By Stuart Grudgings and Rachel Will
KUALA LUMPUR (Reuters) - Malaysia's government will address allegations on Tuesday over its purchase of two French submarines, responding to a scandal that threatens to tarnish Prime Minister Najib Razak ahead of elections he is expected to call later this year.
Defence Minister Ahmad Zahid Hamidi is due to speak in parliament on allegations that Malaysian navy documents were sold to French shipbuilding giant DCNS to help its bid for the 1 billion euro ($1.25 billion) contract it won in 2002.
Najib, defence minister at the time, has for years denied allegations of wrongdoing in the purchase of the Scorpene-class submarines. There has been no evidence linking him directly to corruption in the deal and his supporters say the political opposition is behind efforts to revive the issue just ahead of the election.
But his government is under mounting pressure to give a fuller explanation of the dealings after documents in a French court case brought by a Malaysian human rights group were leaked and picked up by the country's lively online media.
The documents, including records seized by French prosecutors in a raid on DCNS's offices, detail payments made to two companies set up by former political analyst Razak Baginda, a former associate of Najib who worked on the submarine deal.
The documents, most of which were published this week by online media group Asia Sentinel, contain a report prepared for DCNS stating that major defence contracts required "substantial transfers of money to individuals and/or organizations".
"In Malaysia, usually ... the ruling party is the largest beneficiary," the document said, referring to Najib's long-ruling United Malays National Organisation (UMNO).
Another document quotes a former top DCNS executive saying that Perimekar, one of Razak Baginda's companies, appeared to be little more than a "travel agency" set up to create "unjust enrichment" for its shareholders.
Joseph Breham, a lawyer representing rights group SUARAM in the French case, told Reuters that the leaked documents were genuine.
"We cannot prove the money went to UMNO. But we can prove the money had no counterpart. If it was not for corruption, they paid for nothing," Breham said.
Officials at DCNS, a state-controlled company part-owned by defence electronics group Thales, could not immediately be reached for comment. Malaysian government officials did not immediately respond to requests for comment.
A source close to Malaysia's government said that SUARAM was heavily linked to the country's opposition, which is aiming to topple the ruling Barisan Nasional (BN) coalition in elections that Najib must call by March. Government supporters say that civil prosecutions, such as that brought by SUARAM, are common in France and are no indication that a crime has been committed.
Breham told reporters at a news conference in Bangkok last month that a confidential Malaysian navy document assessing the French bid was sold to DCNS by another Razak Baginda-controlled firm, Terasasi, for 36 million euros. Opposition politicians have said that would amount to treason, if proved to be true.
Malaysia's government has acknowledged that Perimekar received 114 million euros for its support services, but has yet to comment on the role of Hong Kong-based Terasasi.
The documents also mention Razak Baginda's relationship with Altantuya Shaariibuu, a murdered Mongolian interpreter and model who was blown up with military-grade explosives near Kuala Lumpur in 2006. Razak Baginda was acquitted of the murder but two of Najib's bodyguards were convicted and jailed for killing the woman. Razak Baginda is believed to have moved to Europe and could not be reached for comment.
The allegations emerging from the French court have helped galvanize Malaysia's opposition. The coalition is expected to win the election but its victory is far from guaranteed after the opposition made shock gains in 2008 that shook the BN's half-century grip on power.
"Any implication that the Scorpene deal involved corruption would be enough to derail him (Najib)," opposition MP Tony Pua told Reuters at a recent dinner to raise funds for SUARAM's legal expenses.
(Writing by Stuart Grudgings; Editing by Nick Macfie)