Laxell called John Ennis, he needed to met him to talk about counter-trade between France and Finland, suggesting that they meet for lunch at Le Boeuf sur le Toit, the seafood restaurant on rue du Colisée that runs parallel to the Champs Elysée.
It’s not easy,” said Ennis uncomfortably. ‘It’s a pity but Papcon doesn’t have any capital of its own to invest. The Indonesians and the consortium members-especially Strecker-seem to be slow at getting their check books out.’
‘So we understand.’
‘If we had something to prime the pump, then I’m sure it would be easier. What about Finland? Finntech is a big company,’ said Ennis in a forlorn hope.
Laxell bowed his head, as he always did when faced with a difficult question, he fidgeted, moving his knife and fork about the table, as though they were not well aligned.
‘Yes, you know our position, were not bankers.’ Then he smiled. ‘That’s just what I wanted to talk to you about, maybe we have a solution.’
Ennis waited with interest, whilst Laxell accepted the menu that the Maitre d’hôtel had presented to him.
‘We’ve been thinking about that last point, you know priming the pump as you put it.’
He ordered aperitifs, two Kirs, a finger of cassis, a liquor made from black currants, topped up with white wine.
‘Finland is a customer of France,’ Laxell started slowly as Ennis irritably wished he would get to the point.
‘We’re buying defence equipment; you know radar systems, fighter aircraft, coastal patrol boats and things like that.’
Ennis made an effort to look interested, but he could not see the link.
‘Well the Finnish government has a counter-trade clause in their defence contracts. It means that the French companies have to buy an equivalent value of goods from Finland.’
Ennis nodded in agreement, he knew that such a clause was a fairly common arrangement in government purchasing, although he had thought that such dealings were limited to developing countries.
‘So, I’ve been in contact with Leopard Aerospace and Aquitaine Dynamiques, they’re manufacturing radar systems and aircraft and are in the process of negotiating defence contracts with Finland-big contracts, almost four billion dollars. Their problem is to place business for compensatory purchases with Finland, either directly or indirectly. They both have divisions specialised in counter trade.’
‘I see,’ said Ennis who was now interested but still wondering how it was connected with Indonesia.
‘They can help Finntech to get certain contracts we are in the process of negotiating!’ he paused and moved nearer to Ennis continuing in a lower voice.
‘If a deal can be worked out, a triangular arrangement, they will pay a commission to Finntech, an agent or to anybody else that we care to nominate.’ He paused again looking at Ennis to see if he was following.
‘A commission?’
‘Yes, it’s built into the prices whether it’s used or not, so we just have to arrange that it’s used, if you understand me?’
Ennis nodded, it was noisy, but he had the general idea of what Laxell was saying and sensed its importance.
‘I have spoken with Tapani, he has accepted that Papcon collects this commission and use it for Barito, if they can work with Leopard and get the business to Finntech. I don’t have to say this is extremely confidential and nothing will appear in writing, in any case Leopard will deny their knowledge of any agreement if ever anything happens, so will we for that matter.’
Ennis held back, he needed time to absorb this news, which seemed too good to be true.
‘In the arms business, there’s a lot of profits and price padding. This allows for all of the special payments needed to grease the rails. I suppose that in the end the government pays, with the taxpayers’ money. In this case we can say it’s in the pursuit of further business.’
They had ordered a plateau of seafood, garnished with oysters, crabs, shrimps and other shellfish. As they started the ritual work of extracting the edible parts as Laxell described in detail the workings of the system.
‘In this particular case it will be Leopard. I’d like to introduce you to Henry Koslowski, who looks after the Finnish market for them; his office is on avenue Foch. We’ll fix up a dinner with him.’
‘What kind of contracts do Finntech have in mind?’
‘Well, we have a two or three and they’re in quite an advanced phase of discussion. Two are for Morocco, one for a pulp and paper mill and another for a fertiliser plant. The third is for Indonesia, for an offshore oil rig. They’re pretty big contracts.”
Ennis was listening carefully as he began to get the idea.
‘We are very well placed, and a push in the right direction is all that’s needed to conclude these contracts. That’s Leopards job. They say they can look after that without any problem. The total value of both contracts would be in the order of about eight hundred million dollars!’
‘What’s the commission?’ Ennis asked carefully in a low voice.
‘Well it’s negotiable. Theoretically the commissions are limited to between one and a half to two percent, our government does not approve of this kind of transactions, too suspicious and it’s the taxpayer who pays in the end.
‘In practice though, the French, if they think it helps them to get the arms deal, can be very generous, they’ll pay between five and ten percent.’
Ennis whistled softly, he knew that in the arms trade it was common practice to pay large commissions.
‘You know the Americans pay more!’ Laxell laughed.
The struggled with their crabs concentrated in their thoughts.
‘It will be up to you to work out a suitable arrangement, in fact we don’t really want to know. You, indirectly as a Finntech man, will act as a technical and marketing consultant in this business. Leopard will arrange for the commissions to be paid to any place indicated to them.’
Ennis made a quick calculation five percent of eight hundred that was forty million dollars, two hundred and forty million Francs. He took a quick gulp of his Entre Deux Mers. That was a very large sum of money for a commission! Ten percent was eighty million! As capital it was more than enough to prime the pump and for Papcon it was a fortune.
‘You should understand this money is to be used as part of the capital for the project. We are not asking for any written obligations, as I said, we don’t even want to know about the details. On the other hand, we will see to it that our contracts will be adequately padded to recover part of that as profits for Finntech, and naturally the Finntech share in the equipment supply contract should not be subject to price reductions or discounts, that’s the only thing we are asking for!’ he said laughing. Ennis realised that he was serious.
Ennis nodded that he understood.
They returned to Laxell’s office, he called Leopard, and a dinner was fixed with Koslowski. Laxell also gave Ennis the names of the persons to contact at Finntech who were handling the business for Morocco and Indonesia.
The Finns would fill him in on the background of the business, and he would inform them of the role of Papcon, who would be seen as a political agent, with the contacts necessary to procure the contracts. The commission arrangement with Leopard would be most confidential; in no case were the other Finns, who would become involved during the course of the business, to be party to that knowledge.
Laxell reiterated the most confidential nature of the arrangement, in which there could be no risk of compromise. Their action could be very badly taken by the Finnish authorities and the French could not be implicated in any scandal. He suggested the utmost caution, leaving to Ennis the responsibility of informing Brodzski at his convenience.
Ennis prudently decided not inform Brodzski or Axelmann at once. He would await the outcome of his discussions with Koslowski and the Finns. He wanted to have the maximum background information and be sure that Laxell’s proposals were serious.
Koslowski was a Pole; he had arri
ved in France with his parents in the late fifties. He still had a very slight hint of an accent, but otherwise he was thoroughly French. He was friendly but gave the appearance of a sort of casual disinterest in the offset business, as though the subject bored him and that he had heard it all before.
He confirmed what Laxell had already explained. Laxell had approved Papcon or their nominee as the receiving party for commissions or payments which would be made in the case of success, paid into any bank in any country of their choice without any other justification than the conclusion of the contract with the Finnish government and receipt of the contractual down payment.
There would be absolutely no link with Finntech or Finland. Leopard would pay for services rendered, consulting fees or similar commissions.
What was important for Leopard was that Finntech signed the contracts in Morocco and Indonesia, and that these contracts were accepted by the offset committee in Finland, whose responsibility was to approve the eligibility of the contracts presented to them for compensation.
It was essential to demonstrate that it was Leopards intervention that had been instrumental in the conclusion of the contracts, for material or services, which were not in the traditional Finnish sector of basic forestry products, paper or wood.
Koslowski explained to Ennis that Leopard Aerospace was heavily engaged in civil, military and tele-communications sales in Morocco and Indonesia.
They had an important commercial presence in both countries, which gave them leverage in government and decision making circles. This was necessary since in the different contracts under consideration, the purchasers being state owned or state dependent companies.
In the case of Indonesia, it was a mixed joint-venture project, sponsored by the Ministry of Mineral Resources and an Australian oil company, for an offshore production platform. The Ministry issued the licenses and a state owned company held a minority share.
Leopard would arrange commission local payments to ensure that the ministers in both countries signed the contracts with Finntech.
Papcon would have its own position enhanced by appearing to introduce an independent investor who would put up equity capital for the project. The investor would in reality be an offshore company set up by Papcon, managing the commissions through a reputable international investment bank. They would appear as an independent investor, showing the way to the consortium and larger banks and finance institutions, whose large organisations and slow decision-making processes were hindering the projects progress.
The magnitude of the commissions was sufficient to galvanise Ennis into action. In his mind he started to explore the opportunities that such a sum of money could create, both for the project and for his personal needs.
A BANKER IN HONGKONG
Borneo Pulp Page 23