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By Bill Goldston |
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March 2, 2010 - BAE Systems pleaded guilty on Monday in U.S. District Court in the District of Columbia to conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act (FCPA) compliance program, and to violate the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR), announced Acting Deputy Attorney General Gary G. Grindler.
BAES was sentenced
by U.S. District Court Judge John D. Bates to pay a $400 million
criminal fine, one of the largest criminal fines in the history of DOJ’s
ongoing effort to combat overseas corruption in international business
and enforce |
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BAE Systems is
a British defence, security and aerospace company headquartered in
Farnborough,
BAE is the
successor to various aircraft and defence electronics companies,
including The Marconi Company, the first commercial company devoted
to the development and use of radio; A.V. Roe and Company, one of
the world's first aircraft companies; de Havilland, manufacturer of
the world's first commercial jet airliner; British Aircraft
Corporation, co-manufacturer of the Concorde supersonic transport;
and Supermarine, manufacturer of the Spitfire. It has increasingly
disengaged from its businesses in continental Europe in favour of
investing in the
“Today, BAE
Systems pleaded guilty to knowingly and willfully making false
statements to
The
remediation measures BAE Systems has undertaken, in conjunction with
its agreement to retain an independent compliance monitor, are
evidence supporting BAE Systems’ stated commitment to ensure that it
operates in a transparent, honest and responsible manner going
forward. The Department of Justice will continue to hold accountable
companies that impair the operations of the |
“Competition is
one of the foundations of our economic system,” said Shawn Henry,
Assistant Director in Charge of the FBI’s Washington Field Office.
“Corporations and individuals who conspire to defeat this basic economic
principle not only cause harm but ultimately shake the public’s
confidence in the entire system.”
“Providing false
statements to circumvent
BAES is a
multinational defense contractor with headquarters in the
According to court
documents, from approximately 2000 to 2002, BAES represented to various
U.S. government agencies, including the Departments of Defense and
Justice, that it would create and implement policies and procedures to
ensure its compliance with the anti-bribery provisions of the FCPA, as
well as similar, foreign laws implementing the Organization for Economic
Cooperation and Development (OECD) Anti-bribery Convention. According to
court documents, BAES knowingly and willfully failed to create
mechanisms to ensure compliance with these legal prohibitions on foreign
bribery.
According to court
documents, the gain to BAES from the various false statements and
failures to make required disclosures to the
The FCPA makes it
illegal for certain businesses and individuals, or anyone taking action
within
According to court
documents, BAES made a series of substantial payments to shell companies
and third party intermediaries that were not subjected to the degree of
scrutiny and review to which BAES told the
In fact, BAES took
steps to conceal from the
BAES also
encouraged certain advisors to establish their own offshore shell
companies to receive payments from BAES while disguising the origins and
recipients of these payments. BAES admitted that it established one
company in the British Virgin Islands (BVI) to conceal its marketing
advisor relationships, including who the advisor was and how much it was
paid; to create obstacles for investigating authorities to penetrate the
arrangements; to circumvent laws in countries that did not allow such
relationships; and to assist advisors in avoiding tax liability for
payments from BAES.
Through this BVI
entity, from May 2001 onward, BAES made payments totaling more than £135
million plus more than $14 million, even though in certain situations
BAES was aware there was a high probability that part of the payments
would be used to ensure that BAES was favored in foreign government
decisions regarding the purchase of defense articles. According to court
documents, in many instances, BAES possessed no adequate evidence that
its advisors performed any legitimate activities in justification of the
substantial payments.
In addition,
according to court documents, BAES began serving as the prime contractor
to the
BAES admitted it
undertook no adequate review or verification of benefits provided to the
KSA official, including no adequate review or verification of more than
$5 million in invoices submitted by a BAES employee from May 2001 to
early 2002 to determine whether the listed expenses were in compliance
with previous statements made by BAES to the U.S. government regarding
its anti-corruption compliance procedures. In addition, in connection
with these same defense deals, BAES agreed to transfer more than £10
million plus more than $9 million to a bank account in
Also as part of
its guilty plea, BAES admitted to making and causing to be made certain
false, inaccurate and incomplete statements, and failing to make
required disclosures to the
As part of the
licensing scheme, applicants are required to identify associated
commissions to the
BAES admitted
that, as part of the conspiracy, it knowingly and willfully failed to
identify commissions paid to third parties for assistance in soliciting,
promoting or otherwise securing sales of defense items in violation of
the AECA and ITAR. BAES failed to identify the commission payments paid
through the BVI entity described above, in order to keep the fact and
scope of its external advisors from public scrutiny. In one specific
instance, BAES caused the filing of false applications for export
licenses for Gripen fighter jets to the Czech Republic and Hungary by
failing to tell the export license applicant or the State Department of
£19 million BAES paid to an intermediary with the high probability that
it would be used to influence that tender process to favor BAES.
As part of its
guilty plea, BAES has agreed to maintain a compliance program that is
designed to detect and deter violations of the FCPA, other foreign
bribery laws implementing the OECD Anti-bribery Convention, and any
other applicable anti-corruption laws, and that is designed to detect
and deter violations of the AECA and ITAR, as well as similar export
control laws. Under the terms of the plea agreement, BAES has agreed to
retain an independent compliance monitor for three years to assess
BAES’s compliance program and to make a series of reports to the company
and the Justice Department.
The criminal case
is being prosecuted by Senior Litigation Counsel Nathaniel B. Edmonds
and Deputy Chief Mark F. Mendelsohn of the Criminal Division’s Fraud
Section and Trial Attorney Patrick T. Murphy of the National Security
Division’s Counterespionage Section. The Fraud Section is responsible
for all investigations and prosecutions of the Foreign Corrupt Practices
Act, and conducts other investigations into sophisticated economic
crimes. The Counterespionage Section supervises the investigation and
prosecution of cases involving the export of military and strategic
commodities and technology, including cases under the AECA and ITAR. The criminal case was investigated by FBI special agents who are part of the Washington Field Office’s dedicated FCPA squad and special agents of the U.S. Immigration and Customs Enforcement’s Counter Proliferation Unit. Investigative assistance also was provided by the Defense Criminal Investigative Services and the General Services Administration, Office of Inspector General. The Criminal Division’s Office of International Affairs provided substantial assistance in support of the investigation.
The Department of
Justice acknowledges and expresses its appreciation of the significant
assistance provided by the |
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