Update on BAE Systems

Today, a myriad of arms manufacturers descended on London for four days of exhibiting and selling their wares to dignitaries from such utopias as Libya, Saudi Arabia and Indonesia at the world's largest arms fair, DSEi.

Earlier this week I republished an article I wrote in December last year, which focused on allegations of bribery made against BAE Systems, the world's third largest defence contractor.

The Serious Fraud Office has been investigating numerous corruption allegations against the company for six years and in 2006 was forced by the Lord Chancellor to close one particular inquiry into an alleged £60 million slush fund to bribe officials in Saudi Arabia.

Yesterday the Times reported "BAE Systems is negotiating a possible settlement with the Serious Fraud Office (SFO) over bribery and corruption allegations that could see [them] pay a fine but admit no guilt."

These remaining allegations concern deals in South Africa, Tanzania and the Czech Republic. Deals involving Qatar and Chile were discreetly dropped from the inquiry last year and the Mail reported last week that a similar investigation into a Romanian deal for two frigates was quietly shelved, something the Times neglect to mention. The Romanian investigation will remain on hold unless fresh evidence comes to light.

The Times said:

"With the inquiry entering its sixth year, sources close to the fraud office have said that it may go after BAE for 'procedural' failings. This would allow the SFO to fine BAE without the company admitting guilt on the more serious charges of corruption.

"One possibility is that BAE could be penalised for its accounting procedures, specifically the tax treatment of commissions paid to middle men."

However, BAE have denied there is any resolution in sight, but they have pledged to continue to help with the investigation as far as possible.

Closure of the Saudi inquiry into the al-Yamamah contracts embarrassed the Blair government, coming ten days after the Saudis warned BAE risked losing a deal to a rival French bid if the investigation wasn't dropped. The government's decision was upheld by the House of Lords in April 2008.

These allegations are still being investigated by the US Department of Justice, under the Foreign Corrupt Practices Act which [loosely defined] allows people or businesses with dealings in the US to be investigated for bribery of foreign officials. BAE employs some 46,000 people in the US, more than in any other country including the UK.*

However, according to Raymond J. Learsy at the HuffPo:

"...little has been forthcoming to date. And no wonder when such as Louis Freeh can retire as the head of the FBI and be retained by none other than Prince Bandar [of Saudi Arabia] to represent him in connection with the Justice Department probe, while William Bradford Reynolds the chief of the Justice Department's civil rights division during the Reagan administration is representing Prince Bandar in ancillary lawsuits."

Only time will tell how these tales play out.


*Yet our government still pays 80% of their research costs.