As damaging as the allegations of "aggravated bribery" against three executives of its Swedish unit are for Bombardier Inc., paperwork filed on Friday in a Stockholm court points to the possibility of more legal trouble ahead.
While this week's pretrial hearings pertained only to Bombardier Transportation Sweden – and to a single 2013 deal to install signalling systems on a railway line in the former Soviet republic of Azerbaijan – the evidence submitted by the prosecution suggests the case may reach wider than that.
Central to the prosecution's allegations about the 2013 contract is the involvement of an offshore shell company known as Multiserv Overseas Ltd., a mysterious entity with a constantly shifting ownership structure that was the focus of a major Globe and Mail investigation last year.
The Azerbaijan case may just be the tip of the iceberg. The Globe's Dec. 17 report, part of which was read out in court by Swedish prosecutors on Friday, found evidence of 100 transactions involving sales of rail-signalling equipment from Bombardier Transportation's Sweden unit to Multiserv between 2011 and 2016. Only one of those deals involved Azerbaijan. The other 99 involved the export of the equipment, known as EBI Lock 950, to buyers in Russia.
The central question of the Globe investigation was: What does Multiserv actually do?
In December, Bombardier spokesman Mike Nadolski said Multiserv is a firm that "manages the subcontractors responsible for the logistics related to shipping components from our Sweden facility. Multiserv also assumes the financial risk associated with the large swings in the foreign exchange that can arise when selling products in Swedish kronor to customers who pay in Russian rubles."
Speaking to The Globe and Mail after Friday's court hearing in Stockholm, Thomas Forsberg, the senior public prosecutor for Sweden's National Anti-Corruption Unit, said he believed Multiserv Overseas was a "shell company" that exists only "to produce invoices."
Documents that were released by the prosecution – including internal e-mails the company sought on Friday to prevent becoming public – reveal there were individuals within Bombardier who appeared to have shared that opinion for a long time. Many of the e-mails are partially redacted.
"I understand from [redacted name] that Multiserv is now a U.K. company. That does not change much though; it has no physical presence in the U.K. and for companies that do not trade in the U.K., there are options to hide ownership and you pay no taxes in the U.K. The balance sheet of Multiserv that we have received, confirms the impression that it is a shell with no true trading," reads one e-mail sent from a Bombardier "Corporate" e-mail account to a Bombardier Transportation e-mail address on Sept. 4, 2015.
Multiserv Overseas Ltd. is registered to an address in London. However, The Globe and Mail found the address belonged to an international law firm that specializes in registering offshore companies. Multiserv's director lives in Cyprus, while during its seven years of existence its ownership has shifted several times between other shell companies based in Seychelles, Panama and Belize.
Another Bombardier e-mail from Sept. 4, 2015, is even blunter in its assessment of the mystery firm: It suggests that it is a vehicle used to siphon money from public projects.
"Is it not so that Evgeny more or less admitted that Multiserv is in his view owned by the management of the public sector companies involved in these trades and used as a vehicle to siphon monies from the public sector into private pockets? The question then was whether we really wished to be involved in that. Is there any update on this?" the sender asks, again from a Bombardier Corporate account.
It is not clear whether "Evgeny" is Evgeny Pavlov, the 37-year-old regional head of sales at Bombardier Transportation Sweden. He is one the three Bombardier officials detained this week, and the only one to appear in court so far.
The e-mail goes on: "I understand that Russia and the [former Soviet Union] is a good market for RCS so we should be careful when saying 'no.'"
RCS appears to refer to Bombardier's Rail Control Solutions division, which manufactures and sells the Ebi Lock 950, among other products. The division is based in Sweden.
In the Azerbaijani case, prosecutors believe that nearly one-third of the total value of the $340-million deal flowed through Multiserv Overseas – despite the fact it is not listed as a contractor or subcontractor on the project to install Bombardier's sophisticated EBI Lock 950 systems along a rail line from the Azerbaijani capital of Baku to the country's border with Georgia.
Documents that Swedish police seized from Mr. Pavlov's desk show Bombardier sold the EBI Lock 950s to Multiserv Overseas at a price of $20-million (U.S.). Multiserv then sold the EBI Lock 950s to Trans-Signal-Rabita, the Bombardier-led joint venture that had won the contract to carry out the Azerbaijan deal, for $104-million, or more than five times the price of purchase.
What explains the $84-million gap? Sweden's anti-corruption unit believes part of it went to pay off Azerbaijani officials, who chose the Bombardier-led bid despite it being tens of millions of dollars more expensive than four other submitted bids.
The Globe and Mail's investigation found that Multiserv Overseas was founded in 2010 by Yuriy Obodovskiy, a known business associate of former Russian Railways boss Vladimir Yakunin. Mr. Yakunin was removed from his post in 2015 following allegations that he had funnelled contracts worth billions of dollars to his close business associates, using shell companies to disguise the ultimate beneficiaries.
Mr. Yakunin was one of the first names added to the U.S. State Department's sanctions list of individuals linked to Russian President Vladimir Putin, as Washington sought to punish Moscow for its 2014 annexation of Crimea.
While Canada maintains an even longer list of Russian and Ukrainian individuals targeted for sanctions over the conflict, Mr. Yakunin's name is not on the list. Bombardier has acknowledged lobbying Ottawa because "including Mr. Yakunin on Canada's sanctions list could have unilaterally harmed a Canadian business."
Mr. Obodovskiy remains the deputy head of the board of directors of Elteza, a joint venture between Bombardier and Russian Railways that was created in 2007. He is also the general director of the "1520 Group of Companies" that subsequently controls what Swedish prosecutors say is one of the minority partners in Trans-Signal-Rabita.
A briefing paper – which appears to have been prepared for a Bombardier official who was going to meet Mr Obodovskiy in late 2014 – says Mr. Obodovskiy and his colleague Alexey Krapivin belonged to a "small group of powerful people" the author of the note calls "the Partners" in Russian transportation's sector.
"Partners have access to Yakunin and all key members of [Russian Railways] management except Gapanovich," reads the document, which – like many of the e-mails – is written in imperfect English. (Valentin Gapanovich is a senior vice-president at Russian Railways.)
"Also they have access to almost all heads of railways of former USSR companies. Having such connections they can influence to decision taken from both technical and commercial sides."
The briefing note concludes with a crude diagram, drawing a line that starts with a Bombardier division – its Swedish, Polish or Russian subsidiaries – that then flows through a box that reads "Partner companies outside Russia. Usually U.K. legal entity."
The next link in the chain reads "BT [Bombardier Transportation] lead entity" before the line finally reaches "final customer or Partners company."
The briefing note explains: "In all projects where Partners are involved they have scope and profit in supply chain."
It's not clear what the author of the note means by "scope," but documentary evidence strongly suggest "the Partners" were profiting from Bombardier's deals in Russia and the former Soviet Union.