The Full Catastrophe (9 page)

By this time, the political climate in Greece was far different than it had been five years earlier, when the parliamentary committee examined a few Tsochatzopoulos-era armaments deals. The country was on the verge of bankruptcy. The government was cutting wages and pensions. People were angry. Comedians joked bitterly about the many thousands of euros Tsochatzopoulos’s wife was said to have spent on curtains for the bedroom. For all this, a big one finally had to be sacrificed. A leading prosecutor ordered a preliminary investigation into whether there were tax violations or other offenses involving Tsochatzopoulos’s house. PASOK suspended Tsochatzopoulos from the party pending the results of the inquiry. This time, his colleagues were not going to defend him.

From that point on, things started going very badly for Tsochatzopoulos. Prosecutors in Munich had begun an investigation of the Germany-based company Ferrostaal, an “industrial service provider with industrial expertise and financing competence,” in its own words. One particular financing competence prosecutors were interested in involved the suspected payout of bribes, largely pertaining to submarine deals with Greece struck during Tsochatzopoulos’s defense ministry tenure. By this point, the submarine deals in question were already infamous in Greece. A decade earlier, the defense ministry had agreed to buy some state-of-the-art
German submarines from a consortium of Ferrostaal and Howaldtswerke-Deutsche Werft, or HDW, a shipbuilding company based in the Baltic Sea port city of Kiel. HDW at the time had developed new “Type 214” diesel-electric submarines and was looking for its first international buyer. In order to win over the Greeks, German prosecutors later found, Ferrostaal managers solicited the services of a group of people they called the “prayer circle.” The circle had connections in Greece and could convince Greek defense officials of the benefits of choosing the German vessels. The German companies’ prayers apparently came true. The Greeks decided to buy four of the new submarines as part of a program dubbed Archimedes, after the ancient mathematician and scientist. In addition, the two sides signed a second deal for the modernization of three old German submarines already in the Greek navy’s possession. Greece paid out some two billion euros, most of the initial cost of both programs.

The deals did not work out very well. The first new submarine, built in Kiel, had troubles during trial runs, at least according to Greek naval officers, who said it tilted at a precariously severe angle under certain conditions. HDW representatives said some initial problems were fixed and that the tilt was normal. “No big deal except taking care of your coffee cup,” one retired German naval captain told a Greek television program. The two sides fell into a long dispute. The German manufacturer accused the Greek side of failing to honor the contract and of complaining about the sub in order to delay further payments. Whatever the case, the dispute meant that a decade after the Imia incident inspired the urgent purchase of expensive submarines, Greece still didn’t have any new or refurbished subs to show for it. In 2010, months after the Greek government agreed to the first bailout, it reached a complex agreement with HDW to supplant the disputed deals with a new one. Greece decided to finally take the “leaning submarine,” as it had become known among Greeks, fairly or not,
in addition to five more vessels of the same type. One of Greece’s old subs would also be refurbished. The agreement came at an additional cost to the Greek government of over one billion euros. By this point, however, bankruptcy posed a far more imminent threat to Greece than did the Turks, and buying subs did not seem like a wise expenditure. Even as its creditors were compelling it to deeply slash social spending, the Greek government was still buying German subs and other weapons. This fact wasn’t well received by a lot of Greeks.

The submarines came to symbolize both Greek government fecklessness and German hegemony. I once ran into a distant uncle of mine, a farmer, selling fruit at an outdoor market in Athens. He had with him a small machine for printing receipts—an unusual sight at a farmers’ market, but financial-crime investigators had recently visited to see if the vendors were documenting their sales. I watched him print out a receipt for a lady who bought two lemons for a couple of dozen cents, and I thought it was a pretty absurd sight. My uncle told me he viewed the situation like this: billions for undelivered subs, and receipts for lemons. My uncle, a cigarette-rolling former hippie with a gray beard, was normally a very calm guy, but the submarines issue made him angry, not only with his own government, but the German one too: “They’re stomping us with their boot!” Greeks felt still worse about the subs after a German court at the end of 2011 convicted two Ferrostaal managers of bribing Greek officials in order to secure the initial submarine deals. This, it turned out, would be one of several bribery investigations involving European—often German—armaments makers and Greek defense officials. In this case, Ferrostaal was fined 140 million euros.

This time, the alleged bribe recipient was eventually held accountable. Tsochatzopoulos was arrested in 2012 at his home across from the Acropolis. The house proved to be the key that allowed prosecutors to trace the trail of kickbacks in connection
with the German subs. A maze of bank account transfers led to Torcaso, the offshore company that had years earlier bought the home. Tsochatzopoulos was first convicted of failing to properly declare his assets and was sentenced to eight years in prison. He was later convicted of laundering tens of millions of dollars worth of kickbacks not only related to the German subs programs but also connected to the deal for Russian surface-to-air missiles that had come under scrutiny years earlier. He was sentenced to twenty years in prison. The penalty was technically for money laundering and not for accepting bribes, prosecutors told me, because as an ex-minister, Tsochatzopoulos was immune from prosecution for the latter crime. More than a dozen other people were convicted of crimes in connection with the case, including Tsochatzopoulos’s wife, his daughter, his ex-wife, his cousin, his accountant, and his right-hand man at the defense ministry.

The Tsochatzopoulos case opened up a lot of additional leads for investigators to follow, and, as some of Greece’s top prosecutors told me, even though they had caught the former minister, they had barely scratched the surface of the bribery and money laundering associated with armaments spending. The defense ministry had been functioning like a shadowy organized crime network. There was no independent audit agency with the power to review the contracts, and one defense ministry official who resigned in 2010 announced on Greek television that every armaments contract since 1996 was flawed. Prosecutors told me they estimated that Greece had spent some 10 to 15 billion euros on armaments from 1998 to 2002, and that between 7 and 10 percent of the value of the contracts—up to 1.5 billion euros—consisted of illegal payments.

Following Tsochatzopoulos’s conviction, one Greek defense ministry official of not particularly high rank testified that he had expressed reservations about a proposal to buy a large number of tanks from the German company Krauss-Maffei Wegmann.
Then, he said, a Greek representative of the German company left a bag filled with 600,000 euros cash in his office. “I indeed ceased objecting to that procurement,” testified the official, who said he accrued many millions of dollars in bribes related to various arms deals over five years on the job. Greece—this was in the post-Tsochatzopoulos era—ended up buying 170 German Leopard 2 tanks for 1.7 billion euros. Both Krauss-Maffei Wegmann’s German headquarters and their Greek representative—a celebrity in the armaments field whom people speaking with me referred to as “the king” and “the emperor”—denied giving bribes. As of the end of 2014, no charges had been filed, though an investigation into the tank deal was ongoing. Many defense experts questioned the wisdom of the purchase, arguing the tanks would be useful only in case of a protracted land war, which seemed an unlikely prospect. More questions about the tanks’ usefulness were raised when the Greek press reported that they did not come with ammunition, leading many to ask what good ultramodern tanks were if they had nothing to fire.

Though Tsochatzopoulos became an object of near-universal scorn, and his fellow politicians joined in deriding him, it is exceedingly difficult to believe that no one outside Tsochatzopoulos’s immediate circle knew something was very much amiss in the defense ministry. I tried talking to several high-ranking politicians and defense ministry officials about this, and almost no one was willing to discuss the issue with me. The few officials who initially agreed to speak with me either didn’t show up for scheduled interviews or, in one case, contacted me afterward to demand I speak not a word of our meeting. During the prolonged, nerve-racking, and utterly futile effort, I began to feel like I was going around asking master chefs to reveal to me their secret recipes. I wasn’t going to get very far.

As he sat in prison, Tsochatzopoulos continued to deny all charges against him and said he was being singled out by “centers
of power” for “political and moral annihilation.” It’s not hard to understand why he may have felt that way. The political system that had nurtured him was now allowing him to become the mascot of its worst ills. Throughout his money-laundering trial, Tsochatzopoulos repeatedly emphasized that a government council consisting of various other ministers and the prime minister had also signed on to the weapons program. For the whole truth to come out, he said, the others, too, must appear in court. That never happened, though Tsochatzopoulos kept pleading for it. “In the climate of the times, everything is in the light,” he once told television cameras before his conviction, speaking slowly and deliberately, pausing to look up into the empty space around him as if finding the words there. “All the truth to the people, as they say.”

Just as Greece went on the post-Imia weapons-spending splurge, it also launched an effort to enter the eurozone. In order to gain membership, Greece, like all the other members, had to cut its annual deficit to below 3 percent of gross domestic product. Greece was able to meet this requirement—an impressive accomplishment for a country that in 1995, before the Imia episode, was running a deficit of over 9 percent of GDP. Based on its apparent budget discipline, Greece was welcomed into the currency union on New Year’s Day 2001. The nation’s deficit, as initially reported, stayed well below the 3 percent limit through the first years of its membership. Greece was therefore able to drastically boost armaments spending while maintaining strict budget discipline. How was it able to do this?

Not everyone believed the numbers Greece was reporting. Some investment bankers in London had taken to calling the head of Greek statistics “the magician” for his ability to make deficits disappear. The deficits, however, reappeared later, when
Greek authorities, under the supervision of Eurostat, the European Union statistical office, revised the country’s 1997 through 2003 numbers. In reality, it turned out, Greece’s deficit had never fallen below 3 percent of GDP, though it came close in 1999—the year its fiscal performance was assessed for eurozone membership. In other words, the Greek government, while having done a lot to improve its finances in the years leading up to its euro entry, had never quite met the criteria. Greece’s accounting of military expenditures—or rather, lack thereof—provided a central reason for the big revisions, Eurostat reported in 2004. The data on weapons spending were apparently inconsistent and contradictory going back as far as 1994, or even earlier, according to the agency. Greece at one point told Eurostat that it recorded armaments expenditures when the arms were delivered. At another point, it said such military information was considered confidential, and therefore the people doing the statistics never received information on deliveries. Most weapons expenditures covered by borrowing from 1997 through 2003 were therefore not recorded. The armaments deals were, in short, off-the-books transactions.

On a summer day in Athens in 2014, I visited Yannos Papantoniou, the PASOK politician who was finance minister in the years leading up to Greece’s eurozone entry, and who considered Greece’s currency-union admission a crowning achievement of his political career. As such, he did not agree with the conclusion that it was accomplished on false grounds. I met Papantoniou at his office at the Center for Progressive Policy Research, a think tank of which he was president. The morning of my visit, not much seemed to be going on at the center. There was no one there but his assistant and a thin old man who had arrived at the same time as I did. The old man wanted to know why his latest retirement check had come in a few euros under the previous one. The assistant tried to be polite, but suggested the appropriate government office where he could find an answer. After the old man left, Papantoniou came
out of his office and shook my hand. He had gone to college at the University of Wisconsin in Madison, earned a PhD in economics at Cambridge, and later became part of PASOK’s “modernizing” wing. Following his time as head of the finance ministry, he became defense minister, taking over in the place of Tsochatzopoulos.

Papantoniou wore a suit jacket and khaki pants and flashed his broad, well-practiced smile, though it seemed rather forced. He did not appear to be in a particularly good mood, and this was perhaps understandable. He was coming under a lot of scrutiny at the time for some tax-related matters. His wife’s name was on the Lagarde List, and financial investigators, it seemed, were finally making some progress probing it. Some months after I met him, Papantoniou and his wife were convicted of failing to declare assets in 2009, and each was sentenced to a four-year suspended prison term. The couple faced additional charges for the same offense in 2008. Papantoniou was also coming under scrutiny for his tenure at the ministry of defense. Around the time we met, prosecutors were making progress on their investigation of the very large Leopard 2 tank deal, which was completed under Papantoniou’s reign. Also, the president of the parliamentary committee that had a decade earlier investigated Tsochatzopoulos was quoted in a Greek newspaper as saying the findings back then had shown that Papantoniou too had partaken in the “party” of kickbacks at the defense ministry. Papantoniou, in response, said there was no evidence he was involved in that party, calling allegations that he had engaged in wrongdoing slander.