SFO raids four premises in BAE contracts probe

[Mr C Hinecap]

From the Telegraph - Money Section:

The Serious Fraud Office has taken a new direction in its investigation into allegations of corruption surrounding defence contracts with BAE Systems. The SFO confirmed it had on Tuesday raided four addresses in connection with its investigation into situations where BAE has been the prime contractor.

It is understood that the focus of the raids was not connected with Saudia Arabia and Romania. Allegations of corruption involving BAE and those two countries are well known.

It appears the SFO and the Ministry of Defence Police, which was also present at the raids, is also focusing on other contracts, possibly in Africa.

BAE said it was "cooperating fully with the SFO and as this is part of an ongoing investigation we cannot make further comment at this stage".

It was reported that among the properties searched were the Kensington home of John Bredenkamp and a company he owns.

Mr Bredenkamp, a Zimbabwean, has interests in Southern Africa in a company called ACS – Aviation Consulting Services – which is a representative for aircraft makers including BAE.

The latest raids do not necessarily represent a widening or deepening of the SFO investigation. No arrests were made during the SFO raids. Various BAE employees have been questioned by the police but no arrests have been made. The company has denied all allegations it has acted in a corrupt way.


I thought this was worth dragging from the Money Section and sharing with you all.

[GOLF_BRAVO_ZULU]

If we trade with countries and cultures where "palm greasing" is reputed to be SOP, what's the solution? All Contractors or national governments boycott them until they mend their ways? It would still happen, I'm sure; but the Customer would probably receive less effective/safe kit from less than reputable sources.

[backseatjock]

This SFO investigation has been active for some time now and it would seem that while a number of BAE staff have been questioned, no charges have been brought against anyone. So far, no evidence seems to have been found that BAE actually did anything wrong or I am sure we would have seen charges pressed.
Interesting thing about today's coverage (also in Guardian) is that while BAE is consistent in saying it can not comment because this is an ongoing investigation (understandable I guess as it could prejudice any future case against it) the SFO would seem to be briefing journalists. Not sure how appropriate that is!
And it does seem odd that while the SFO probes into BAE's affairs on a seemingly never-ending basis the UK MoD and other government officials, up to and including TB, are supporting the same Company in its bid to secure a Tyhoon deal in Saudi.
Presume the SFO is a government body and the two very different approaches/attitudes to the same Company must send conflicting signals to any potential customer. Would be interesting to know if this is damaging BAE's sales at all and, if it lost a big order on the back of all this, whether it might have a case of its own to press for damages to its business through loss of corporate reputation.

[MrBernoulli]

BAe in general seem to feel that the MoD exists to keep its fat cats in fat pensions and perks, in spite of the third-rate gear they produce. I hope the SFO screw them big time.

[GlosMikeP]

Originally Posted by MrBernoulli

BAe in general seem to feel that the MoD exists to keep its fat cats in fat pensions and perks, in spite of the third-rate gear they produce. I hope the SFO screw them big time.

MOD is every bit as much to blame as the suppliers. And I suspect BAE's income comes more from USA and Saudi these days; MOD will be a small, and declining, part of its portfolio.

However, on thread, I recall a BAe (before BAE Systems) marketing guy telling me years ago that the difference between a 'bribe' and 'commission' was timing. I do hope they get their timing right, unfailingly....

I don't think I could sail that close to the wind; and what really surprises me is that so many ex mil guys have, and perhaps, do.

[A2QFI]

Commisions etc.

"I don't think I could sail that close to the wind; and what really surprises me is that so many ex mil guys have, and perhaps, do."

The ex-mil guys find that they can relax from their rigidly structured fixed salary past and get stuck into some wheeling and dealing and get paid by results - at least I did!

[GlosMikeP]

Originally Posted by A2QFI

"I don't think I could sail that close to the wind; and what really surprises me is that so many ex mil guys have, and perhaps, do."

The ex-mil guys find that they can relax from their rigidly structured fixed salary past and get stuck into some wheeling and dealing and get paid by results - at least I did!

Me too but not with BAE and not where I have any difficulty seeing which side of the line I'm on. Still lots manage it well enough and good luck to them, but I still find it surprising.

[EODFelix]

I also believe that a quite a few years ago the NAO conducted an audit of the whole Al Yamamah contract. However mysteriously it never saw the light of day - rumours of sweetner payments to members of the Saudi royal house abounded. Al Yamamah prime contractor, BAE Systems, said in 2005 that it and its predecessor British Aerospace had earned £43 billion in twenty years from the contract.

[GlosMikeP]

The numbers seem quite believable. It's often been said that the AY contract kept BAE afloat. And in the present UK climate of under-funding, that's believable too!

[WasNaeMe]

MrBernoulli -" I hope the SFO screw them big time."

Not going to happen.....
Seem there are a lot of (maybe to many) Wannabee..... 'aircraft designer/builder/I know better/experts' in the RAF (or ex RAF with little or no experience of) these days.

[backseatjock]

" I also believe that a quite a few years ago the NAO conducted an audit of the whole Al Yamamah contract. "


Think you will find the original AY contract was negotiated by the UK and Saudi governments and BAe's role is as the 'prime contractor' for delivery of kit. This next contract for Typhoon seems to be the same.

Re commissions. Things that may or not have been done in the business world of 15 or 20 years ago, are often not done today. Surely the reason for this is as much about different attitudes in society today than years gone by. We see this across many business and also non business applications.

The real question is whether anyone, no matter who it is, broke any laws. If there is hard, factual evidence to suggest they did, they should be dealt with accordingly.

But the SFO, which seems quick to speak (or leak) information to members of the national media, would appear no closer to producing anything that would indicate this to be the case. If it had, charges would surely have been pressed by now.

It will be interesting to see how long this organisation will be allowed to adopt this approach, without results. Or will BAe have a case for claiming damage to its business through contiunued and unsubstantiated allegations against it?

[BEagle]

From The Sunday Times November 19, 2006:

Blair hit by Saudi 'bribery' threat

David Leppard


SAUDI ARABIA is threatening to suspend diplomatic ties with Britain unless Downing Street intervenes to block an investigation into a £60m “slush fund” allegedly set up for some members of its royal family.

A senior Saudi diplomat in London has delivered an ultimatum to Tony Blair that unless the inquiry into an allegedly corrupt defence deal is dropped, diplomatic links between Britain and Saudi Arabia will be severed, a defence source has disclosed.

The Saudis, key allies in the Middle East, have also threatened to cut intelligence co-operation with Britain over Al-Qaeda.

They have repeated their threat that they will terminate payments on a defence contract that could be worth £40 billion and safeguard at least 10,000 British jobs.

The Saudis are furious about the criminal investigation by the Serious Fraud Office (SFO) into allegations that BAE Systems, Britain’s biggest defence company, set up the “slush fund” to support the extravagant lifestyle of members of the Saudi royal family.

The payments, in the form of lavish holidays, a fleet of luxury cars including a gold Rolls-Royce, rented apartments and other perks, are alleged
to have been paid to ensure the Saudis continued to buy from BAE under the so-called Al-Yamamah deal, rather than going to another country. Al-Yamamah is the biggest defence contract in British history and has kept BAE in business for 20 years.

At least five people have been arrested in the probe. They include Peter Wilson, BAE’s managing director of international programmes, and Tony Winship, a former company official who oversaw two travel and service firms that are alleged to have been conduits for the payments. Both deny any wrongdoing.

The Saudi threat was made in September after the royal family became alarmed at the latest turn in the fraud inquiry. Sources close to the investigation say the Saudis “hit the roof” after discovering that SFO lawyers had persuaded a magistrate in Switzerland to force disclosure about a series of confidential Swiss bank accounts.

The sources said the accounts relate to substantial payments between “third party” offshore companies that may have received large sums in previously undisclosed “commissions”. Fraud office sources say they are now trying to get more documents that will tell them who benefited from the accounts. The trail is said to lead to the Saudi capital Riyadh.

The Saudis learnt of this development only when they were contacted by the Swiss banks in the late summer. “They hit the roof,” said a source close to the investigation.

The Saudi royal family, which effectively controls the government, instructed a senior diplomat, said to be Prince Mohammed bin Nawaf, its London ambassador, to visit Downing Street. He held a meeting with Jonathan Powell, Blair’s chief of staff, according to the sources.

The diplomat is said to have delivered a 12-page letter drawn up by a Saudi law firm demanding a detailed explanation of why the investigation was still continuing.

The Saudis had been given the impression during a meeting with Blair in July last year that the inquiry would be stopped, say the sources.

“The Saudis are claiming in this letter that the British government has broken its undertaking to keep details of the Al-Yamamah deal confidential,” said a source who has read the document.

“It regards the disclosure of these documents to the SFO from Switzerland, and from the Ministry of Defence, as a totally unacceptable breach of that undertaking. They are claiming the deal is protected by sovereign national immunity and that the British have no right to poke around in their private financial affairs.

“It is a really infuriated letter demanding a full and open explanation, pending which the Al-Yamamah contract is suspended and all payments would stop.”

A defence official said that the preliminary contract, signed last August, to sell the first 24 of 72 promised Typhoons, better known as Eurofighters, was then temporarily suspended. That contract alone is said to be worth £11 billion and would safeguard 9,000 jobs at the Eurofighter’s UK headquarters in Warton, Lancashire, for the next decade.

Downing Street is said to have persuaded the Saudis to reverse for the time being their decision to suspend the Typhoon payments. However, the Saudis made clear they would carry out their threats unless the demands in their letter were met.

During the meeting with Powell the Saudi diplomat is said to have issued a threat to sever all diplomatic and intelligence ties. Such a move would be
damaging for Britain’s strategic interests in the volatile region.

It would involve the Saudis withdrawing their ambassador to London, and the British ambassador in Riyadh would be sent home. Direct communications between the two countries on political, economic and security issues would have to be conducted through a third country.

“It was the Swiss stuff that sent the Saudis over the top. The threat to cut off diplomatic and intelligence ties was a very real one,” said the defence official.

The row will put renewed pressure on Lord Goldsmith, the attorney-general, to intervene. Earlier this year Goldsmith, who is the “superintending” minister for the SFO, was asked to determine whether its inquiry was “in the public interest”. That request followed earlier Saudi pressure on the Ministry of Defence.

A spokesman for Goldsmith said: “We do not comment on ongoing investigations.”

Al-Yamamah, meaning “the Dove” in Arabic, has kept BAE in business for 20 years. It was signed in 1985 when Britain agreed to sell 72 Tornados and 30 Hawks to Saudi Arabia.

The deal was renewed in 1993 when the Saudis agreed to buy another 48 Tornado warplanes. In a third stage of the contract signed last year, Britain is selling up to 72 more planes, the Typhoons.

A Downing Street spokesman said: “We don’t speak about ongoing investigations and we don’t speak about discussions with other countries.”

[soddim]

They are banging on about old news but nevertheless it is worth remembering how sensitive this hot potato is - conseqences far more important to UK than cash for peerages scandal.

There is no doubt that the muck is there waiting to be spread but is it in anybody's interest to spread it?

[Brian Abraham]

Lecture on ethics by company

"We dont pay bribes but we will make facilitation payments"

Could someone define the difference - confused.

[soddim]

Interesting article:

Geopolitical Diary: A U.K.-Saudi Crisis?
Nov 20, 2006

According to the Sunday Times, a senior Saudi diplomat informed British Prime Minister Tony Blair in September that Saudi Arabia was prepared to suspend diplomatic relations with the United Kingdom and to stop sharing intelligence on al Qaeda unless a British investigation into corruption at British Aerospace Systems is halted. British officials are investigating a $113 million (60 mllion-pound) slush fund that BAE allegedly set up for some members of the Saudi royal family. The purpose of the fund was, according to reports, to ensure that the Saudis would continue to buy aircraft from BAE in what is the largest defense contract in the company's history.

It is not clear why the message to Blair, from September, was revealed now or whether it was the British or Saudi side that did the revealing. If we were to guess, we would guess that the revelation was made by the Saudis. This would increase the pressure being placed on the British, but it also sheds light on the investigation, which the Saudis clearly wanted to hide. Nevertheless, the fact is that someone leaked it to the Sunday Times and, so far, neither government has denied the story.

In some sense, the threat is symbolic. Suspending diplomatic relations has some implications, but not enormous ones. Suspending cooperation over al Qaeda is not insignificant -- but so long as the Saudis are working with the United States, Saud intelligence will continue to be passed on to the British. The substance of the threats, therefore, is not nearly as significant as the fact that the threats were made, and that they were made so publicly. This is a real crisis in U.K.-Saudi relations.

The real Saudi threat is that they will suspend the BAE deal, which is supposed to be valued at about 40 billion pounds (about $76 billion). If that were to happen, it would be a huge blow to BAE and to the British economy. BAE certainly needs this deal; it would be overstating it to say that Britain needs this deal, but not by much. If the Saudis canceled, it would cost thousands of jobs and force a restructuring of the British defense industries. It also would make some other country -- probably the United States -- very happy, when the project is transferred.

The issue is quite simple. BAE is accused of bribing members of the Saudi royal family with money and gifts to get the deal. The British government is now investigating these gifts, which would be illegal under British law. In so doing, they likely will name the Saudi officials and dignitaries who accepted the bribes. Apart from any legal implications, this will publicly embarrass those officials. The Saudi government does not want these names revealed: If there were bribes, they went (by definition) to powerful and significant individuals -- in short, to people in and close to the Saudi government. Therefore, the Saudis want the investigation stopped immediately and have taken the extraordinary step of threatening diplomatic, military and economic consequences ranging from symbolic to disastrous.

Welcome to the real world of multiculturalism. The Anglo-American view of law is that it overrides custom and requires government officials to act in a disinterested fashion. The Saudi view of law is that the formal law must co-exist with the customary form of government. In other words, the giving of gifts to powerful people when seeking their favor is customary, and the idea that a government official may not profit while serving his country -- while undoubtedly the Anglo-American view of law -- is simply not theirs. There is, throughout the world, a profound tension between a wide variety of cultural norms. What is bribery in London is simply good manners elsewhere.

In other words, if BAE is going to get a 40 billion-pound contract from the Saudis, the company is going to follow Saudi custom. Unfortunately, BAE is a British firm and, as such, it has to follow British law, which treats such behavior as a felony. Even if the Saudis are beyond that law, BAE isn't. Now, the British government did everything it could to help BAE win the contract, in hopes that its major defense contractor would prosper. However, the British government is now investigating the same company that it cheered on, knowing full well how business is done in Saudi Arabia.

While the British get twisted in deep ethical knots, the Saudis are going ballistic. They may not expect the world to understand how they do business, but they also do not expect senior members of the royal family to be dragged through the courts and the media. The Saudis have gone to this extreme to show how seriously they are taking the matter, and they may have no option but to do so. But it is not clear that the British government can block the investigation.

This probably doesn't have long-term geopolitical consequences, except for this: If the BAE contract is not continued, the only other country with the capacity to handle something of such magnitude will be the United States. The Saudis have been cautious about going too deep with the Americans since the crisis of 2002-2003. This affair could change that. It would seem to us that this mess might just draw the Americans closer to the Saudis.

[brickhistory]

What's Arabic for F-35 'Dave?'


Good post, BTW.

[backseatjock]

Soddim says: " It would seem to us that this mess might just draw the Americans closer to the Saudis."

Other option, which would probably not please the Americans too much, is business going to the French who would appear to be all over the Kingdom at the moment. Rafale could do with the order too.

I don't think we should underestimate the threat to British jobs outside the UK defence industry if the Saudi's go ahead with breaking diplomatic ties to the UK. There are a great many more British companies doing good business in the Kingdom.

I just wonder about all this SFO media stuff. Very unusual for an organisation like this to be seemingly conducting an enquiry into any business through the pages of a national newspaper (in this case The Guardian).

Surely, taking the British justice system into consideration, that in itself (a) can't be acceptable behaviour and (b) could prejudice any future case it might wish to bring. I can't see BAE Systems leaking the information that has appeared in print, which seems to follow a view that everyone is guilty, until proved innocent.

Mike Turner, BAE chief is consistent in his statement that his company has and is operating within the laws of the UK. Knowing a bit about this industry, he could also add that it operates within both European and, for BAE, US
anti-corruption legislation. It has no choice, in this respect.

The Telegraph had an editorial piece yesterday in which Jeff Randall criticised the SFO's three year investigation and The Guardian's 'dogged' campaign against BAE. He concluded it was time for the SFO to put names in the frame or close the book, as the longer it drags on the worse it will be for British commercial interests.

A sensible conclusion, in my view and possibly time someone forced the issue.

[mary_hinge]

50,000 British jobs at risk if vital defence deal is lost

Don't know if this is old news coming around again:
http://www.thisislondon.co.uk/news/a...ost/article.do

And also at (sorry)

http://www.dailymail.co.uk/pages/liv...icle_id=418513

[L1A2 discharged]

Also in the torygraph.

If they cancel Typhoon for Saudi it will mean the we can keep those personnel currently being stripped from already short manned (and womanned) locations in order to support the contractor in location.

And the visitors will have to find another country in which to practice those things forbidden inside the magic kingdom.

[dwayne_doberman]

Mr Bernoulli, what a load of utter sh1t you've posted. What a completely stupid post - why have you bothered to waste both your time and the time of those who read this otherwise excellent forum?

You clearly have no idea what is needed to do any deal in Saudi Arabia, have you? The Saudis do not accept "3rd rate" products.

The sales to KSA have allowed the UK to participate/undertake in Eurofighter, Nimrod, Hawk 100/200 and JSF.

What would be YOUR solution to UK investment in aerospace?

Originally Posted by MrBernoulli

BAe in general seem to feel that the MoD exists to keep its fat cats in fat pensions and perks, in spite of the third-rate gear they produce. I hope the SFO screw them big time.