A long-running series of articles by our London-based sister newspaper, the Guardian, suggests that large amounts of cash are filtered through a covert network of front companies around the world to disguise corrupt payments by BAE Systems.
The Guardian first disclosed in 2003 how the company operated a £20-million slush fund to ”entertain” Saudi princes who might favourably influence its chances of winning the ”al-Yamamah” deal to buy warships and fighter jets.
Citing SFO documents and other legal files, the paper said BAE was aware of allegations that its own executives were skimming cash off this fund, but was refusing to investigate because ”this is a means of covering up corruption”.
”Allegations include the provision of prostitutes, sports cars, yachts, first-class plane tickets, Mercedes cars with drivers, unlimited restaurant meals, cup final tickets, club memberships, gambling trips, TV sets and sound systems.”
An internal BAE security report referred to allegations of ”sex and bondage with Saudi princes”.
In October the Guardian‘s David Leigh and Rob Evans discovered that the scale of the payments was much bigger than the £20-million.
”The government was yesterday scrambling to recover secret documents containing evidence suggesting corrupt payments were made in Britain’s biggest arms deal. The documents detail for the first time how the price of Tornado warplanes was inflated by £600-million in the 1985 al-Yamamah deal with Saudi Arabia. A telegram with the details from the head of the Ministry of Defence’s sales unit had been placed in the National Archives. Yesterday it was hastily withdrawn,” it reported in October last year.
”The Ministry of Defence documents reveal that the price of each Tornado was inflated by 32%, from £16,3-million to £21,5-million. It is common in arms deals for the prices of weapons to be raised so that commissions can be skimmed off the top. The £600-million involved is the same amount that it was alleged at the time in Arab publications was exacted in secret commissions paid to Saudi royals and their circle of intermediaries in London and Riyadh, as the price of the deal,” it concluded.
And in mid-December, after British Prime Minister Tony Blair had ordered the SFO to cancel its Al Yamamah probe, the paper reported that investigators had found ”that in recent years an enormous sum — more than £1-billion — had been secretly shuffled through BAE’s accounts.
”It was passed through two anonymous offshore companies, registered by BAE in the financial ‘black hole’ of the British Virgin Islands. One was called Poseidon Trading Investments, set up in 1999, the other Red Diamond, set up in 1997. Neither’s existence was disclosed in BAE’s published accounts, and BAE refuses to give any explanation of their purpose.”
Red Diamond, according to the SFO’s request for assistance from the Scorpions, was also used to pay South African intermediaries.
”The flow of secret money was coordinated through Switzerland where BAE set up another anonymously owned company called Novelmight. BAE kept its secret commission agreements with agents around the world in the custody of Geneva lawyers,” the paper wrote.
The Saudi deal was just one of several under scrutiny. The sincerity of Blair’s much-vaunted Africa policy was sharply called into question after he forced a deal to sell a BAE air-traffic control system through a reluctant Cabinet.
”BAE Systems is being investigated for suspected corruption over an arms deal with the heavily indebted African country of Tanzania, in which commissions of more than 29% may have been paid”, the Guardian reported in November.
”The £28-million military air-traffic control sale was pushed through the Cabinet in 2001 by Tony Blair against the heated opposition of then development minister Clare Short, who subsequently alleged corruption. Both the prime minister and BAE reassured critics at the time that the sale was above board — Tanzania, had no need for an expensive military system to handle its civilian air traffic, and was at the time asking for its debts to be cancelled.
Westminster sources say that the SFO and the Ministry of Defence police, who are conducting a joint investigation into BAE’s deals around the world, believe that millions of pounds were paid into Swiss banks to cement the sale”.
Ngwane Defence and the Buddy System
From the former head of the defence force, to veteran arms dealers and one of the country’s top diplomats, Hlongwane is relying on some well-connected friends to get his fledgling defence company off the ground.
Ngwane Defence sells vehicles through its Uri and Ivema divisions, sniper and assault rifles manufactured by Truvelo in Midrand, as well as riot-control gear and equipment aimed at emergency relief and demining operations. Its senior staff have strong connections in the government, the defence establishment and the global arms trade.
- Ambassador George Nene is Deputy Director General of Foreign Affairs, heading up South Africa’s multilateral diplomacy. He was previously permanent representative at the United Nations, and still serves on several committees of the world body. That hasn’t stopped him from taking up an appointment as a director at Ngwane Defence. Nene’s work for the government and the United Nations not only places him in contact with potential clients for Ngwane, but also may place his diplomatic and commercial interests in conflict. He declined to comment. He has several other business interests, including two other companies in which he shares interests with Siphiwe Nyanda — both men are directors in Thsireledzo and Micromatica 27.
- Retired general Siphiwe Nyanda stepped down as head of the South African National Defence Force in May 2005. He is CEO of Ngwane, and last year told Business Day that the company ”should definitely have a slice” of the local defence market. Nyanda has been a vocal supporter of Zuma, who was compelled to resign as deputy president over allegations that he took bribes in return for protecting the interests of French arms company Thompson-CSF/Thales. Nyanda maintained interests in at least five private business, including a security firm, while he was commander in chief of the defence force.
- Jane Anne Collier is Ngwane’s operations chief. She began her career at BAE systems in the 1980s when it was known as British Aerospace, and is married to BAE’s Bernard Collier. He heads the local team at BAE Systems, which handles the company’s obligations to invest in South African companies.
- Christo Stockenström, a Pretoria-based lawyer, is a key player at Ngwane, with a history as a fixer in the arms trade.
- Brigadier General Damian de Lange is a top South African National Defence Force official who previously headed the foreign relations division in the Ministry of Defence, and as such, would have played a substantial role in government-to-government arms transactions and defence cooperation more broadly. He joined Ngwane in 2004.
