Risk register · entry
Q-F · FraudBAE Systems Al-Yamamah bribery scandal
£43 billion in Saudi jets, a billion to a prince, and a guilty plea for paperwork, not bribery.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this room
The qf placement rests on what was admitted, not on what was alleged. BAE told U.S. agencies from approximately 2000 to 2002 that it had built FCPA compliance machinery, and then, on its own guilty plea, knowingly and wilfully failed to create it, while routing payments to 'marketing advisors' through offshore shell companies it controlled and recording them in the accounts as 'technical services'. The compliance programme and the accounting description were the thing that was never real. The tell is the cleanness of the paperwork: on the UK side, the entire Tanzania radar matter closed with a single count of failing to keep adequate accounting records, and the sentencing judge said it was naive in the extreme to read the documents as showing a well-paid lobbyist.
The record
- BAE Systems plc was sentenced on 1 March 2010 in the U.S. District Court for the District of Columbia to pay a $400 million criminal fine, after pleading guilty to conspiring to defraud the United States, to make false statements about its FCPA compliance programme, and to violate the Arms Export Control Act and ITAR.certain
- The DOJ put BAE's gain from the false statements and non-disclosures to the U.S. government at more than $200 million.certain
- Through a British Virgin Islands entity it beneficially owned, BAE made payments from May 2001 onward totalling more than £135 million plus more than $14 million to advisors, in situations where it was aware of a high probability that part would be used to favour BAE in foreign government purchasing decisions.certain
- In connection with the Saudi deals, BAE agreed to transfer more than £10 million plus more than $9 million to a Swiss bank account controlled by an intermediary, aware of a high probability the intermediary would pass part of it to a KSA public official, and did not verify more than $5 million of invoices submitted by a BAE employee for benefits provided to that official.certain
- In the UK, BAE pleaded guilty to one count of failing to keep accounting records under s.221 Companies Act 1985 over the $39.97m Tanzania radar contract, and on 21 December 2010 Mr Justice Bean fined it £500,000 with £225,000 costs, on top of a £30 million ex gratia payment for the people of Tanzania; about $12.4 million had gone to the intermediary's companies, 97% of it via BAE's offshore vehicle Red Diamond.certain
Sources
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
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