Corruption is a Crime

The arms company BAE is alleged to have paid more than £100m to officials from the South African government, in order to secure a deal to sell aircraft worth £1.6bn.

From the Guardian:

More than £100m was secretly paid by the arms company BAE to sell warplanes to South Africa, according to allegations in a detailed police dossier seen by the Guardian yesterday.

The leaked evidence from South African police and the British Serious Fraud Office quotes a BAE agent recommending “financially incentivising” politicians.

In the arms deal, the new ANC government in South Africa agreed to spend a controversial £1.6bn buying fleets of Hawk and Gripen warplanes.

Critics said the country, beset by unemployment and HIV/Aids, could not afford it. The Hawks, rejected by the military, cost twice as much as Italian equivalents.

But the then South African defence minister Joe Modise and a key official, Chippy Shaik, insisted on the purchase.

BAE is accused in the reports of corrupt relationships with an arms tycoon, John Bredenkamp, recently blacklisted in the US for his links with Robert Mugabe of Zimbabwe. Bredenkamp’s blacklisting freezes his assets in the US.

BAE’s former marketing director for southern Africa, Allan McDonald, has been speaking to police, the leaked files say. He allegedly told them Bredenkamp “gave progress reports directly to Mike Turner”. Turner, who has been interviewed under caution by the SFO, stepped down last year as BAE’s chief executive.

Bredenkamp-linked companies were paid £40m by BAE to promote the arms deal. According to McDonald, “Bredenkamp suggested identifying the key decision-makers, with a view to ‘financially incentivising them’ to make the right decision”.

The Bredenkamp team claimed he said, “We can get to Chippy Shaik”. A seized memo also referred to “third world procedures”. An SFO affidavit says: “I believe that a reference to ‘third world procedures’ is a veiled reference to the payment of bribes.”

From the Financial Times:

A top BAE Systems executive and ex-defence official has been questioned by investigators over a suspected bribery plot involving a Viennese count to win European arms contracts, the Financial Times has learned.

Julian Scopes – BAE’s former head of government affairs and former private secretary to Alan Clark, the late Tory defence minister – was interviewed at Guildford police station on Sunday by the Serious Fraud Office, people familiar with the matter said.

The questioning of Mr Scopes highlights the top-level business and government interests that have turned the BAE case into an explosive affair for both the company and ministers.

Mr Scopes, 55, was interviewed as part of an SFO probe into a suspected conspiracy to bribe people in high positions over arms deals in countries including Austria and the Czech Republic, people close to the matter said.

The Financial Times reports:

BAE Systems, the British arms manufacturer under investigation in several countries for alleged bribery, paid at least £20m to a company linked to a Zimbabwean arms trader allied to President Robert Mugabe, documents seen by the Financial Times show…

The payments raise fresh questions about BAE’s dealings with outside agents, intermediaries who sometimes act as brokers in arms deals. Agents have featured in investigations into whether BAE channelled bribes to foreign officials to win contracts.

BAE refuses to provide details of its relationships with agents, although it has pledged to introduce reforms as part of an effort to improve its image after the corruption investigation into its multibillion-pound al-Yamamah arms deal with Saudi Arabia.

Associated Press reports:

Swiss authorities have widened a corruption investigation linked to arms deals by the British aerospace company BAE Systems PLC, prosecutors said.

Federal prosecutors are conducting three criminal investigations into possible money laundering linked to the company, spokeswoman Jeannette Balmer told The Associated Press late Wednesday.

Previously prosecutors had confirmed only one investigation and Balmer declined to comment on what prompted Swiss authorities to open two additional investigations.

The investigations center on allegations that BAE used Swiss bank accounts to pay millions of pounds (dollars) in bribes to officials from Saudi Arabia in return for contracts. BAE has always said it acted lawfully.

You can read more here.

The Guardian reports that US Department of Justice officials investigating bribery and corruption allegations in relation to the Al-Yamamah arms deal between BAE and Saudi Arabia have issued a subpoena to BAE’s business development director Alan Garwood:

Until last year, Garwood led a team of 600 civil servants at the Defence Export Service Organisation at the MoD, where he worked on projects including last year’s deal to sell Eurofighter Typhoons to Saudi Arabia. He was seconded to the MoD from BAE in 2002.

That secondment reinforces the suggestion that the relationship between the MoD and BAE is too close.

BAE chief executive Mike Turner and non-executive director Sir Nigel Rudd had already been issued with subpoenas.

The Telegraph reports:

City grandee Sir Nigel Rudd, chairman of airports operator BAA and deputy chairman of Barclays Bank, was one of the two BAE Systems executives detained briefly last week by US officials investigating allegations of corruption by the UK defence company.

Sir Nigel, a non-executive director at BAE, was issued with a subpoena by investigators from the Department of Justice (DoJ) when he arrived at New York’s Newark Airport en route to a holiday in Florida. Yesterday, The Sunday Telegraph disclosed that Mike Turner, BAE’s chief executive, had been detained at an airport in Texas, where his laptop and Blackberry were seized.

The DoJ is investigating claims that BAE paid bribes in the 1980s and 1990s to win the £20bn Al Yamamah arms deal with Saudi Arabia. News of the detentions will further strain relations between Washington and London over the DoJ’s probe, as Sir Nigel has been at BAE less than two years and had nothing to do with the Saudi deal.

In 2006 Britain’s Serious Fraud Office controversially dropped its own investigation into Al Yamamah, and there have been claims Whitehall is dragging its feet over requests from the DoJ for information. The detentions may be a sign of the DoJ’s determination to raise the stakes, although one source said last night: “It could equally be a sign of frustration.” …

Liberal Democrat Treasury spokesman Vince Cable said yesterday reports of the detentions “illustrate that the investigation into alleged corruption over this arms deal is very far from closed.”

As the BBC reports:

A review into business practices at defence firm BAE Systems has called for tougher anti-bribery measures.

The study by Lord Woolf, former Lord Chief Justice of England and Wales, set out 23 recommendations for the firm.

Lord Woolf said the report provided a “route map” for BAE to ensure it was a leader for its ethical standards…

The BBC’s business editor Robert Peston says that the report’s finding, that in the past BAE did not pay sufficient attention to ethical standards in the way it conducted business, is an embarrassing admission.

Tanzania’s infrastructure minister, Andrew Chenge, resigned at the weekend after “being allegedly linked to a controversial BAE Systems defence contract that is being investigated by Britain’s Serious Fraud Office”, the Daily Telegraph reports.

The newspaper provides some background information:

The SFO is probing a 2002 contract under which BAE supplied Tanzania with a military radar system, a deal that was strongly criticised by aid agencies and politicians, including the then UK International Development Secretary Clare Short.
[...]
Despite the SFO abandoning its high-profile investigation into BAE’s Al Yamamah arms deal with Saudi Arabia, the fraud office has continued to probe several other overseas deals.

Poverty-stricken Tanzania bought a £28m military air traffic control system from BAE, when many experts said a far cheaper civil system would have done.

You can read the full story on the Telegraph website.

thisismoney.co.uk reports:

The ethics review into scandal-hit BAE Systems could be delayed for up to three months amid suspicions it will present a whitewash report into the activities of the controversial defence firm.

The probe into BAE’s business ethics by the independent committee, chaired by former chief justice Lord Woolf, is already almost a month overdue.And it appears Woolf - who has pocketed an estimated £500,000 in fees so far, all paid for by BAE - is in no hurry to get it finished. Sources have suggested his findings might not emerge until June.

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.