CAATnews Oct/Nov 2005 - Feature

Extraordinary Corruption Guaranteed Department?

Nick Gilby calls for further investigations by the Serious Fraud Office

Readers may recall the report about the "commissions" allegedly paid to former Indonesian President Suharto's daughter Tutut to secure the sale of Scorpion tanks and Stormer Armoured Personnel Carriers made by Alvis (now owned by BAE Systems) to Indonesia in 1995 and 1996 (CAATnews 188). The Export Credits Guarantee Department (ECGD) underwrote the deals to the tune of $105 million in 1995, and £65 million in September 1996, and is still owed £80.7 million by Indonesia.

Persistent attempts by CAAT supporters and The Corner House to discover what the ECGD knew about the deals at the time that they underwrote them are not complete. However, investigations to date show that the ECGD could be more appropriately named the Extraordinary Corruption Guaranteed Department. A paper written for the UK's top civil servants in April 1976 reveals that ECGD "practice is to insure any commission as part of the overall contract price; they do not enquire whether any part of the commission may be in the nature of a bribe". At the time the same officials knew that bribery was common practice among UK companies bidding for foreign contracts, particularly arms sales.

Nothing has really changed since. In a letter to The Corner House, the ECGD confessed that they underwrote the "commissions" paid on the Alvis deals; that at the time they made no enquiries as to the identity of the agents (alleged by the Guardian to be Suharto's daughter and the children of an Indonesian Brigadier-General); and that the ECGD has made no enquiries of its own into the transactions (either to BAE Systems or Indonesian officials).

The ECGD has shown a total lack of interest in the allegations despite the £80.7 million that it is owed. It has not even bothered to read the court file that is freely available from the Guardian, CAAT or The Corner House, preferring to read truncated versions on the internet.

CAAT would like to thank supporters who wrote to the National Audit Office (NAO) and succeeded in pressuring it to carry out an investigation into the ECGD's scandalously cavalier behaviour. The NAO investigation has established that "ECGD complied with the assessment procedures in force at the time", which required the level of commissions to be disclosed, but not the names of the agents. The commissions (£16.5 million for Suharto's daughter according to the Guardian) "were within acceptable limits". The NAO and ECGD have stated that Indonesia's debt on the deals will be paid back by Indonesian taxpayers (around 55 per cent of whom live on less than $2 per day) by 2021.

Challenged by a CAAT supporter to give an opinion on whether the ECGD's behaviour gave the taxpayer value for money, the NAO has refused to offer an opinion. It has used the cop-out that as the ECGD's procedures have since changed there is "little value in examining the procedures in use in the mid-1990s". Translated: a body which is "helping the nation spend wisely" (according to its mission statement) thinks the ECGD's corporate reputation is so important that it is too chicken to criticise the actions of a Government that has long ago left office.

As far as we know, no Serious Fraud Office investigation has taken place. For there to be any chance of BAE Systems being held to account for the actions of Alvis, and for the culture of impunity around corruption in the arms trade to end, there must be one. Please write to Robert Wardle, the Director of the Serious Fraud Office, Elm House, 10-16 Elm Street, London, WC1X 0BJ, and demand an investigation into the Alvis allegations. If you have time write to your MP, House of Commons, London SW1A 0AA and press them to ask for an investigation into the Alvis allegations.

These letters do work. In CAATnews 181 we asked supporters to lobby the Serious Fraud Office for an investigation into the BAE Saudi "slush fund" allegations and, according to the Guardian, the Serious Fraud Office has made a breakthrough in the case.