VZCZCXRO4732
PP RUEHCHI
DE RUEHBK #4093/01 1920300
ZNR UUUUU ZZH
P 110300Z JUL 06
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 0039
INFO RUEHVI/AMEMBASSY VIENNA PRIORITY 0406
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 2110
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BANGKOK 004093 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EB/IFD - PAUL BROWN 
COMMERCE FOR 4430/EAP/MAC/OKSA 
TREASURY FOR OASIA 
JUSTICE FOR MARK MANDELSON 
 
E.O. 12958: N/A 
TAGS: EIND ETRD PGOV TH
SUBJECT: OPPOSITION SEEKING USG SUPPORT IN CORRUPTION 
INVESTIGATION 
 
 
¶1.  (SBU) Summary. The Thai Department of Special 
Investigations (DSI, similar to the US Federal Bureau of 
Investigation) told us on July 7 that it will soon submit 
evidence of corruption to the RTG National Counter Corruption 
Commission (NCCC) in the purchase of fire fighting equipment 
by the Bangkok city government (BMA). The supplier under the 
Bt6.7 billion (US$177 million) contract is Steyr-Daimler-Puch 
Spezialfahrezeug GmbH (Steyr) of Austria, a fully-owned 
subsidiary of General Dynamics Corporation of the US. The 
opposition Democrat Party is urging the RTG Attorney General 
to seek US Department of Justice assistance "to investigate 
suspected bribery of American and Austrian executives as well 
as Thai officials in the procurement..." End Summary. 
 
US-Owned, Austrian Supplier 
---------------------------- 
 
¶2. (U) On July 30, 2004 an "Agreement of Understanding" (AoU) 
was executed between The RTG (Ministry of Interior) and the 
Government of Austria regarding the purchase by BMA of 
firefighting equipment from Steyr. Forming part of the AoU 
was a Purchase/Sale Agreement between BMA/Ministry of 
Interior and Steyr. Both agreements specified the requirement 
for the RTG to open a Letter of Credit in the amount of Euro 
133,749,780 for "European Standard" equipment. The equipment 
specifications form an annex to the Purchase/Sale Agreement. 
 
¶3. (SBU) While the Purchase/Sale Agreement was signed by 
then-Bangkok Governor Samak Sundaravej (leader of the 
Prachakorn Thai, or Thai People's Party), current Governor 
Apirak Kosayodhin (a Democrat) opened the Letter of Credit 
following his election to replace Samak in August 2004. A 
current Democrat Party leader told us that he advised Apirak 
not to open the L/C but that Apirak felt pressured by then 
Interior Minister Bhokin to do so "because of the harm to 
bilateral Austrian-Thai relations" if he did not. Because the 
Democrats are concerned that the Thai authorities will pursue 
this case in a manner most favorable to PM Thaksin and least 
favorable to their party, they are seeking US involvement 
under the Foreign Corrupt Practices Act., in hope of a more 
even-handed investigation. 
 
The DSI Investigates 
-------------------- 
 
¶4. (SBU) Police Colonel Tawee Sodsong, Deputy Director 
General of DSI and chief investigator of this case told us 
that there were several bases for legal proceedings in the 
fire fighting equipment purchase and that he was suggesting a 
focus on internal Thai activities rather than what foreign 
entities may have done. The first issue is a discrepancy 
between a Thai cabinet resolution authorizing the AoU and 
what the AoU actually contains. This includes an upper limit 
of Euro 133 million for the contract to include all expenses 
while the final contract excludes Thai VAT and import duties. 
Tawee also said that the cabinet approved separate contracts 
for foreign-sourced and Thai-sourced equipment and BMA 
violated the decision by combining all the purchases under a 
single contract. 
 
¶5. (SBU) Earlier this year Tawee visited Europe as part of 
his investigation, including a visit to Steyr. He says he 
found that Steyr did little manufacturing itself and acted as 
a general contractor for the contract, purchasing equipment 
from all over Europe and Thailand. Tawee believes that Steyr 
significantly padded the prices, citing as an example the 
purchase of Thai-made fire boats for Bt14 million which Steyr 
then supplied to the BMA for Bt26 million with little or no 
value-added. Tawee says he has requested from Steyr, and sent 
a corresponding letter to the Austrian Attorney General, 
asking for a breakdown of Steyr's costs in fulfilling the 
contract to see if there are any "unaccounted for" expenses. 
Tawee has not heard back from the Austrians. 
 
Austrians Argue "It's All in the Contract" 
--------------------------------------------- ---- 
 
¶6. (SBU) We also met with the Austrian Commercial Attach in 
Bangkok, Georg Weingartner, who said that the contract was 
completely above-board and that arguments that similar 
equipment could have been purchased in Europe for much less 
cost simply were not based on the specifications as outlined 
 
BANGKOK 00004093  002 OF 002 
 
 
in the Purchase/Sale Agreement. Weingartner admitted that the 
purpose of the AoU was to use it as a loophole in Thai 
procurement regulations to avoid a public tender. However, he 
said that items were purchased in Thailand in accordance with 
Thai cabinet requirements that procurements maximize Thai 
content as much as possible. Weingartner claimed it was 
"nonsense" that Steyr provided no value-added to the 
Thai-made items and that the real issue is that Steyr is 
caught in the middle of a Thai political battle. He noted 
that he has never seen any of the letters DSI claims it has 
sent to the Austrian government seeking assistance and that 
DSI has never visited the Austrian Embassy to seek 
information about the transaction. Note: Tawee confirmed this 
but added that the Austrians have never visited his office 
either. End Note.) 
 
¶7. (SBU) Weingartner noted that Steyr and General Dynamics 
had conducted their own internal investigation of the 
transaction and found everything to be done in accordance 
with transparent and correct business practices and that 
Steyr had completely fulfilled the terms of the contract. He 
also supplied us with a comparison of prices for fire trucks 
Steyr supplied to Thailand in 1997 with the 2004 prices; 
pointing out that - adjusting for inflation - the prices were 
comparable.  He also implied that some senior Democrat party 
members represent a Spanish firm that is hoping to win a new 
contract. He also noted (and we later confirmed) that a 
"technical committee under Apirak had reviewed and OKed" the 
terms of the contract before Apirak opened the L/C. Christian 
Suchs, CEO of Steyr, visited Bangkok the week of July 3 in an 
effort to convince BMA to take delivery of the 170 fire 
trucks currently sitting in a Bangkok warehouse. BMA instead 
asked that the contract be cancelled. Steyr is considering 
suing the BMA and the RTG for the cost of storing and 
insuring the vehicles. 
 
¶8. (SBU) Comment. As an Austrian-Thai, government-to 
government business deal, we have tried to keep the US out of 
this argument but the fact that Steyr is wholly-owned by 
General Dynamics keeps dragging us back into the fray. We 
have been in touch with DSI since this issue was raised in 
the OECD about six months ago and offered the Thai 
investigators our full cooperation, which they have never 
sought. We have also had regular contact with the Austrian 
Embassy and encouraged them to conduct their own 
investigation of the matter. Last week, Colonel Tawee asked 
if we could follow-up with the Austrian Attorney General on 
their letter requesting information on costing from Steyr and 
we responded that we would seriously consider any such 
request but that we needed to see a copy of the letter sent 
to the Austrians. We have not yet received the promised copy 
of the letter.  In Thailand, the odds are pretty good that a 
no-bid government contract could involve money flowing to 
politicians. Whether the foreign suppliers might be party to 
any possible corruption is not certain. 
ARVIZU