Austria says prosecutors open fraud probe on fighter deal

(Adds prosecutors, Airbus comment)

By Shadia Nasralla and Kirsti Knolle

VIENNA, Feb 24 (Reuters) - Austria said on Friday that Vienna prosecutors had initiated a formal criminal investigation against Airbus and the Eurofighter consortium over alleged fraud, widening the potential fallout from a $2 billion combat jet order more than a decade ago.

Defence Minister Hans Peter Doskozil said he had been notified that the two companies had been listed as defendants by Vienna prosecutors following a recent ministry complaint.

"The criminal procedure thus enters a new phase," he said in a statement.

The defence ministry has alleged Airbus and the Eurofighter consortium in 2003 illegally charged nearly 10 percent of the purchase price of 1.96 billion euros for so-called offset deals.

Such deals, which involve work being given to local companies, were part of the agreement, but their cost should have been reported separately, the ministry has said.

Airbus has denied the accusations.

"We have no comment on investigations by Austrian prosecutors," an Airbus spokesman said on Friday.

Under the legal system used in Austria and several European countries, opening an investigation is a potentially significant step that falls short of filing charges but which indicates that sufficient evidence is available to warrant a formal probe.

Vienna prosecutors declined to confirm opening an investigation, but said one was in preparation - a step that usually leads to the launch of such a probe.

"Investigative steps are being prepared in connection with the defence ministry's statement of the facts," a spokeswoman for the Vienna prosecutors said.

The new investigation would come on top of ongoing Austrian and German investigations of the controversial aircraft purchase. Munich prosecutors have said they expect to complete separate preliminary proceedings by mid-year.

The Vienna prosecutor's office said it was co-operating with the German probe.

Austria filed a criminal complaint against Airbus and the Eurofighter consortium last week, alleging wilful deception and fraud linked to the order, claiming the damage incurred could amount to 1.1 billion euros ($1.2 billion).

The defence ministry said it might also seek to involve the U.S. and British authorities in the investigation.

"There are indications that the jurisdiction of the English and U.S. authorities could be justified due to the many offset deals with U.S. parties," a spokesman said.

Airbus is already under investigation in the UK over two cases including a Saudi security contract and suspected fraud and bribery in commercial airplane sales. It has pledged full co-operation with these and other pending legal investigations.

($1 = 0.9442 euros) (Reporting by Shadia Nasralla and Kirsti Knolle; Editing by Larry King and Keith Weir)