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Arms giant BAE Systems went to war with the Serious Fraud Office today saying it will see the anti-corruption agency in court over allegations of bribery of eastern European and African customers.
The SFO is seeking to impose fines and penalties on BAE believed to be running into hundreds of millions of pounds over corruption claims in the sale of fighter planes, warships and radar technology.
However BAE appears to have called the SFO's bluff as plea-bargain talks between the two broke down last night.
And in an extraordinary twist it has emerged that despite six years of investigations and recent sabre-rattling, the SFO is apparently not ready to launch an immediate prosecution.
In a statement, the SFO today confirmed it “intends to seek the Attorney General's consent to prosecute BAE Systems for offences relating to overseas corruption”.
However, the statement was forced to concede that the SFO “will prepare its papers to be submitted to the Attorney when the SFO considers it is ready to proceed.”
BAE released a pugnacious response stating: “If the Director of the SFO obtains the consent that he seeks from the Attorney General and proceedings are commenced, the company will deal with any issues raised in those proceedings at the appropriate time and, if necessary, in court.”
BAE added that it “continues to expend considerable effort seeking to resolve, at the earliest opportunity, the historical matters under investigation by the SFO.”
It is believed the SFO may have been demanding BAE to pay penalties which could be in excess of £500 million.
While BAE is reckoned to be open to settling the case, it is suggested it prepared to pay penalties running only to tens of millions of pounds.
Analyst Christophe Menard of investment bank Bryan, Garnier believes BAE has the SFO on the back foot and said: “If the case had been so promising, the SFO would not have sought a settlement before going to court. It would have gone to court immediately.”
The case is politically charged.
The SFO's claims of bribery on contracts to supply the Czech Republic, Romania, Tanzania and South Africa, follow the 2006 closure of its high-profile investigation into alleged BAE bribery in the £43 billion Al-Yamamah warplane deal with Saudi Arabia. That probe was closed down by the then prime minister Tony Blair who cited national security.
The allegations are also hugely sensitive for BAE as it chases billions of dollars of American contracts with the Pentagon and shares in the FTSE 100 company were on the slide today, off 14.1 at 335.1p.
But Steve East, analyst at broker Credit Suisse, said he believes the ramifications are not as bad for BAE as feared. “We do not think this damages BAE competitiveness relative to peers,” he suggested because many US firms have been fined for bribery in the past and not been blackballed from future contracts. “BAE has consistently denied wrongdoing in all of these cases.
“However,” he added, “we believe it is possible the company could settle the cases to get closure on the issue — six years of negative press could be enough for management to take a view. BAE's management has changed significantly since the programmes under investigation were signed.
“It appears to us they have a strong claim that they have not — and have not for many years — won work through unethical practices.”
Reader views (12)
Surely the executives and management responsible should be punished heavily rather than the shareholders and future for employees and the UK effectively. A company fine is just stupid.
- Michael, London, UK
Let it go, bribes make deals happen. I used to work for a similar Company and these payments are common place, it's the nature of the beast and a legitimate business expense. It's good for UK jobs and the UK Economy, let it go, there's bigger fish to fry!
- Matthew, Ware, Herts
Some argue BAE should not be prosecuted for corruption, because BAE is good for the UK. But see an honest ad campaign put together by Campaign Against Arms Trade: http://bit.ly/DLBRO
- Anne-Marie, CAAT, London
Nigel, The US, French and Germans have prosecuted over 200 company's in relation to overseas bribery and corruption in the last few years, even Boeing was prosecuted by the US, and fined with a top executive jailed and they were barred from government contracts for 4 years. The IMF states that bribery amounts to $1 trillion annually and ultimately its not the poor who benefit. Did Tanzania really need a military radar system, which doesn't work, or did the individuals who accepted $12 million in bribes decide this was more important than roads, schools and hospitals?
- Peter, London
"it has emerged that despite six years of investigations and recent sabre-rattling, the SFO is apparently not ready to launch an immediate prosecution."
Maybe the SFO should be charged with fraud for ripping off the taxpayers!
- W R Stevenson, London SE26
We do absolutely nothing about white collar fraud here. So what does the SFO do? Pick on a soft target. Just how do you think business is done in most parts of the world if not by paying 'commissions'. The French, Yanks et al must be wetting themselves at our determination to shoot ourselves in the feet.
- Antoine Desmoines, London, UK
We frown at corruption at home while we encourage it in our deals with others anyway i am not surprised because we are the kings of double speak.
- Ralph, london
Having read the comments it is no wonder that our country is dropping into the moral and legal abyss. Corruption condoned on this scale does not lead to a country becoming a world clas economy, quite the opposite. I believe that as a nation we have entered an immense darkness.
- Robin Mitton, ashford
Come on guys, get real,let's wake up here and smell the coffee. So we slip a few corrupt people a drink to keep folks in jobs. Who cares? Hell we helped blow thousands of people into screaming fragments on prime time TV when shock and awe started in Iraq. ~Oh and interesting timing too with labour's hammering this week.
- Steve, Brentford
Why didn’t the Serious Fraud Squad investigate the clearly fraudulent, dishonest and possibly corrupt bid, those supposedly representing London, made to win the bidding to stage the 2012 Olympics?
- William Boreham, Kingston upon Thames.
Drop it and safeguard the British jobs. This is how the arms game is played. It is a dirty business and all the other governments are at it. The SFO should grow up and find something else to concentrate on.
- Jonathan, London
That the issue should be placed at the foot of Baronees S is bad enough but why is our own country again shooting itself in the foot; the contracts received have created work for many at a difficult time. On never sees France or the US, who are also major arms manufs, being brought to task by their respective countries but of course they are spotless. Whilst one must not condone corruption the real issue is getting caught. In any event if found guilty who receives the fines; guess it will help fund MPs expenses or worse.
- Nigel Rush, Paris France
