BAE Guilty But Escapes Court
(Source: Campaign Against Arms Trade; issued Feb. 5, 2010)
Campaign Against Arms Trade (CAAT) and The Corner House are shocked and angered by the decision of the Serious Fraud Office (SFO) to settle with BAE Systems. As a result of the settlement there will be no opportunity to discover the truth behind alleged bribery and corruption in the many BAE deals that were under investigation by the Serious Fraud Office.

While the acceptance of guilt in relation to Tanzania is welcome, the investigations related to other countries including South Africa and the Czech Republic were far more significant. SFO investigations of deals with several countries were continuing up until today, and only last week the SFO charged a former BAE agent with corruption in relation to deals with several European countries.

The SFO settlement was announced in conjunction with the US Department of Justice whose fine concerned BAE's deals with Saudi Arabia. While the combined fine is more significant, the UK penalty of £30 million is a tiny price for BAE to pay to see the end of the investigations that had been gathering evidence for years and were coming to a head.

Kaye Stearman, spokesperson for CAAT, says:

"CAAT is outraged and angry that the allegations about BAE will not be aired in a criminal court and that the Serious Fraud Office has accepted a plea bargain relating only to the smallest deal. After the Government stopped the SFO's inquiry into the company's Saudi deals, it was even more important the truth about its dealings in central and eastern Europe and Africa was made public. One day a former BAE agent appears in court charged with corruption, the next BAE is let off for an accounting misdemeanour."

Nicholas Hildyard for The Corner House says:

"Given BAE's admission of guilt today in the US concerning the Al-Yamamah contract, the UK should re-open its own Saudi Arabian investigation immediately. The company's admission obviously calls into question its repeated denials of any wrong doing. Far from drawing a line under the allegations, today’s announcement simply raises far more questions and creates yet further demands for justice."

Background

In December 2006 the SFO dropped its corruption investigations into BAE's arms sales to Saudi Arabia, following pressure from BAE and the Saudi regime and a direct intervention from then Prime Minister Tony Blair. The decision was subject to severe criticism and prompted CAAT and The Corner House to launch a Judicial Review of the decision.

In April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation - a decision subsequently overturned by the House of Lords.

The SFO began drawing up the legal papers for the recommended prosecution against BAE on 1 October 2009, following its six-year investigation into alleged bribery in BAE arms deals with several other countries (Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to "advisers" on the deals, to clinch the sales.

On 29 January 2010, the SFO charged Count Alfons Mensdorff-Pouilly with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments including the Czech Republic, Hungary and Austria. (ends)

BAE Systems Settlement Closes Book On Long-Running Corruption Cases
(Source: Lexington Institute; issued February 5, 2010)
(© Lexington Institute; reproduced by permission)
Friday's announcement that BAE Systems has settled long-running corruption cases with the U.S. Department of Justice and the U.K. Serious Fraud Office is very big and very good news for the world's number-two military contractor.

Press releases from both governments and the company obscured the full import of the settlement by downplaying the Saudi angle, but the reality is that the company can now close the book on a story that has dogged its future business prospects since it first won the lucrative Al-Yamamah contract in 1985.

Investigation of whether improper payments were made in that transaction were so politically sensitive that British Prime Minister Tony Blair ended his country's inquiry in 2006, only to see the matter re-opened by the U.S. Department of Justice the following year.

By pleading guilty to one count of relatively modest wrongdoing in each country and paying a hefty fine to the U.S. government, BAE effectively frees itself from concerns that had become a persistent drag on its business prospects and public image. The settlement makes clear that none of the senior executives implicated in the investigation are still employed by the parent company, and that its North American subsidiary never had a role in any wrongdoing.

Had the findings been different, or had the investigation dragged on, it could have impeded the growth of the North American unit at a time when it is becoming the centerpiece of the whole BAE Systems enterprise.

The company can now move on to addressing more prosaic business concerns, such as its recent loss of contracts for military vehicles and the dearth of technical services in its business mix. These are significant concerns at a time when U.S. defense spending looks likely to plateau or fall in the years ahead. But they might have appeared far worse if the company continued to be dogged by allegations of corruption.

Instead, BAE Systems can now look to a future in which the ill-advised actions of past executives no longer put it at a potential disadvantage vis-a-vis major competitors. And that isn't necessarily bad news for those competitors, because many of them are also partners with BAE on programs like the F-35 Joint Strike Fighter and intelligence networks.

More broadly, Friday's settlement brings to an end the only major corruption cases currently pending against military contractors in either country, which is good news for a sector where critics never seem to take a day off.

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