/ 28 September 2005

BAe’s secret £1m to Pinochet

The United Kingdom’s Serious Fraud Office (SFO) is expected to launch an investigation into disclosures that the British arms company BAe secretly paid more than £1-million to the former Chilean dictator Augusto Pinochet.

The Guardian revealed how BAe had been identified in United States banking records as routing the payments through front companies between 1997 and last year.

Calls for action were led by the British Liberal Democrat leader, Charles Kennedy. He said: ‘These allegations will be deeply embarrassing for BAe, a leading British company with ready access to Downing Street under this and previous governments and a company which receives significant subsidies from the public purse … The government needs to send a strong message to British companies that corruption and bribery will not be permitted or excused.”

SFO investigators are studying the files relating to Red Diamond Trading, a front company controlled by BAe and registered in the British Virgin Islands. It is alleged that the arms company has been using Red Diamond to channel secret commissions worldwide to agents on arms sales, and may have circumvented laws on corruption and money-laundering.

Susan Hawley, of the anti-corruption group The Cornerhouse, said: ‘This is an absolutely textbook example of how appallingly complicit Britain is in fomenting corruption and undermining democracy around the world.”

An Amnesty International spokesperson said: ‘These latest allegations raise worrying issues of business complicity with those who may have been responsible for mass human rights violations … It is important that BAe Systems fully accounts for its dealings with General Pinochet.”

The SFO investigation is expected to be combined with the existing inquiry into allegations that BAe also ran a £60-million slush fund to pay members of the ruling family in Saudi Arabia. That investigation is proceeding vigorously, with the arrest last month of former British air force officer Tony Winship, a BAe paid consultant, and his chauffeur David Baron, on suspicion of money-laundering. They were released without charge after questioning.

BAe told The Guardian that its official policy was to clamp down on misconduct by employees and to comply with the law. But it refused to disclose whether it was holding disciplinary inquiries into Winship.

A spokesperson said: ‘We have assisted the SFO with their [Saudi] enquiries and look forward to resolution of the inquiry at the earliest opportunity.” —