MoD had 'active role in BAE bribes'

Until last night it had been alleged the Ministry of Defence knew of and approved bribes of more than £1bn from arms manufacturer BAE Systems to Prince Bandar of Saudi Arabia over the Al Yamamah arms deal.

But the BBC's Panorama programme went much further and alleged the MoD had in fact played a vital role themselves in processing the money.

According to Whitehall sources who spoke to the programme, officials from the department processed quarterly 'invoices' from the Saudi Prince.

These were said to be payment for his 'support services' in relation to the £40 billion Al Yamamah deal, Britain's biggest arms contract.

The invoices were then apparently passed to BAE bosses who are then alleged to have sent them to accounts at a bank in Washington.

Last night the MoD refused to address the specific allegations while attorney general Lord Goldsmith continued to stonewall questions over his involvement.

BAE Systems has been accused of paying £1 billion bribes to Prince Bandar for setting up the Al Yamamah deal in the 1980s.

Prince Bandar, who was ambassador to the US for 20 years, allegedly received £30 million every quarter for at least ten years - totalling £1.2 billion.

Earlier this year a Serious Fraud Office probe into the affair was halted on the grounds it would harm national interests. Tony Blair took personal responsibility for the decision. Opponents accused the Government of a whitewash claiming there was a legitimate cause to investigate the alleged slush fund to leading Saudis.

Critics have seized on the fresh allegations as clear evidence for an inquiry.

Liberal Democrat Deputy Leader Vince Cable said: "If the Ministry of Defence was actually directly involved in running the payment system, this is absolutely shocking and reveals the depths of the government's complicity in this scandal.

"We must know if BAE's payments to Prince Bandar are still going on today." BAE did not comment.

Prince Bandar said in a statement the allegations are "not only untrue but are grotesque in their absurdity".

He said the money was not a "corrupt personal benefit" from BAE but "Saudi government money from start to finish".

He added: "BAE was not party to any of these accounts."

It's also emerged Lord Woolf, the former Lord Chief Justice of England and Wales, is to head an independent review of business practices at BAE Systems.

An ethics committee chaired by Lord Woolf is to look into how the defence giant conducts its arms deals.