Corruption is a Crime

The Serious Fraud Office (SFO) is escalating its probe into alleged bribery and corruption at BAE Systems, with one line of investigation being a series of commission payments personally overseen by chief executive Mike Turner during the late 1980s.

You can read the full report in the Sunday Telegraph.

The New York Times reports:

As far back as July 2002, representatives from the State, Justice and Defense departments, as well as the C.I.A., sat down in Washington with senior British officials from the Ministry of Defense to complain about suspected bribery by BAE in Central Europe, the Persian Gulf and South Africa.

Sir Kevin Tebbit, then Britain’s permanent under secretary of the Ministry of Defense, rejected the suspicions as baseless. American officials who participated in the meeting later nicknamed him Sir Topham Hatt after a character in the Thomas the Tank Engine children’s series because of what they said was “his almost haughty disdain for the allegations of bribery involving BAE” and the manner in which he challenged them to detail evidence of wrongdoing…

American officials say they believe that the Hungarian and Czech governments were influenced by payments. They cite a C.I.A. briefing during which they were told that BAE paid millions of dollars to the major political parties in Hungary to win the contracts there.

Hat tip: Guido Fawkes.

From The Guardian:

US corruption investigators have gone behind the back of Downing Street to fly a British witness to Washington to testify about Saudi arms deals with the UK arms firm BAE Systems, the Guardian can disclose. In a hitherto secret move, Swiss federal prosecutors have also agreed to hand over to Washington financial records linked to the Saudi royal family.

The US is seeking - but has so far been refused - more than a million pages of documents seized from BAE, its bankers, Lloyds TSB, and the Ministry of Defence during an investigation by the Serious Fraud Office…

British ministers are refusing to grant a six-month-old official request from the US department of justice for mutual legal assistance, in defiance of the UK’s anti-bribery treaty obligations. This follows the suppression of Britain’s own Serious Fraud Office investigation, which was abandoned last year on the grounds that the inquiry might jeopardise national security.

Lynne Featherstone, the Liberal Democrats’ Shadow Internet Development Secretary, has written an article on Liberal Democrat Voice arguing that corruption in international arms deals should be taken as seriously as other crimes:

It’s the only area of crime (other than graffiti!) where - when campaigning against it - I’ve encountered a handful of people saying, “but it’s ok”.

Read the article here.

Local authority pension schemes are to review their investments into arms companies, based partly on how those companies win contracts. According to today’s Observer:

The Local Authority Pension Fund Forum (LAPFF), which represents 40 funds with invested assets totalling £70bn, is drawing up a series of questions to put to defence companies as it seeks to encourage responsible investment by pension funds.

Among the areas to be probed will be the conduct of companies in winning contracts, including the use of bribery. Both BAE and the government are at the centre of a political storm over the issue, following the abandonment of an investigation by the Serious Fraud Office into bribery connected to the £40bn al-Yamamah arms deal with Saudi Arabia in the Eighties and Nineties.

The group Campaign Against Arms Trade (CAAT) has used the Freedom of Information Act to find out how much local authority pension funds invest in BAE. They found that there is £311m invested in BAE across 75 local authority funds. West Yorkshire has the biggest investment, with nearly £28m, followed by the West Midlands, Strathclyde, Kent and Aberdeen.

The full story is here and the CAAT campaign is here.

Vince Cable, the Deputy Leader of the Liberal Democrats, has written an article for Comment Is Free calling for an inquiry into the Al Yamamah affair as a step towards cleaning up such international deals.

I still find it difficult to get my head round the idea that, until December, one agency of government (the Serious Fraud Office) was investigating what it believed could be crimes, leading to prosecutions, while another arm of government was cheerfully helping the suspected felons. Since there are six other bribery cases still being investigated by the SFO in relation to the BAE contracts with South Africa, Tanzania, the Czech Republic, Qatar, Chile and Romania, the obvious question is whether the government has been, or is, actively involved in facilitating payments there as well.
[...]
These issues are, on one level, legal and technical, but at another, moral and political. So far, the government has shown itself utterly impervious to political embarrassment. The prime minister happily signed up to a G8 communique condemning corruption, and British minsters and ambassadors go round the world lecturing (Africans, in particular) on the virtues of honest and transparent government procurement.

Read the full article here. Vince’s article from last week - “Today’s allegations about secret payments to a Saudi prince mean that the government must come clean about its role in the BAE arms deals” - is here.

The Financial Times reports today that the United States made a “formal diplomatic protest to the British government” over the decision to abandon the Serious Fraud Office’s investigation into BAE’s export sales to Saudi Arabia.

Diplomatic insiders told the Financial Times that Washington said the British decision put the Blair government in breach of both the spirit and the letter of the OECD anti-corruption convention that requires member states to have a “level playing field” in which to conduct commercial relations.

The Labour Government have repeatedly cited national security implications as the justification for ending the investigation. According the the FT:

The US said this was in sharp contrast to the 1977 US law, the Foreign Corrupt Practices Act, which was behind US-led moves during the 1990s to secure international agreement on the OECD convention. “What we are really asking is how do we protect the integrity of the [anti-corruption] convention,” said a US official. Washington wants Britain to give a full explanation of its decisions at the OECD.

The full story is on ft.com whilst Ming Campbell’s reaction is on the Liberal Democrat website.

Speaking in a Commons debate on Strategic Export Controls last Thursday, Susan Kramer, the Liberal Democrats’ Shadow Trade & Industry Secretary, noted that:

The chances of being caught for travelling without a ticket on the London Underground are considerably higher than for illegally exporting arms from the UK.

In a detailed speech, Susan went on to question the “third-party arms transactions that would be illegal were they carried out directly from the UK, and the trend among UK companies to move arms production from the UK offshore to places with lighter licensing regimes”, to call for the banning of cluster bombs, and for an enforceable common EU position on arms exports.