Corruption is a Crime

From the Sunday Times:

Police investigating alleged corruption by Britain’s biggest defence company sought access to Downing Street’s computer system to trawl for e-mails sent by and to Jonathan Powell, Tony Blair’s chief of staff.

The full story is here.

Sir Alistair Graham, former chairman of the Committee on Standards in Public Life, has strongly criticised the axing of the Serious Fraud Office’s investigation into the Al-Yamamah arms deal. According to the BBC:

He said he felt “personally affronted” by the decision to stop the SFO probe, as he had given lectures abroad, at the request of the Foreign Office, on Britain’s anti-corruption measures.

This is a pretty damning indictment of the decision from a highly respected public servant who was chairman of the Committee from 2003 until earlier this year.

Yesterday’s Observer newspaper carried three interesting stories about BAE Systems plc.

Congress stands by to torpedo BAE’s deal

In January, the US formally protested to the British government about the abandonment at the end of last year of the Serious Fraud Office investigation into bribery allegations over the £40bn al-Yamamah arms deal with Saudi Arabia and the sale of Eurofighters to the Saudis.
[…]
As for the Saudi allegations, BAE maintains it has not broken the law and that it would not have launched the Armor deal without taking soundings about regulatory problems. However, there is only so much BAE could have learned on this. One senior industry figure says: ‘I am sure they have got a sign from the Pentagon, but it would have been far harder to get a sounding from the Department of Justice, for example.’

Part of the difficulty is the spread of responsibility around government departments. The Department of Justice looks into anti-trust and criminal issues. A spokeswoman confirms that bribery allegations such as those made over al-Yamamah cannot be investigated under anti-trust laws. As for criminal activity - the SFO’s investigation was a criminal one - a spokesman says this would be the responsibility of the US Treasury.

BAE to face new bribes probe in US

Congressional aides told The Observer they were briefed on Tuesday by officials from the US State Department on investigations by the Serious Fraud Office into allegations of bribery relating to the £40bn al-Yamamah deal with Saudi Arabia, controversially halted in December, and continuing probes into deals with Tanzania, the Czech Republic, South Africa, Chile, Qatar and Romania.

It emerged recently that the UK government had a complaint from the US about the dropping of the Saudi inquiry, and it has been criticised by the OECD.

Swiss investigate BAE corruption claims

Jeannette Balmer, a spokeswoman for the Swiss federal prosecutor’s office, said that a criminal investigation is under way into suspicions of money laundering involving the company, but declined to give further details. The investigation was the result of a report prosecutors received from the Swiss money-laundering authority.

Protesters from Campaign Against Arms Trade (CAAT) are demonstrating this morning outside the AGM of BAE Systems plc. CAAT owns “token shares” in the company which will also allow some of its representatives into the meeting itself. The protest will focus on the company’s activities, and in particular a demand for the SFO investigation into Al Yamamah to be reopened. CAAT believes that “the Government’s intervention [in closing down the investigation] sends a clear message that BAE Systems is above the law.”

Today’s AGM is also marked by Jeremy Warner’s business comment in The Independent:

Washington has already issued a formal protest and several Congressmen have demanded that a full explanation of US concerns be given before any more BAE-related arms deals are approved. That would presumably include the proposed $4.1bn purchase of Armor Holdings which yesterday’s share placing is intended partially to fund.
[…]
However, it is plainly going to be a bit of a problem if the US takes the view that BAE broke the law in winning the Al Yamamah arms contract, and that the Brits are trying to hush it up in their own perceived commercial interest. BAE could find itself blacklisted not just from buying Armor, but potentially from all US arms deals.

Warner also suggests how BAE could proceed:

BAE’s broad-brush assurance that it did nothing wrong is frankly not good enough in the circumstances the company now finds itself in. Neither the public and now, more worryingly from the point of view of the shareholders, the US authorities, are likely to be convinced by it.

If BAE is so confident of its innocence, why doesn’t it order an independent inquiry, similar to what James Baker did for BP over the Texas City oil refinery blast, chaired by someone of unimpeachable integrity, whose findings would be published.

Following confirmation that the US Department of Justice has been discussing BAE Systems plc with the Serious Fraud Office, Vince Cable MP, the Liberal Democrat Deputy Leader, has called for transparency in the Government’s dealing with the company.

“It is highly significant that the Americans are sniffing around this inquiry, particularly as we know the US Government has protested to the British Government about its unwillingness to prosecute.

“If it is true that the Department of Justice are taking seriously suggestions that offences may have been committed in American jurisdiction, then this could be a major escalation. It would also put BAE Systems in some jeopardy, since a third of its defence sales are to the US and it envisages major expansion there.

“With all these rumours swilling around it becomes all the more important that the British Government should be completely transparent in its dealings with the company. If there has been any bribery or corruption in relation to Saudi Arabia and other contracts, it must be pursued.

“It is simply not sustainable for some companies to be required to clean up their acts, while another enjoys more favorable treatment.”

The Guardian reports today that prosecutors from the Sweden, Austria and the Czech Republic will meet with representatives of the UK’s Serious Fraud Office in The Hague next week “to co-ordinate their corruption investigations into BAE.”

The meeting of prosecutors will take place under the aegis of an EU body called Eurojust, set up in 2003 to fight organised crime. Law enforcement sources said the prosecutors expected to share information and decide which countries were best placed to bring any charges.

The newspaper also reports that Liberal Democrat Deputy Leader Vince Cable has been keeping up the pressure on the Labour Government:

Vince Cable, the Liberal Democrat deputy leader, this week renewed his attack on the UK government for blocking the SFO’s Saudi investigation. In an adjournment debate on Tuesday night, he accused BAE of passing secret funds through an undeclared British Virgin Islands company and asked: “Is that compatible with the Treasury’s rules about money laundering?”

He also demanded that the UK express confidence in Mark Pieth, head of the OECD’s anti-bribery watchdog, which is reviewing claims that Britain broke an international treaty by halting the Saudi investigation in order to protect its relations with the Saudi ruling family.

The full story is here.

Today’s Times carries the continuing story of the United States’ interest in the allegations of bribery against BAE Systems plc.

The US Department of Justice (DoJ) is in talks to establish whether it can launch a formal inquiry into alleged bribery and corruption in BAE Systems, The Times has learnt.

The newspaper reports that the inquiry would be similar to that dropped by the Serious Fraud Office at the end of last year and would focus on payments alleged to have been made by the Red Diamond company, which The Times suggests is a subsidiary of BAE.

Vince Cable, the Deputy Leader of the Liberal Democrats, told the Commons last night that the allegations of corruption against BAE were damaging the reputation of Britain overseas. He also asked what help the UK authorities were giving to the DoJ and what the Department of Trade and Industry was doing to investigate Red Diamond and its links to BAE. Dr Cable said yesterday: “How can we allow an operation like Red Diamond to be hidden offshore, given the concerns about money laundering and corrupt practices?”

Full story here.