Page last updated at 23:37 GMT, Friday, 5 February 2010

BAE Systems handed 286m criminal fines in UK and US

BAE Chairman Dick Olver: "We need to be a transparent, modern, clean company"

BAE Systems will admit two criminal charges and pay fines of £286m to settle US and UK probes into the firm.

It will hand over more than £250m to the US, which accused BAE of "wilfully misleading" it over payments made as the firm tried to win contracts.

The defence group will pay about £30m in the UK - a record criminal corporate fine - for separate wrongdoings.

The firm said the pleas did not relate to accusations of corruption or bribery but that it "regretted" shortcomings.

BBC business editor Robert Peston said that pleading guilty to criminal charges in Britain and the US was "a serious embarrassment" to BAE, the UK's largest manufacturer.

The US Department of Justice's charge is serious and damaging to BAE's reputation
Robert Peston

However, he added: "Although the fines will be seen by some as damaging to one of the UK's most significant companies, BAE's directors are relieved at what they see as a final settlement of a controversy that has dogged the company for years."

'Anti-bribery failures'

US and UK authorities have been investigating the case for about eight years, and it is believed to be the first time the two countries have co-ordinated such a corporate corruption "plea bargain".

THE STORY SO FAR...
The biggest probe into BAE focused on a £43bn contract to supply more than 100 fighter jets to Saudi Arabia. The deal began in 1985 but a National Audit Office investigation was suppressed in 1992
The SFO launched an investigation in 2004 into the allegations - including claims BAE was running a "slush fund" that offered sweeteners to Saudi royals and their intermediaries in return for lucrative contracts
This was dropped two years later amid political pressure from the UK and Saudi Arabia. BAE always denied any wrongdoing
In June 2007, BAE said it was being investigated by the US authorities over deals with Saudi Arabia
In July 2008, BAE pledged to implement recommendations from an independent review into its conduct
The SFO began new probes into whether BAE had used corruption to win contracts from countries including Tanzania, the Czech Republic and South Africa. Last year it asked the Attorney General to prosecute BAE as the sides could not agree what the firm would admit or the fine to be paid

In a deal with the US Department of Justice (DoJ), BAE admitted a charge of conspiring to make false statements to the US government.

A charge filed in a District of Columbia court contains details of substantial secret payments by BAE to an unnamed person who helped the UK firm sell plane leases to the Hungarian and Czech governments.

The DoJ also details services such as holidays provided to an unnamed Saudi public official and cash transfers to a Swiss bank account that it says were linked to the £40bn Al-Yamamah contract to supply military equipment to Saudi Arabia.

The DoJ gave a damning condemnation of BAE, which it said had accepted "intentionally failing to put appropriate, anti-bribery preventative measures in place", despite telling the US government that these steps had been taken.

It then "made hundreds of millions of dollars in payments to third parties, while knowing of a high probability that money would be passed on to foreign government decision-makers to favour BAE in the award of defence contracts", the DoJ said.

There was also an infringement of restrictions on the supply of sensitive US technology in deals to supply aircraft in Hungary and the Czech Republic.

BAE has also reached agreement with the UK Serious Fraud Office (SFO) to plead guilty to a breach of duty to keep accounting records.

The British charge stems from a $39.5m (£25.2m) contract signed in 1999 to supply a radar system to Tanzania, and relates to payments to a former marketing adviser in the east African country.

Part of the fine will be a charity payment which will go to Tanzania.

'Line drawn'

The SFO said the settlement brought an end to its probe into BAE.

The last of the offences was committed in 2002, and BAE says it has since reformed the way it conducts business.

"We're satisfied with that global settlement," said chairman Dick Olver.

BBC business editor Robert Peston: "This is a very serious embarrassment"

"It allows us to draw a very heavy line under the legacy, the historical issues. We're obviously pleased to see uncertainty removed for our shareholders."

Transparency International UK, which campaigns against corporate and government corruption welcomed the announcement.

"It's important for companies to receive large fines if they have engaged in unethical behaviour," said executive director Chandrashekhar Krishnan.



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