Sunday, 18 September 2011

BAE Systems - Corruption investigations

...from Wiki...

Serious Fraud Office

BAE Systems has been under investigation by the Serious Fraud Office, into the use of political corruption to help sell arms to Chile, Czech Republic, Romania, Saudi Arabia, South Africa, Tanzania and Qatar.[123][124][125] In response, BAE Systems' 2006 Corporate Responsibility Report states "We continue to reject these allegations...We take our obligations under the law extremely seriously and will continue to comply with all legal requirements around the world.[126] In June 2007 Lord Woolf was selected to lead what the BBC described as an "independent review.... [an] ethics committee to look into how the defence giant conducts its arms deals."[127] The report, Ethical business conduct in BAE Systems plc – the way forward, made 23 recommendations, measures which BAE has committed to implement. The finding stated that "in the past BAE did not pay sufficient attention to ethical standards in the way it conducted business," and was described by the BBC as "an embarrassing admission."[128]

In September 2009, the Serious Fraud Office announced that it intended to prosecute BAE Systems for offences relating to overseas corruption. The Guardian claimed that a penalty "possibly of more than £500m" might be an acceptable settlement package.[129] On 5 February 2010, BAE Systems agreed to pay £257m criminal fines to the US and £30m to the UK. The UK already massively benefited from £43 billion contract in tax receipts and jobs in the UK, and had dropped an anti-corruption investigation into the Al Yamamah contracts later taken up by US authorities.[130][131] Crucially, under a plea bargain with the US Department of Justice BAE was convicted of felony conspiracy to defraud the United States government and sentenced in March 2010 by U.S. District Court Judge John D. Bates to pay a $400 million fine, one of the largest fines in the history of the DOJ. U.S. District Judge John Bates said the company's conduct involved "deception, duplicity and knowing violations of law, I think it's fair to say, on an enormous scale".[132][133] BAE did not directly admit to bribery, and is thus not internationally blacklisted from future contracts. Some of the £30m penalty BAE will pay in fines to the UK will be paid ex gratia for the benefit of the people of Tanzania.[134] On 2 March 2010 Campaign Against Arms Trade and The Corner House were successful in gaining a High Court injunction on the Serious Fraud Office's settlement with BAE. The High Court may order a full review of the settlement.[135]

[edit] Saudi Arabia

One of 24 Panavia Tornado ADVs delivered to the Royal Saudi Air Force as part of the Al Yamamah arms sales.

BAE (and British Aerospace previously) has long been the subject of allegations of bribery in relation to its business in Saudi Arabia. The UK National Audit Office (NAO) investigated the Al Yamamah contracts and has so far not published its conclusions, the only NAO report ever to be withheld.[136] The MOD has stated "The report remains sensitive. Disclosure would harm both international relations and the UK's commercial interests."[137] The company has been accused of maintaining a £60 million Saudi slush fund and was the subject of an investigation by the Serious Fraud Office (SFO). However, on 14 December 2006 it was announced that the SFO was "discontinuing" its investigation into BAE. It stated that representations to its Director and the Attorney General Lord Goldsmith had led to the conclusion that the wider public interest "to safeguard national and international security" outweighed any potential benefits of further investigation.[138] The termination of the investigation has been controversial.[139] In June 2007, the BBC's Panorama alleged BAE "paid hundreds of millions of pounds to the ex-Saudi ambassador to the US, Prince Bandar bin Sultan" in return for his role in the Al Yamamah deals.[140] In late June 2007 the United States Department of Justice (DOJ) began a formal investigation into BAE's compliance with anti-corruption laws.[141] On 19 May 2008 BAE confirmed that its CEO Mike Turner and non-executive director Nigel Rudd had been detained "for about 20 minutes" at two US airports the previous week and that the DOJ had issued "a number of additional subpoenas in the US to employees of BAE Systems plc and BAE Systems Inc as part of its ongoing investigation".[142] The Times suggested that such "humiliating behaviour by the DOJ" is unusual toward a company that is co-operating fully.[142]

A judicial review of the decision by the SFO to drop the investigation was granted on 9 November 2007.[143] On 10 April 2008 the High Court ruled that the SFO "acted unlawfully" by dropping its investigation.[144] The Times described the ruling as "one of the most strongly worded judicial attacks on government action" which condemned how "ministers 'buckled' to 'blatant threats' that Saudi cooperation in the fight against terror would end unless the ...investigation was dropped."[145] On 24 April the SFO was granted leave to appeal to the House of Lords against the ruling.[146] There was a two-day hearing before the Lords on 7 and 8 July 2008.[147] On 30 July the House of Lords unanimously overturned the High Court ruling, stating that the decision to discontinue the investigation was lawful.[148]

[edit] Others

In September 2005 The Guardian reported that banking records showed that BAE paid £1 million to Augusto Pinochet, the former Chilean dictator.[149] The Guardian has also reported that "clandestine arms deals" have been under investigation in Chile and the UK since 2003 and that British Aerospace and BAE made a number of payments to Pinochet advisers.[150] In 2003, HMS Sheffield was sold to the Chilean Navy for £27 million, however the government's profit from the sale was £3 million, after contracts worth £24 million were placed with BAE for upgrade and refurbishment of the ship.[151]

HMS Coventry was one of two frigates sold to Romania.

BAE is alleged to have paid "secret offshore commissions" of over £7 million to secure the sale of HMS London and HMS Coventry to the Romanian Navy. BAE received a £116 million contract for the refurbishment of the ships prior to delivery;[152] however the British taxpayer only received the scrap value of £100,000 each from the sale.[153]

BAE ran into controversy in 2002 over the abnormally high cost of a radar system sold to Tanzania.[154][155] The sale was criticised by several opposition MPs and the World Bank;[156] Secretary of State for International Development Clare Short declared that BAE had "ripped off" developing nations.[157][158] In December 2010, leaked US diplomatic communications revealed that Edward Hoseah, the Tanzanian prosecutor investigating misconduct by BAE, had confided in US diplomats that "his life may be in danger" and was being routinely threatened.[155]

In January 2007, details of an investigation by the Serious Fraud Office into BAE's sales tactics in regard to South Africa were reported, highlighting the £2.3 billion deal to supply Hawk trainers and Gripen fighters as suspect.[159] In May 2011, as allegations of bribery behind South Africa's Gripen procurement continued, BAE partner Saab issued strong denials of any illicit payments being made; however in June 2011 Saab announced that BAE had made unaccounted payments of roughly $3.5 million to a consultant, this revelation prompted South African Opposition parties to call for a renewed inquiry.[160][161] The Gripen's procurement by the Czech Republic was also under investigation by the Serious Fraud Office in 2006 over allegations of bribery.[151]

[edit] Criticism


In September 2003 The Sunday Times reported that BAE had hired a private security contractor to collate information about individuals working at the Campaign Against Arms Trade and their activities.[162][163] In February 2007, it again obtained private confidential information from CAAT.[164]

Human rights records

Like many arms manufacturers, BAE has received criticism from various human rights and anti-arms trade organisations due to the human rights records of governments to which it has sold equipment.[165] These include Indonesia,[166] Saudi Arabia,[167] and Zimbabwe.[165] BAE's US subsidiary makes several subsystems for F-16s, which have been supplied to the Israel Defense Forces.[168]

Nuclear weapons

In 2006, BAE was excluded from the portfolio of the government pension fund of Norway "because they develop and/or produce central components for nuclear weapons".[169] "According to the ethical guidelines for the Government Pension Fund – Global, companies that produce weapons that through normal use may violate fundamental humanitarian principles shall be excluded from the fund."[169] BAE is indirectly engaged in production of nuclear weapons – through its 37.5% share of MBDA it is involved with the production and support of the ASMP missile, an air launched nuclear missile which forms part of the French nuclear deterrent. BAE is also the UK's only nuclear submarine manufacturer and thus produces a key element of the UK's nuclear weapons capability.

Cluster bombs

BAE has in recent times been criticised for its role in the production of cluster bombs, due to the long term death/injury risks they cause to civilians (they behave similarly to land mines). However, after pressure campaigns from various human rights groups, BAE recently stated it no longer produces land mines or cluster bombs.[170]

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