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1 October 2009

Statement on the BAE Corruption Case

Andrew Feinstein

[Feinstein is a former ANC MP who resigned after South Africa’s President stopped Parliament's investigation of a controversial multi-billion pound arms deal with BAE. His book "After the Party" recounts the case. He is currently working on a book on the global arms business]

Today's statement by the UK's Serious Fraud Office that it will seek to charge BAE with bribery and corruption is to be welcomed. The company is alleged to have paid bribes to secure weapons contracts in South Africa, Tanzania, the Czech Republic and Romania. Justice will be served in the UK and all of these countries by a court case that reveals the evidence against BAE and the company's defence against these charges.

The British taxpayer will discover exactly what activities we have been funding through government subsidies and support for BAE. While the citizens of the countries effected will be better able to hold their public officials to account for their decisions.

There is no doubt that BAE has a substantive case to answer:

The company is alleged to have paid over £115 million in commissions to middlemen, senior politicians, officials and political parties in South Africa to win a contract to provide trainer jets. This despite BAE not making an initial shortlist for the contract and the SA Air Force stating they did not want the BAE jet, which was two and a half times more expensive than the jet favoured by the air force.
It is alleged that the political adviser to the then Defence Minister was paid over £10 million by BAE through a circuitous offshore process. It is further alleged that a middleman was paid £40 million by BAE through the British Virgin Islands. A senior BAE executive involved in the negotiations stated that the middleman and his team "contributed nothing towards BAE's selection". Instead the middleman suggested "identifying the key decision makers [in the SA government] with a view to financially incentivising them to make the right decision".
In the Tanzanian case the Minister identified in the bribery scandal has been forced to resign.
BAE's undercover agent in Eastern Europe was arrested by Austrian prosecutors earlier this year.
A number of bank accounts in Switzerland belonging to the above-mentioned individuals have been frozen.

These arms deal have had a negative impact on democracy in the effected countries and the UK. In the case of South Africa constitutionally independent state entities were undermined to prevent a full investigation of the corruption allegations, which continue to haunt the country's polity. Tanzania, one of the world's poorest nations was certainly not in a position to afford the equipment sold to it, or to suffer the loss of the substantial bribes that were allegedly paid to key decision-makers.

The envisaged court proceedings will restore the credibility of British justice, so badly damaged by the decision to close down the enquiry into the Al Yamamah arms deal with Saudi Arabia. It will send a clear message to the global business and regulatory communities that Britain will not tolerate bribery or corruption by its companies.

For further information contact Andrew Feinstein on +44 (0)7809 728164 or andrew(at)policyorg·com