Judge criticises 'hastily drafted' BAE plea deal
SFO corruption investigation concludes with £500,000 fine
Wednesday 22 December 2010
A judge yesterday attacked the plea bargain between BAE Systems and the Serious Fraud Office (SFO), concluding a six-year corruption investigation, as "loosely and perhaps hastily drafted".
Handing down a £500,000 fine and £225,000 in costs, Mr Justice Bean told Southwark Crown Court he was "surprised" the prosecutor had given BAE indemnity for all past offences, disclosed or otherwise, as part of the deal.
The fine concludes an inquiry into payments of £8m to businessman Shailesh Vithlani in the run-up to a £28m military radar contract for Tanzania. It will be paid out of the £30m compensation fund for the Tanzanian people, agreed as part of a US-style plea bargain between BAE Systems and the SFO.
The Tanzanian investigation was just one part of a multi-year, multi-jurisdiction investigation covering the company's activities in South Africa, Saudi Arabia, Tanzania and Eastern Europe. And the plea bargain was one element of a global settlement agreed last February, under which the company paid $400m (£259m) to the US Department of Justice over arms sales to Saudi Arabia in the 1980s and 1990s.
Passing sentence yesterday, Mr Justice Bean said he had kept the fine to a minimum to ensure as much money as possible made it through to the Tanzanian people. "The structure of this settlement agreement places moral pressure on the court to keep the fine to a minimum so that the reparation is kept at a maximum," he said.
Although the case was part of a global corruption investigation, the charges brought by the SFO – and agreed by BAE – specified only accounting irregularities in respect of the payments to Mr Vithlani. BAE denies corruption.
On hearing the case on Monday, Mr Justice Bean said the "obvious inference" was that at least part of the money paid by to Mr Vithlani was "used to bribe decision makers".
Under current legislation covering "extra-territorial bribery", a charge of corporate corruption requires the prosecution to prove beyond reasonable doubt that there was a "controlling mind" – namely that a member of the board was aware of and complicit in the corruption. In practice, it is almost impossible to secure a conviction, not least because of the difficulty of collecting evidence in countries whose politicians might themselves be implicated in a guilty verdict. In order to maximise its chances of success, the SFO instead offers the company a bargain, under which the group admits a lesser charge of financial irregularity, while agreeing to pay compensation.
Gavin Cunningham, a director at BTG Global Risk Partners, said the plea bargain had allowed BAE to "get off lightly", given the scale of UK and US investigations. "The common sense view is that the charges did not reflect the underlying allegations of corruption," he said.
But the law is about to change. Under a new Bribery Act, which comes into force in April, the prosecution will have to show only that bribery took place, against which it will be up to the company to prove that it has adequate measures in place to prevent corruption.
Neill Blundell, the head of fraud at Eversheds law firm, said: "There is about to be a fundamental change in the law, which moves the onus of proof on to the company and makes it much, much easier to secure a prosecution."
Welcoming the conclusion of the Tanzanian investigation yesterday, SFO director Richard Alderman said: "I am delighted that the judge stressed the seriousness of BAE's actions and that he recognised that the true victims were the people of Tanzania."
BAE Systems said the judgment "draws a line under a historical matter", and stressed that the company has "systematically enhanced its compliance policies" since the Tanzanian radar deal was concluded in 1999.
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