Key facts
In August 2023, the irregularities in the purchase of 100 Leopard 1 tanks and the ongoing criminal proceedings in Germany concerning the trade in Leopard 2 spare parts caused the Board of Directors of RUAG MRO Holding AG (RUAG MRO) to mandate the law firm Niederer Kraft Frey (NKF) to undertake a broadly defined investigation.
The Finance Delegation (FinDel) subsequently requested the Swiss Federal Audit Office (SFAO) to provide an independent assessment of any potential aspects of fraud at RUAG MRO in the transactions surrounding the Leopard 1 and 2 battle tanks. The reason for this was that RUAG, as the concerned party, issued the investigation mandate and this resulted in risks of an appearance of bias.
The SFAO decided to the use NKF’s ongoing investigation to answer the FinDel’s questions. The collaboration between the parties (SFAO, NKF and Board of Directors of RUAG MRO) was regulated in a tripartite agreement. It ensured that the SFAO was closely involved in the role of contracting authority. In this way, the SFAO can guarantee that NKF’s investigation is independent. The Board of Directors of RUAG MRO ensured internal independence through the delegation of the Head of the ARC. Furthermore, the SFAO’s report to the FinDel ensures transparency concerning the investigation findings and the chosen approach means that duplications and additional costs can be avoided.
NKF’s investigation is multi-layered and ongoing. Important data sets and related interviews with individuals of interest to the investigation are pending. For instance, legal issues mean that data from the German subsidary RUAG GmbH is missing. Likewise, it has not been possible to decrypt part of the emails from the Federal Office of Information Technology, Systems and Telecommunication (FOITT), as the mandated data processor, due to legal reasons. These are interim findings which could still change. Despite this background, there were sufficient indications of fraud at reporting date of 23 December 2024. At least one manager with a dual function at RUAG MRO and RUAG GmbH in Germany is concerned. There were significant organisational shortcomings and failures within the then RUAG Holding AG, RUAG MRO and RUAG GmbH in Germany. As a result of the interim investigation findings, the Board of Directors of RUAG MRO has taken initial measures. The SFAO did not take these measures into account when producing this report.
Depending on the valuation of the materials, the potential financial damage from the cases known to date could be in the double-digit millions, although this is the SFAO’s own estimate. This concerns suspected losses due to sales of parts at well below market price, potential claims for compensation due to unfulfilled delivery obligations, economically implausible transactions to the detriment of RUAG, and VAT-related back payments and fines for business activities in Italy. Taking into account the internal and external costs of reviewing these cases, and the reputational damage, the overall financial damage is significantly higher, but cannot be quantified.