Page last updated at 12:53 GMT, Saturday, 6 February 2010

Lord Goldsmith defends BAE Systems plea deal

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

The former attorney general says he "strongly supported" the deal struck by UK defence contractor BAE Systems to end inquiries into its affairs.

The firm is to admit two criminal charges and pay fines of £286m ($447m) to settle US and UK investigations.

Campaigners against the arms trade say they are "shocked and angered" that BAE Systems will not have to face a court.

But Lord Goldsmith said the new plea bargaining approach of the Serious Fraud Office was the best way to work.

He told the BBC: "This is one of the most significant things about this settlement, it is the first time there has been a plea bargain of this sort.

"And it is one of the things we are learning from the United States - that's the way to deal with these issues and companies need to understand that."

Lord Goldsmith, who was attorney general from 2001-2007, also said after the SFO had dropped the investigation into the Saudi Arabian deals, he had ensured they were given enough cash to "vigorously and rigorously" investigate the allegations in relation to Tanzania, the Czech Republic and South Africa.

'Wilfully misleading'

But the Campaign Against the Arms Trade said it was "outraged and angry" that claims of corruption, which BAE has not admitted, would not be aired in court.

It dismissed the £30m UK fine as a "tiny price" for BAE in the wake of an abortive investigation by the Serious Fraud Office (SFO) into the company's contracts in Saudi Arabia.

Spokeswoman Kaye Stearman said: "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.

Liberal Democrat MP Norman Lamb said more should have been done to probe the "very serious" allegations.

The move follows corruption investigations into deals that BAE Systems secured from Saudi Arabia, Tanzania, the Czech Republic, South Africa and Hungary.

Under the agreement, announced on Friday, BAE will hand over more than £250m to the US, which had accused it of "wilfully misleading" US investigators over payments made as the firm tried to win contracts.

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

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

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 UK 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.

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".

However, Mr Lamb, who has campaigned for BAE to face charges, said he was concerned that "allegations of corruption involving contracts in a number of countries" would not be subject to the full judicial process.

He added: "Ultimately the charges that we see admitted are administrative charges, not charges of corruption."

Nicholas Hildyard, of social justice campaign group The Corner House, called for the UK to reopen all its investigations into the company.

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

He added that the announcement "simply raises far more questions and creates yet further demands for justice".

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

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

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

"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."

In its 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.

Also, 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.



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