Criticism of BAE Settlement With U.K., U.S. Continues
By Christopher M. Matthews | February 19, 2010 2:07 pm

BAE armored vehicles in Iraq, (Wikimedia Commons)

The fallout from British defense industry titan BAE Systems’ settlement over bribery allegations continued this week, as a group of lawyers wrote the director of the United Kingdom’s Serious Fraud Office (SFO) asking him to revoke BAE’s plea bargain.

The U.K.-based firm Leigh Day & Co announced Monday it had written SFO Director Richard Alderman on behalf of clients Corner House and Campaign Against Arms Trade to tell Alderman his office had acted unlawfully because BAE’s plea agreement did not reflect the seriousness of the allegations against the company.

On Feb. 5, the SFO announced that BAE had agreed to plead guilty to failing to keep reasonably accurate accounting records in relation to its activities in Tanzania. The U.S. Justice Department simultaneously announced that BAE would pay $400 million in fines for making false statements to the U.S. government about its anti-corruption efforts.

Under the U.K. agreement, BAE is set to pay £30 million to Tanzania. In turn, the SFO decided to end its investigation into widespread allegations of BAE bribery and corruption around the world.

The SFO settlement was immediately criticized as a slap on the wrist for a company that has allegedly paid millions, if not more, in bribes.

Allegations of corruption have swirled around BAE for years. In a series of articles starting in 2003, The Guardian reported that over 15 years the defense firm allegedly provided Saudi royals with cash, cars, prostitutes and houses, among other things, in exchange for lucrative defense contracts.

Lawyers at Leigh Day want BAE’s alleged corrupt conduct around the world investigated.

“Crucially, by striking this deal, BAE has managed to avoid the possibility of a conviction for bribery which would probably have led to far more wide ranging sanctions (including debarment from public contracts) and the possibility of individual directors facing charges,” the firm’s release said. “In fact, BAE’s share price actually rose after the announcement.”

Indeed, the Financial Times reported Friday that BAE had announced a £500 million share buy-back program, causing yet another share price rise as investors welcomed the news. According to the Telegraph, BAE expects profits on sales of fighter jets and cyber-security systems to grow in 2010.

But despite mounting criticism, the SFO quickly denied Leigh Day’s request. The firm is likely to ask the U.K.’s High Court to hold a judicial review of the settlement, according to the British magazine the Tribune.

Serious Fraud Office Director Richard Alderman, (United Kingdom's Serious Fraud Office)

On Wednesday, two days after the announcement of the letter, Alderman defended the SFO’s handling of the case in an interview with the Financial Times.

“The Americans tease me about my understated approach,” he said. “Companies underestimate that [approach] at their peril.”

In the interview, Alderman denied that BAE got off easy and said he doesn’t think there is widespread criticism of the plea. He also argued that the SFO was integral in securing BAE’s much larger settlement with the U.S.

Though it seems likely to go through, BAE’s agreement is pending judicial review. In the United States, the matter has been assigned to U.S. District Court Judge John Bates in Washington, D.C. A hearing is tentatively scheduled for March 1.

Meanwhile, Tanzania may be considering its own investigation of BAE, despite the £30 million payout.

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  1. [...] SFO was slammed in the British press for giving BAE what critics called a slap on the wrist compared to the U.S. [...]

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