In a week when the Indian government sought to lay the ghost of the Bofors scandal by deciding to drop charges against Italian businessman Ottavio Quattrocchi in the Rs. 64-crore pay-offs case, Britain was wrestling with its own “armsgate” in the form of a multi-million pound bribery scam involving BAE Systems. Indeed, in terms of its global scale and the size of the alleged kickbacks, the BAE case is even more serious than Bofors.
The BAE Systems is Britain’s biggest arms manufacturer with close links to the government and a history of controversial trade practices. Three years ago, the then Prime Minister Tony Blair caused a political storm when he intervened to stop an ongoing criminal investigation into allegations that the company paid upto a billion pounds in bribes to secure a £43-billion defence contract with Saudi Arabia in the 1980s. Mr. Blair claimed the decision was taken on grounds of “national security” as the Saudis had threatened to stop sharing terror-related intelligence if the inquiry was not halted. The real reason, though, was believed to be the Saudis’ threat to scrap a pending multi-million pound arms deal with BAE if the investigations were to go ahead.
While that row continues to rumble with demands for the case to be reopened, BAE is at the centre of another headline-grabbing bribery scandal spanning six countries across Africa, Latin America, Eastern Europe and West Asia. After six years of investigation, the Serious Fraud Office (SFO), Britain’s anti-corruption body, claims that it has sufficient evidence to press criminal charges against BAE.
The company was offered an American-style plea bargain that included a £500 million fine and an admission that it was guilty of corruption but it is said to be playing hardball saying the proposed fine is too high. Although the SFO’s deadline for a settlement expired on September 30, behind-the-scenes haggling is still going on. The SFO has, meanwhile, announced that it intends to go ahead and seek the Attorney-General Baroness Scotland’s consent to prosecute BAE for “offences relating to overseas corruption.”
Briefly the case against BAE is that it paid upto £100 million in backhanders to push arms deals in Tanzania, South Africa, Chile, Romania, the Czech Republic and Qatar. According to the SFO, some of these payments were routed through a company based in the British Virgin Islands, a tax-haven, an allegation denied by BAE.
The most controversial deal relates to Tanzania which was sold an air defence radar system worth £28 million in 2001 on the back of an alleged £9 million bribe to a local agent from a secret Swiss bank account. The deal was opposed by the then Secretary of State for International Development Clare Short on grounds that Tanzania, a recipient of British aid, was too poor to afford such an expensive system (the cost amounted to nearly half of what the country received in debt relief annually from foreign donors) but she was overruled by Mr. Blair prompting the then Foreign Secretary Robin Cook to comment that the BAE bosses appeared to “have a key to the garden door of No 10.”
Last year, a Tanzanian minister, accused of receiving kickbacks, was forced to resign after a large sum of unaccounted money was found in his offshore accounts though he denied it came from BAE. The Tanzanian government is reported to be considering launching its own investigation.
The SFO’s hardline is seen as its “revenge” for having been forced to drop investigation into the Saudi case and this time it is said to be determined not to give into any political pressure. Sources in SFO have been reported as saying that they felt so humiliated over the Saudi episode that they decided to look more closely at other BAE deals.
“Serious Fraud Office, dismayed at this political interference [into the Saudi case], immediately set to work on the myriad other probes into BAE’s activities in Africa, Europe, Latin America and the Middle East. The agency, according to one lawyer familiar with what went on, ‘took other cases off the back burner and began to look at them various seriously and actively,’” The Financial Times reported.
The allegations against BAE are as embarrassing for the company as they for the British Government — and not simply because it involves a British firm but because London is a signatory to the OECD’s (Organisation for Economic Cooperation and Development) anti-bribery convention which makes it illegal to bribe foreign officials. Besides, Britain never tires of lecturing other countries on the need to crack down on corruption. It has often been accused of double-standards, especially by African countries, for preaching the virtues of transparency to others while failing to attack corruption in its own backyard.
“I think this is a political scandal as well as a corporate scandal. We’ve got to establish why the government was in such incestuous relationship with this company,” said Norman Lamb, a senior Liberal Democrat MP and an anti-arms campaigner.
But Britain is not the only European country where corporate corruption is a “way of life,” as The Guardian put it pointing out that some of the biggest names in European corporate world such as the French oil firm Elf Aquitaine and the German industrial giant Siemens had been accused of paying bribes to win contracts.
According to the Tax Justice Network, an independent think tank which promotes transparency in financial affairs, much of the corruption in developing countries is sponsored by western companies paying bribes, dressed up as “commission,” to push through business deals.
Meanwhile, BAE denies any wrongdoing and says that it is cooperating with the investigation.
Whatever the truth, the claim that Britain plays with a “straight bat” is becoming increasingly thin.
The claim that Britain plays with a “straight bat” is becoming increasingly thin.