Engineering, Freight Rail, Passenger Rail

Bombardier hits back at Russian accusations

Bombardier logo on tram. Photo: RailGallery.com.au

A senior Bombardier executive has slammed a major report from Canadian newspaper The Globe and Mail, which suggests the Montreal-based rail and aerospace manufacturer has engaged in questionable business in Russia.

Just prior to the Christmas break, The Globe and Mail published an article questioning Bombardier’s affiliation with the Russian rail sector, suggesting it used a “shell” company to mask its dealings, and had inappropriately pressured Canadian officials to leave the head of Russian Railways off the list of sanctioned officials after Russia annexed the Crimean Peninsula in 2014.

The article, titled Bombardier and the Putin connection, outlines how Vladimir Yakunin, the head of state-controlled monopoly Russian Railways, was one of the 27 individuals banned from travelling to the US as part of the economic sanctions following Putin’s bold land-grab.

But Yakunin – described by the US as “a close confidant of Putin” – was left off Canada’s list of sanctioned individuals following the 2014 incident.

The Globe and Mail reports that Yakunin – who resigned in 2015 after a series of reports alleged he had funnelled billions of dollars to his close friends and associates – had “developed a close relationship with key figures at Canada’s flagship transportation company, Bombardier Inc.”

Mike Nadolski is Bombardier’s vice president of communications and public affairs.

A week after the article was published, Nadolski responded with a lengthy statement on Bombardier’s website, in which he flamed the paper’s investigation, and its presentation of findings, labelling it “sensationalised rather than straightforward journalism”.

“There is no doubt that as one of Canada’s largest exporters, Bombardier does business in markets outside of North America, where the laws are different and the political environment more challenging and complicated,” Nadolski said.

“What is not complicated, however, is how Bombardier conducts itself in those markets.”

He said Bombardier had indeed recommended the Canadian Government exclude Yakunin from sanctions, but that the company’s actions were far from questionable.

“Here are the facts,” Nadolski wrote. “Like many other companies, we informed the Canadian government of Bombardier’s investments and interests in Russia when Canada was considering imposing sanctions.

“Our main concern was ensuring that our rail business would not be placed at a competitive disadvantage against our global competitors.

“What the article failed to mention is that our rail competitors are not from the US, but rather from Europe, Japan, China and Korea. The Globe and Mail also fails to note that Mr Yakunin was not sanctioned by any of these countries, meaning our competitors were free to compete for business in Russia.”

Nadolski was adamant the article was nothing short of a witch-hunt, and defended Bombardier’s track record and reputation.

“At all times, and in every country, Bombardier acts in full compliance with all laws, and adheres to our strict internal code of ethics; a code that goes beyond legal requirement,” he said.

“To even suggest that this is not the case is an insult to the company and our tens of thousands of employees around the world.”

He also responded to suggestions in The Globe and Mail’s story that through a “shell” company, Multiserv, Bombardier had sold roughly US$2.5 billion of equipment to Russian Railways, with figures detailed in the Panama Papers leak last year.

Nadolski said on December 22 that the figure was closer to just 5% of that, and that the article’s suggestions that the payments “raised questions” about the company’s conduct were baseless.

“The source of the error was currency information from the database,” he pointed out. “Some entries … were interpreted [by the paper] as being in US dollars when they were actually in rubles.

“Had the figures been calculated correctly, the Globe would have realised the real amount was about US$150 million, or 94% less.”

Nadolski was particularly critical of the Globe and Mail’s portrayal of Multiserv itself, which it labelled “Bombardier’s mysterious middleman in Russia … a shell company [that] appears to have no staff and no operating headquarters”.

“Some people believe that without a large street front office building like, say, a newspaper, that a business is somehow illegitimate,” Nadolski responded.

“But this is erroneous.

“Multiserv 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 product in Swedish kroner to customers who pay in Russian rubles.

“These types of logistics management and hedging activities happen every day in international commerce. Mystery solved.”

Nadolski said he understood that being one of Canada’s leading multinationals brought with it an understandable level of scrutiny. “When criticisms are warranted, we will own up to them,” he said.

“Halfway through the lengthy article is the key takeaway, which should have led the story: ‘None of the material seen by The Globe and Mail suggests any criminal activity by Bombardier’.

“Readers would be right to apply heavy scepticism to a story that buries the main outcome of the investigation dozens of paragraphs after the headline.”

The Globe and Mail republished Nadolski’s response without further comment.