Judge says BAE appears to have benefited from corrupt payments

By staff writers
December 21, 2010

A judge in London has insisted that multinational arms company BAE Systems appears to have benefited from corrupt payments in Tanzania.

Mr Justice Bean suggested at Southwark Crown Court today (21 December) that payments made by BAE to one of its agents appeared to be intended to bribe decision-makers and secure a controversial deal to supply an air traffic control system.

The judge had been expected to simply rubber-stamp a plea bargain between BAE and the Serious Fraud Office (SFO). But shortly after the case opened yesterday, he made clear that he thought the plea bargain did not make sense.

Under the bargain, BAE pleaded guilty to accounting irregularities and the SFO dropped all its corruption investigations into the company. The SFO had been looking into BAE deals with South Africa, Romania and the Czech Republic as well as Tanzania.

Bean fined BAE £500,000 for the accounting offence, saying he had no power to pass sentence for corruption charges which had not been brought. But he strongly hinted that a trial would have been preferable.

BAE, one of the world's largest arms companies, has long been criticised by NGOs and faith groups for arming countries around the globe, including repressive regimes such as Saudi Arabia and Indonesia. The company faces allegations of corruption in five continents and has often been accused of undue influence within the UK government.

Much of the Tanzanian case focused on BAE's payments, via the secretive intermediary company Red Diamond, to the Tanzanian agent Sailesh Vithlani. BAE insisted that a payment to Vithlani of £12.4m was for services such as “lobbying”, “marketing” and “public relations”. It is widely alleged that he used the money to bribe Tanzanian decision-makers to spend public money on equipment the country did not need.

The SFO's legal team said that they accepted BAE's claim. But as he gave sentence this morning, the judge insisted that it would be “naive in the extreme to think that Mr Vithlani was simply a well-paid lobbyist”.

Bean said that BAE was not directly a party to corruption because they “did not need to be”, as they were “at two removes” via Red Diamond and Vithlani.

He suggested that the clear inference of the arrangement with Vithlani was that “he should have free reign” to make payments, about which BAE “didn't want to know”. And he pointed out that Vithlani's reappointment in 1998 had been personally approved by BAE's then chairman, Richard Evans.

The plea bargain was described by the judge as “loosely and perhaps hastily drafted”. He criticised the SFO for agreeing not to prosecute BAE in future for any offences already committed, saying, “I am surprised to find a prosecutor granting a blanket immunity for all offences committed in the past”.

After the sentence, one observer in the public gallery expressed the view that, “That's judge-ese for, 'This is a stitch-up'”.

BAE had already agreed to make a payment “to the Tanzanian people” of £30 million minus the fine imposed by the court, an offer that some campaigners have seen as moral blackmail. The judge said he felt a “moral pressure” to impose a relatively low fine because the Tanzanian people were “the victims of this way of obtaining business”.

Kaye Stearman of the Campaign Against Arms Trade (CAAT) described the judge's statement today as “an indictment of BAE's culpability”.

Nicholas Hildyard, a leading anti-corruption campaigner and director of The Corner House said, “BAE has been convicted of an accounting misdemeanour that hid a major crime: concealing improper payments. The company will never be able to deny this in future."

He added, “The tragedy of this outrageous plea agreement is that the Tanzanian government is unlikely to accept the payment if doing so would be to admit that officials had taken bribes. The SFO's practice of plea agreements must be reviewed urgently if justice is to be served and to ensure that this travesty never happens again."

As the court hearing opened yesterday morning, campaigners gathered outside despite the snowy weather, with a puppet of BAE Chairman Dick Olver handing out peanuts – representing the fine resulting from the plea bargain. They sang, “We wont' go until there's justice,” to the tune of We Wish You a Merry Christmas.


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