/ 12 February 2010

BAE’s global bribing campaign

So now it’s clear: BAE Systems paid bribes to sell its weapons — and prosecuting bosses in the United Kingdom are as politically pliant as our own.

That much emerged from the deal struck between the UK Serious Fraud Office (SFO) and BAE to close the investigation into BAE’s “marketing” activities across the globe.

The SFO investigation covered allegations of BAE bribery in Saudi Arabia, Hungary, the Czech Republic, Tanzania and South Africa.

However, the office reached a deal last Friday in which BAE would pay a paltry £30-million and admit to a “breach of duty to keep accounting records” in relation to payments made to “a former marketing adviser in Tanzania”.

The Saudi probe had already been quashed following political pressure from former prime minister Tony Blair.

The Tanzanian case saw BAE sell the impoverished country an overpriced and obsolete radar system.

The probe — which led to the resignation of Tanzania’s attorney general Andrew Chenge when the SFO wanted to question him about £500 000 he received, allegedly via BAE’s “marketing adviser” — is dead. Tanzania will receive a “charitable donation” from BAE as part of the settlement. The SFO confirmed that all other BAE investigations were being terminated, including the South African leg.

Bizarrely, on the day of the announcement last Friday, South African arms deal activist Andrew Feinstein was at the SFO offices delivering an updated witness statement at the investigators’ request. Feinstein told the M&G he was informed they had a “strong case”.

As the M&G revealed previously, the SFO uncovered evidence that BAE paid about R1.7-billion in “commissions” on the sale of Hawk and Gripen jets to South Africa — including payments of about R280-million to former ministry of defence adviser Fana Hlongwane.

In contrast with the vanilla announcement about “accounting” lapses the SFO was more honest in private. At the closed February 5 bail hearing of Count Alfons Mensdorff-Pouilly, BAE’s “marketing adviser” for Eastern Europe, counsel for the SFO said “BAE adopted and deployed corrupt practices to obtain lucrative contracts of jet fighters in Central Europe”.

Barrister Tom Foster said it was “a sophisticated and meticulously planned operation involving very senior BAE executives”, who “conspired with Mensdorff” and “spent over £10-million to fund a bribery campaign in Austria, the Czech Republic and Hungary”.

Mensdorff was also let off the hook in the deal with BAE. Proceeding with the case against him would have exposed the “accounting” misdemeanours for the sham they were.

The only official confirmation of the allegations against BAE has come from the United States, where a parallel settlement showed how much more serious the Americans were.

BAE was forced to agree to a fine of $400-million and pleaded guilty to a charge of “conspiring to make false statements” as set out in an indictment that exposed its rancid marketing tactics in detail.

According to the indictment, “beginning in 1993, BAE knowingly and wilfully failed to identify commissions paid to third parties — to secure the conclusion of the sale of defence articles, in violation of its legal obligations”.

The document says BAE concealed these payments by setting up an elaborate network of offshore front companies and made payments “even though in certain situations there was a high probability” that they would be partly used to buy favour for BAE.

The indictment says that after May 2001 — when BAE gave certain assurances of probity to the US – the company made undisclosed payments of more than £135-million and more than $I4-million to its “marketing advisers”.

It is understood that the largest portion of those sums were in relation to the South African deal.

Feinstein told the M&G that British defence watchdogs The Corner House and Campaign Against the Arms Trade were taking legal advice on challenging the SFO settlement.