S.Africa arms deal probe widens

South African President Thabo Mbeki denies any corruption in the arms deal

PRETORIA, South Africa -- South Africa has widened an inquiry into a multi-billion dollar arms deal to examine claims that officials received luxury cars from a European defence company.

German authorities began an investigation on Tuesday into the allegations that the cars were used to help defence companies win a major arms deal contract.

The German prosecutor's office in Munich launched a formal investigation following media reports alleging the sale of luxury cars at big discounts to South African political and defence officials, a spokesman told Reuters.

The company linked to the affair is the European Aeronautic Defense and Space Company, which has an operating base in Munich.

EADS was one of the European firms that landed contracts under Pretoria's biggest arms purchase since the end of apartheid in 1994. The government is to spend more that $5 billion on helicopters, submarines and jet fighters.

South Africa's Star newspaper on Monday claimed that 33 luxury cars were sold by EADS at a loss to prominent South African officials from 1998 when the arms deal was sealed.

South Africa's trade department said it was conducting an internal investigation into one of its officials who was involved in the deal, Reuters reported.

Following irregularities found by the parliament's public accounts committee, three state agencies are probing up to 50 allegations of fraud and corruption in awarding contracts in the arms deal.

Though senior government officials, including President Thabo Mbeki, have denied any corruption problems, local police have already spoken to EADS Managing Director Michael Woerfeland and chief whip of the ruling African National Congress, Tony Yengeni, said Reuters.

EADS, the parent firm of Airbus, is owned by DaimlerChrysler, Aerospatiale Matra of France and Spain's Casa.