BAE To Pay $400 Million In Settlement On Corruption Charges <


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BAE To Pay $400 Million In Settlement On Corruption Charges

By Mike Mitchell

February 8, 2010 - London, United Kingdom - The Company, the U.S. Department of Justice and the UK Serious Fraud Office have reached settlements in connection with the Justice Department investigation announced by the Company on 26th June 2007 and the Serious Fraud Office announced by the Company on 3rd November 2004. 

Under the agreement with the Department of Justice, which requires court approval, the Company will plead guilty to one charge of conspiring to make false statements to the U.S. Government in connection with certain regulatory filings and undertakings. The Company will pay a fine of $400 million and make additional commitments concerning its ongoing compliance. 


Under the agreement with the with the United States Department Of Justice And United Kingdom Serious Fraud Office, the Company will plead guilty to one charge of breach of duty to keep accounting records in relation to payments made to a former marketing adviser in Tanzania.  The Company will pay an agreed penalty of £30 million comprising a fine to be determined by the Court with the balance paid as a charitable payment for the benefit of Tanzania. 

The Company issued the following statement from Chairman Dick Olver concerning the settlement:  "In 2000, the Company gave a commitment to the U.S. Government that it would establish and comply with defined U.S. regulatory requirements within a certain period and it subsequently failed to honor this commitment or to disclose its shortcomings.  

"In connection with the sale of a radar system by the Company to Tanzania in 1999, the Company made commission payments to a marketing adviser and failed to accurately record such payments in its accounting records. The Company failed to scrutinize these records adequately to ensure that they were reasonably accurate and permitted them to remain uncorrected. The Company very much regrets and accepts full responsibility for these past shortcomings.


"These settlements enable the Company to deal finally with significant legacy issues.  In the years since the conduct referred to in these settlements occurred, the Company has systematically enhanced its compliance policies and processes with a view to ensuring that the Company is as widely recognized for responsible conduct as it is for high quality products and advanced technologies." 

BAE Systems is a global defense, security and aerospace company delivering a full range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and customer support services. With approximately 105,000 employees worldwide, BAE Systems' sales exceeded £18.5 billion (US $34.4 billion) in 2008. 

Campaign Against Arms Trade (CAAT) and The Corner House are shocked and angered by the decision of the Serious Fraud Office (SFO) to settle with BAE Systems. As a result of the settlement there will be no opportunity to discover the truth behind alleged bribery and corruption in the many BAE deals that were under investigation by the Serious Fraud Office. 

While the acceptance of guilt in relation to Tanzania is welcome, the investigations related to other countries including South Africa and the Czech Republic were far more significant. SFO investigations of deals with several countries were continuing up until today, and only last week the SFO charged a former BAE agent with corruption in relation to deals with several European countries.  

The SFO settlement was announced in conjunction with the US Department of Justice whose fine concerned BAE's deals with Saudi Arabia. While the combined fine is more significant, the UK penalty of £30 million is a tiny price for BAE to pay to see the end of the investigations that had been gathering evidence for years and were coming to a head. 

Kaye Stearman, spokesperson for CAAT, says: "CAAT is outraged and angry that the allegations about BAE will not be aired in a criminal court and that the Serious Fraud Office has accepted a plea bargain relating only to the smallest deal. After the Government stopped the SFO's inquiry into the company's Saudi deals, it was even more important the truth about its dealings in central and eastern Europe and Africa was made public. One day a former BAE agent appears in court charged with corruption, the next BAE is let off for an accounting misdemeanor." 

Nicholas Hildyard for The Corner House says: "Given BAE's admission of guilt today in the US concerning the Al-Yamamah contract, the UK should re-open its own Saudi Arabian investigation immediately. The company's admission obviously calls into question its repeated denials of any wrong doing. Far from drawing a line under the allegations, today’s announcement simply raises far more questions and creates yet further demands for justice." 

Background: In December 2006 the SFO dropped its corruption investigations into BAE's arms sales to Saudi Arabia, following pressure from BAE and the Saudi regime and a direct intervention from then Prime Minister Tony Blair. The decision was subject to severe criticism and prompted CAAT and The Corner House to launch a Judicial Review of the decision. In April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation - a decision subsequently overturned by the House of Lords.  

The SFO began drawing up the legal papers for the recommended prosecution against BAE on 1 October 2009, following its six-year investigation into alleged bribery in BAE arms deals with several other countries (Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to "advisers" on the deals, to clinch the sales. 

On 29 January 2010, the SFO charged Count Alfons Mensdorff-Pouilly with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments including the Czech Republic, Hungary and Austria.

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