New arms-deal pressure on Mbeki

Details of the British Serious Fraud Office (SFO) investigation of BAE Systems published in the Mail & Guardian last week have placed both the British and South African governments under renewed pressure over the activities of the controversial defence company.

On Wednesday the British Guardian newspaper published information drawn from the M&G story, naming BAE chief executive Mike Turner and other senior company figures suspected of corruption by the SFO.

The disclosures added to a storm of controversy raging in Britain about British Prime Minister Tony Blair’s decision to terminate the SFO investigation of alleged bribes paid by BAE to Saudi officials to secure a multibillion-pound aircraft order during the 1980s.

The decision to halt the Saudi leg of the BAE investigation has led the SFO — angered by Blair’s move to block the Saudi probe — to increase its focus on suspected corruption in the South African deal.

The investigation into South African deals began over two years ago, when it emerged that a secret BAE front company, Red Diamond Trading, central to the routing of sweeteners paid to the Saudis, had also been used to pay commissions on the South African deal.

The M&G reported last week that the SFO investigation had revealed that a total of more than R1-billion had been paid to eight different entities in relation to the South Africa deal. This information was drawn from a request for legal assistance sent by the SFO to the South African justice department more than six months ago, and which was seen by the M&G.

The SFO request said the system of paying so-called commissions was maintained by BAE in conditions of such secrecy ‘that there is a legitimate suspicion concerning the real purpose of the payments.”

The M&G revelations led to questions being put to President Thabo Mbeki during a television interview broadcast by the SABC this week. Mbeki defended the deal, as he has done repeatedly in the past, claiming that the process of granting the arms deal contracts was ‘not affected by any corruption —That conclusion will stand whatever investigation the British are doing,” he told interviewer Tim Modise.

Asked about the SFO investigation, Mbeki told Modise: ‘I have heard about this but as far as I know the British government haven’t raised this with us.” However, the National Prosecuting Authority last week publicly confirmed receiving the SFO’s request for assistance.

The request, first tabled in June 2006, asked for help in probing the flow of funds to and through the bank accounts of South African entities linked to the deal.

Mbeki’s rejection of allegations of corruption in the SA deal may back-fire.

It is understood that NPA national director Vusi Pikoli is yet to be briefed on the SFO request and the information contained in it.

The SFO document sets out its case against BAE in relation to the South African deal in considerable detail, running to some 100 pages. Pikoli may be forced to re-look at the Scorpions own dormant investigation of the BAE part of the arms deal.

Former Scorpions lead investigator Gerda Ferreira, who resigned in mid-2003, is known to have submitted a progress report to Pikoli’s predecessor, Bulelani Ngcuka, recommending that the criminal probe into aspects of the BAE deal be pursued actively.

Ngcuka, however, chose to shelve the BAE leg of the probe while resources were devoted to the prosecution of Schabir Shaik. Now that decision may have to be reviewed.

The M&G also understands that new allegations concerning the contracts with German companies to purchase ships and submarines are set to emerge in the German media. Meanwhile, Blair also faces an investigation by the Organisation for Economic Cooperation and Development (OECD) of his decision to block the Saudi probe.

Blair ordered the SFO to shut down the Saudi leg of the BAE probe in December, citing a threat to British security interests should the Saudi government decide to halt intelligence cooperation over terrorism.

However many commentators suggested that the real reason for shutting down the probe is that the Saudis had threatened to pull out of a multibillion-pound follow-up deal to buy the Typhoon euro-fighter from BAE.

Blair was also embarrassed when it emerged that the head of MI6, Britain’s foreign intelligence agency, refused to endorse the prime minister’s claims that the Saudis were contemplating a rupture in intelligence cooperation between the two countries.

Britain is a signatory to the OECD anti-bribery convention and the British government was hauled before an OECD hearing this week to explain Blair’s decision, which may have violated treaty obligations. Indications are that the organisation will recommend an in-depth investigation.