BAE in £286m settlement over corruption claims

Defence giant BAE Systems is to pay £286m (€327m) in fines and plead guilty to two criminal charges to settle corruption claims in the UK and US.

The settlement announced yesterday with the Serious Fraud Office (SFO) and US Department of Justice (DoJ) follows long-running probes into its business dealings across the world.

BAE will pay $400m (€293m) to the DoJ and plead guilty to one charge of conspiring to make false statements to the US government.

The charge relates to its US regulatory filings in the Czech Republic and Hungary, and its conduct in the US over the mammoth £43bn (€49bn) Al-Yamamah contract with Saudi Arabia.

BAE will also pay £30m (€34m) in the UK for failing to keep “reasonably accurate” accounting records over activities in Tanzania – the SFO’s largest settlement with a UK company.

The British charge relates to a £25m (€29m) contract signed in 1999 to supply a radar system to Tanzania, and also to more than £7m (€8m) of payments to a former marketing adviser in the east African country.

Chairman Dick Olver said the settlement would help the firm draw a “very heavy line” under the corruption claims.

It comes four months after the SFO asked the Attorney General to pursue bribery allegations against BAE over its business dealings.

The SFO’s own probe into Al-Yamamah was dropped in 2006 after intervention by then prime minister Tony Blair.

Mr Olver said the settlement would not affect its ability to trade in the US and Europe, while none of the counts related “to corruption, bribery or conspiracy to corrupt”.

Saying the SFO had looked at the affair in a “very serious and pragmatic way”, he added: “The company very much regrets and accepts full responsibility for these past shortcomings.”

BAE has “systematically enhanced” its compliance policies and procedures in the decade since the conduct had taken place, it said.

The £30m (€34m) payout to the SFO will be made up of a fine set by a UK court with the remainder an “ex gratia payment” for the benefit of the people of Tanzania, BAE added.

Following BAE’s settlement, the SFO said it was “no longer in the public interest to continue the investigation into the conduct of individuals”.

As a result the SFO has dropped its corruption charge brought last week against Count Alfons Mensdorff-Pouilly, a former Austrian agent for BAE Systems.

The count was accused of bribing Government officials in the Czech Republic, Hungary and Austria in return for contracts for Gripen fighter jets, although his solicitor said last year that the accusations were groundless.

Speaking about yesterday’s settlement, Richard Alderman, director of the SFO, said: “I am very pleased with the global outcome achieved collaboratively with the DoJ.

“This is a first and it brings a pragmatic end to a long-running and wide-ranging investigation.”

The group will publish more details on the fine and its impact on the group’s financial performance on February 18. In 2008 the group made pre-tax profits of £2.4bn (€2.7m) on worldwide sales of £18.5bn (€21bn).

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