Fraud Office remains under pressure over deal with arms giant

By staff writers
April 15, 2010

The Serious Fraud Office (SFO) remains under pressure over its controversial 'plea bargain' with the multinational arms company BAE Systems, despite the end of legal action.

The Campaign Against Arms Trade (CAAT) have emphasised that they wish to campaign against the company's privileged status through the most effective means possible, and have taken the difficult decision not to pursue a court case against the SFO.

The SFO caused outrage in February by agreeing to accept £30 million from BAE, along with an admission of “accounting irregularities”. In return, they dropped investigations into alleged corruption in BAE's arms deals with South Africa, Tanzania, Romania and the Czech Republic.

CAAT and The Corner House, an anti-corruption NGO, applied for a judicial review of the decision, to allow a judge to decide if the SFO had acted unlawfully. But their request was turned down by the courts.

“We are disappointed we cannot take the judicial review process further,” said CAAT's Kaye Stearman. But she added, “Anyone looking at the details of the numerous corruption allegations regarding BAE that have emerged over the last six years can draw their own conclusions as to whether or not justice has been served by the plea bargain that the SFO has accepted from this large, well-connected company”.

When they applied for a judicial review, the campaigners drew attention to an SFO announcement in October, which suggested that BAE was on the brink of being prosecuted over several cases of alleged corruption.

The SFO has now admitted “with hindsight” that while “the ordinary language of the press release” conveyed the impression that its investigation was complete and the SFO had decided to prosecute, the press release in fact “overstated the stage which had been reached in both the investigative and prosecutorial decision-making process”.

The SFO's admission means that legal action would have less chance of success than was initially thought.

This is despite the SFO itself stating earlier this year that “from 2002 onwards, BAE adopted and deployed corrupt practices to obtain lucrative contracts for jet fighters in central Europe” in a “sophisticated and meticulously planned operation involving very senior BAE executives”.

Nicholas Hildyard of The Corner House insisted that “Many searching questions need to be asked about a plea bargain process in which corporates negotiate their crime and punishment”.

He added that “legal guidance needs to be strengthened if the SFO Director is to fulfil his duty of upholding the law rather than helping companies avoid its consequence”.

Hildyard's concerns echo those of South African former MP Andrew Feinstein, who has spent years delving into the alleged corruption in BAE's arms sales to his country. He suggested in February that the SFO settlement implied that large and powerful companies could buy their way out of justice.

There are also a number of specific concerns remaining over the settlement. The SFO seems to have given an undertaking that it will never in future prosecute any individual if doing so involves alleging that BAE was guilty of corruption.

Further, the SFO Director acknowledges that “a conviction for an offence of corruption would have had the effect of debarring BAE for tendering for public contracts in the EU” under the European Union Public Sector Procurement Directive. He said that this would have been a “disproportionate outcome”.

But the SFO’s own Guidance on Corporate Prosecutions states that “a decision not to prosecute because the Directive is engaged will tend to undermine its deterrent effect”, which “is intended to be draconian”.

BAE Systems has long been accused of wielding undemocratic influence within the UK government. The former Foreign Secretary Robin Cook wrote in his diaries that the head of BAE had "the key to the garden door at Number Ten”.

In 2006, the then Prime Minister, Tony Blair. pressurised the SFO into dropping an investigation into BAE's arms deals with Saudi Arabia. This was later declared to be unlawful by the High Court, although their ruling was overturned by the law lords following a government appeal.


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