BAE faces fine over Tanzanian radar contract

A judge will this morning rule on the size of the fine that BAE Systems must pay for illegal false accounting, in conclusion of a long-running corruption investigation into a £28m Tanzanian radar contract won by the defence giant in 1999.

The allegations heard by Southwark Crown Court yesterday focus on £8m of payments to the businessman Shailesh Vithlani – variously referred to in company documents as an "overt" and a "covert" adviser – in the run-up to the conclusion of the deal.

The company denies corruption. But it yesterday admitted – as part of a US-style plea bargain – that it had failed to keep accurate records of money paid to Mr Vithlani through a company set up in the Virgin Islands. Under the Serious Fraud Office (SFO) settlement, BAE has agreed to pay £30m to the Tanzanian people.

Mr Justice Bean, hearing the case in London yesterday, was outspokenly critical of BAE. Describing the company's attitude as "hear no evil, speak no evil", the Judge told the court that BAE "didn't want to know how much money would be paid and to whom. They just wanted the job done." The "obvious inference" was that at least part of the money paid to Mr Vithlani was "used to bribe decision makers", he said.

The SFO investigation into BAE's Tanzanian deal has been running for more than six years, alongside other investigations into contracts in Saudi Arabia and Eastern Europe. But with no evidence that the money paid to Mr Vithlani was used "improperly", the SFO brought charges of false accounting under the Companies Act.

Although the case had been expected to conclude yesterday, the Judge's final sentence – which includes a ruling on the total fine and costs payable by BAE – will be handed down this morning. He has the option of sticking to the £30m agreed as part of the SFO settlement, or of increasing the fine levied against BAE if he decides the amount does not fully reflect the seriousness of the case.

The settlement was agreed in February alongside a $400m (£258m) deal with the US Department of Justice in response to a charge of conspiring to make false statements to US authorities over the sale of arms to Saudi Arabia in the 1980s and 1990s. The separate UK investigation into the Saudi al-Yamamah deal was controversially dropped in 2006 over issues of national security. All SFO investigations into BAE will be concluded with today's sentence.

Following the SFO deal with BAE agreeing that the £30m settlement be paid to the people of Tanzania, Hugh Bayley, a member of the House of Commons international development committee, is calling for a change in the law on transnational bribery to guarantee that all such payments go to the people of the country affected.

"We need to make sure that in future cases involving a developing country, the victims of the financial crime – that is the people in the country – are the ones that receive the compensation," Mr Bayley said.

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