind the structure of a controversial contract in Azerbaijan, pointing the finger of responsibility at more senior staff in the railway unit of the Montreal-based transportation giant.

Evgeny Pavlov, 37, faces up to six years in prison if he is convicted of the aggravated bribery charges brought against him by Sweden's National Anti-Corruption Bureau. The signature of the Russian national, head of a newly established Bombardier branch office in Azerbaijan, is on key documents related to a 2013 deal that saw a Bombardier-led consortium win a $340-million (U.S.) contract to install computerized train-signalling systems at stations along Azerbaijan's main east-west rail line.

Evidence entered by the prosecution last week appears to show Mr. Pavlov as the author of a series of e-mails advising senior Bombardier staff in Stockholm and Moscow about the need to partner with a specific local company in Azerbaijan in order to win the bidding for the project, which was 85 per cent funded by the World Bank. Prosecutors allege that the local partner, a previously unheard-of company called Trans-Signal-Rabita, was controlled by employees of the state-owned Azerbaijan Railways, the same organization responsible for choosing the winning bid from among eight competitors.

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But Mr. Pavlov's defence team argued Tuesday that their client was not empowered to make decisions about whom Bombardier would partner with on a $340-million contract. That decision, they said, needed to be made at the "group level," implying the Berlin headquarters of Bombardier Inc.'s rail unit, Bombardier Transportation.

Secret bidding books seized during a police raid on Bombardier's Stockholm headquarters last fall show that senior executives in Sweden, Belgium and Britain signed off on the Azerbaijan contract.

It is not clear from the evidence before the Stockholm court whether anyone at the Montreal office of Bombardier Inc. signed off on the 2013 bid.

"His mission was to see if [Bombardier and Trans-Signal-Rabita] could work together technically. The rest was handled by Bombardier's senior employees," Mr. Pavlov's lawyer, Peter Lindqvist, said in opening remarks to the Stockholm court.

A Bombardier spokesman said at the outset of the trial that the company "denies any allegations that it acted improperly." The company has not responded to follow-up questions from The Globe and Mail about the evidence produced by the prosecution.

In addition to Trans-Signal-Rabita, the Azerbaijan consortium included the Stockholm-based Bombardier Transportation Sweden, along with Bombardier Transportation (Signal), a Moscow-based joint venture between Bombardier and Russian Railways.

Cristina Bergner, the other member of Mr. Pavlov's defence team, said her client had "no influence" over how the Azerbaijan deal was crafted.

The defence also argued that there was nothing unusual or illegal about Mr. Pavlov's contacts with Azerbaijan Railways staff before and during the bidding process.

The prosecution made its own opening argument over two days last week, and delivered 3,163 pages of evidence to the court, some of which were redacted following the interventions of Bombardier lawyers who are monitoring the proceedings, but not aiding Mr. Pavlov in his defence.

Mr. Pavlov's lawyers are public defenders provided by the Swedish government. He also took the stand on Tuesday, at the beginning of what is expected to be several days of testimony. Asked by the prosecution on Tuesday whether there were "rules about corruption at Bombardier," Mr. Pavlov replied: "We acted according to Russian legislation."

While only Mr. Pavlov has been charged, the National Anti-Corruption Bureau has named five other employees of Bombardier Transportation Sweden – including Peter Cedervall, the president of the company's Stockholm-based rail control solutions division – as suspects in the case.

Bombardier said in June that it had suspended Mr. Pavlov and Mr. Cedervall from their posts, pending the outcome of an internal investigation.

Separately, the World Bank's anti-fraud arm, known as the Integrity Vice Presidency, is conducting its own review of how the contract was awarded in 2013. In a preliminary report that was included in the evidence presented by the prosecution in Sweden, the Integrity Vice Presidency wrote that "the evidence indicates that Bombardier may have funnelled bribe payments to Azerbaijan Railways officials through Trans-Signal-Rabita."

In the report – which was written in August, 2016, and marked as "strictly confidential" – the Integrity Vice Presidency alleges that five Bombardier employees "appear to be directly involved in the collusive and corrupt arrangements." Those named include Mr. Pavlov, Mr. Cedervall, and Konstantin Khromushkin, the head of Bombardier's representative office in Moscow, along with a vice-president and a director of sales at Bombardier Transportation Sweden.

Bombardier could be barred from competing for future World Bank funded projects if the Integrity Vice Presidency's ongoing audit concludes that Bombardier was aided by corruption or collusion in winning the 2013 contract.

Prosecution evidence also includes the testimony of a former Bombardier employee who e-mailed his superiors – including Laurent Troger, the president of Bombardier Transportation – regarding his concerns about the Azerbaijan deal, and specifically the presence of a mysterious shell company called Multiserv Overseas.

Contracts submitted by the prosecution suggest that Multiserv Overseas made an $84-million profit off the Azerbaijan deal by purchasing Bombardier train signalling equipment from Bombardier Transportation Sweden at $20-million and then selling it onwards to Bombardier Transportation (Signal) for $104-million.

Internal Bombardier documents, as well as transcripts of phone calls recorded by Swedish police, suggest that Multiserv Overseas is connected to two men – Alexey Krapivin and Yuriy Obodovskiy – who are referred to as associates of former Russian Railways boss Vladimir Yakunin.

Mr. Krapivin and Mr. Obodovskiy together own 4 per cent of Bombardier Transportation (Signal), according to the evidence. They are also major partners in Elteza, another joint venture between Bombardier and Russian Railways.

Mr. Yakunin – a long-time member of Russian President Vladimir Putin's inner circle – ran Russian Railways for a decade before resigning in 2015 amid allegations of massive corruption.

Bombardier, which said in June that it had suspended its relationship with Multiserv Overseas, has admitted to lobbying the Canadian federal government to keep Mr. Yakunin's name off the list of individuals sanctioned over Russia's 2014 seizure and annexation of the Crimean Peninsula from Ukraine.

Magnus Aronson is a freelancer writer.