BAE admits guilt - but avoids court

By staff writers
February 6, 2010

The Serious Fraud Office (SFO) has triggered outrage by reaching a 'plea bargain' with the arms company, BAE Systems.

BAE have for the first time admitted to two criminal charges in response to longstanding corruption allegations and have agreed to pay over £280 million to the UK and US authorities. But campaigners say that the settlement has let the company “off the hook”, as it keeps the issue out of the courts.

In the UK, the SFO agreed to accept £30 million from BAE and an admission to accounting irregularities in respect of their 2002 deal with Tanzania, which has long been dogged by accusations of bribery. Clare Short, who was the UK’s International Development Secretary at the time, says that the deal “stank” of corruption.

However, the SFO will drop its inquiries into allegations of bribery on an even greater scale in BAE deals with South Africa and the Czech Republic.

The Campaign Against Arms Trade (CAAT) said that they were “shocked and angered” by the SFO’s agreement with BAE.

“There will be no opportunity to discover the truth behind alleged bribery and corruption in the many BAE deals that were under investigation” they said in a statement, adding that £30 million is “a tiny price for BAE”, which is one of the world’s largest arms companies.

CAAT insisted that the truth about BAE’s deals in Africa and Europe must come out in court. They suggested that this has become even more important since 2006, when Tony Blair’s government pressurised the SFO into dropping their investigation into BAE’s deals with Saudi Arabia.

There has been particular surprise that the settlement has been reached only a week after a former BAE agent, Alfons Mensdorff-Pouilly, was arrested on corruption charges.

“One day a former BAE agent appears in court charged with corruption; the next BAE is let off for an accounting misdemeanour” said CAAT’s Kaye Stearman.

Andrew Feinstein, a former MP in South Africa who has led the campaign to examine BAE’s deals with the country, said that the SFO had sent “the message that large enough corporations are able to pay their way out of trouble."

In a separate deal, BAE will pay out over £250 million to the US authorities, who accuse the company of “wilfully misleading” the US Department of Justice over various arms contracts, including those with Saudi Arabia.

Nicholas Hildyard of anti-corruption NGO The Corner House, said that, given BAE’s admission of guilt in the US concerning their Saudi deals, the SFO “should re-open its own Saudi Arabian investigation immediately”.

The Guardian, which uncovered much of the evidence on which corruption allegations have been based, welcomed BAE’s admission of guilt while appearing frustrated that the matter had not come to court.

BAE’s admissions and payouts contradict their previous insistence that they were not guilty. However, no BAE director or senior official has resigned as a result of the confessions.

BAE’s chair Dick Olver insisted the issue is “very much in the past”, although the offences with which Mensdorff-Pouilly was charged last week related to BAE deals as recent as December 2008.

Olver has long faced derision for his attempt to portray BAE as an ethical company. Even after making the plea bargain, he said that BAE would be a “transparent, modern, clean company”.

He told the BBC that “all these matters” had now been settled. But Nicholas Hildyard said that, “Far from drawing a line under the allegations, today’s announcement simply raises far more questions and creates yet further demands for justice."

After the SFO dropped its Saudi investigation in 2006, legal action by CAAT and The Corner House resulted in the High Court ruling that the government and SFO had behaved illegally, although the decision was later overturned by the law lords. It remains to be seen whether there will be a legal challenge on this occasion.

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