Bribery Newsflash: BAE Systems agrees joint settlement with Serious Fraud Office and Department of Justice
05 February 2010
The Serious Fraud Office ("SFO") announced today that both the
SFO and the US Department of Justice ("DoJ") have agreed
settlements with BAE Systems plc "BAE". This is a ground breaking
global agreement which demonstrates the increasing co-operation
between the enforcement agencies in the fight against corruption.
The DoJ's agreement involves BAE's business dealings in a number of
countries whilst the SFO agreement concentrates on the company's
operations in Tanzania.
The SFO has been investigating allegations that BAE paid bribes to
win contracts from several nations in Africa and Eastern Europe
including Tanzania, the Czech Republic, Romania and South Africa.
In 2001, Tanzania, one of the world's poorest countries, purchased
a military air traffic control system from BAE. Suspicions were
aroused because Tanzania didn't have military aircraft. It needed
civil air traffic control improvement in order to improve its
tourist industry. In January 2007, it was reported that $12m
(£7.5m) had been paid into the Swiss bank account of a middle man
involved in the Tanzanian deal by a BAE subsidiary, Red Diamond.
The payment amounted to approximately a third of the value of the
contract.
As part of the biggest SFO settlement ever agreed, BAE will plead
guilty in the Crown Court to an offence under section 221 of the
Companies Act 1985 of failing to keep reasonably accurate
accounting records in relation to its activities in Tanzania and
will pay £30 million comprising a financial order to be determined
by a Crown Court judge with the balance paid as an ex gratia
payment for the benefit of the people of Tanzania. At the time of
the suspicious payment, Britain agreed a £35 million aid package
for Tanzania to help provide more children with education but
virtually the whole sum was spent on the air traffic control system
deal.
In reaching the settlement the SFO said that it took account of the
implementation by BAE of substantial ethical and compliance reforms
and the company's agreement with the DoJ.
On
the evening of Friday 5 February 2010, the SFO dropped proceedings
against former BAE agent, Count Alfons Mensdorff-Pouilly who was
charged on 29 January 2010 with conspiracy to corrupt. It
was further announced that the settlement with BAE reported
above would bring an end to the SFO's investigations into BAE's
defence contracts. The SFO said that in making its
decision not to pursue individuals, it took account of BAE's
settlement with the DoJ in which BAE agreed
to pay a $400m fine and plead guilty to one charge of conspiring to
make false statements to the government in connection with
regulatory filings and undertakings.
For further information, please contact Tony Lewis or Alexandra Underwood.