Sound familiar? The BAE scandal, and the parallels with the Iraq war

An Attorney General who suddenly switches his legal advice, a Prime Minister desperate to please a foreign power, Clare Short fuming on the sidelines, and the truth shrouded in mystery...

Lord Goldsmith, the former attorney general, sought yesterday to defend a deal struck between prosecutors and BAE Systems in the face of anger by those who wanted the defence giant to be held to account in court.

The settlement with the Serious Fraud Office and US Department of Justice, which will cost BAE £286m in fines, was "strongly supported" by Lord Goldsmith, who was the Government's chief legal authority when the previous Al-Yamamah bribery probe was dropped.

But critics claimed that it had, in effect, let the company off the hook. They pointed to comparisons with Tony Blair's handling of the decision to go to war in Iraq in 2003. In that case also, Mr Blair rejected the initial legal advice offered by Lord Goldsmith, this time on the legality of the planned invasion in 2003. The attorney general later amended his opinion into line with the former prime minister's intentions.

The Campaign Against Arms Trade (CAAT) said yesterday it was "outraged and angry" as it meant there was "no opportunity to discover the truth" about the firm's bribery and corruption allegations.

Nicholas Hildyard, for social justice campaigner The Corner House, called on the UK authorities to reopen its probe into the Al-Yamamah deal. He said: "The company's admission obviously calls into question its repeated denials of any wrongdoing. Far from drawing a line under the allegations, the announcement simply raises far more questions and creates yet further demands for justice."

Yesterday's announcement of a settlement comes four months after the SFO asked the attorney general to pursue bribery allegations against BAE over its business dealings.

Lord Goldsmith told the BBC that after the SFO dropped that investigation he urged it to continue with investigations into the firm's dealings in other countries. "At the time I said to the director of the SFO: 'There we are, there are particular problems in relations to Saudi Arabia, but I want you to pursue vigorously and rigorously the other investigations you have got', and I made sure that he had the money to do so. We are now seeing what the results of that are."

He added that he "strongly supported" the SFO's new approach using plea bargaining. "This is one of the most significant things about this settlement. It is the first time that there has been a plea bargain of this sort, and that is one of the things we are learning from the US," he said. "That is the way to deal with these issues, to negotiate." As a result of the deal, the SFO dropped a 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.

The BAE saga was also distinguished by the opposition of Clare Short, the former secretary of state for international development. Ms Short's complaint that the sale of military radar to poverty-stricken Tanzania "stank" of corruption did not prevent from Mr Blair forcing the deal through.

Following criticism that Britain is too lax in dealing with corporate corruption and bribery, police have carried out a number of sting operations targeting British executives across a range of industries. Executives in utility firms and the oil and gas sector will face prosecutions in the next few months, a senior officer in the City of London's overseas anti-corruption unit confirmed this weekend.

A two-year joint undercover operation with the FBI into the defence industry has already led to charges last month against four British arms dealers and raids on offices in London, Surrey and Manchester.

Operation Birchwood is still probing a network of British and American companies and sales agents involved in the supply of armoured vehicles and body armour, some of it to Iraq and Afghanistan. It follows a sting operation between May and December last year during which undercover FBI agents posed as representatives of a corrupt African defence minister who lured their targets to a Miami hotel with offers of a £9m arms deal to kit out the presidential guard.

A key target was Florida-based Briton, Jonathan Spiller. He became a major player in the defence world during the 1990s as a former chief executive of Armour Holdings, a US company that got close to the Foreign Office through a UK subsidiary of ex-SAS soldiers that guarded British embassies in Africa and South America. It is understood that a former Armour colleague, who has apparently turned supergrass after striking a deal with the FBI over unrelated bribery allegations, lured Spiller into the sting.

According to the US indictment, between 2001 and 2006 Richard Bistrong, an American, took part in three corrupt deals. One of them in 2004 involved the illegal sale of body armour to the Kurdish government in northern Iraq through another of Armour's UK subsidiaries after British officials had refused an export licence. Armour was taken over by BAE after these events occurred.

Also arrested were David Painter from Oxted in Surrey and Brighton-based Lee Wares. They were directors of Security Support Services, which had contracts with the Ministry of Defence and sells armoured vehicles to the US government in Iraq and Afghanistan. The firm is owned by the Ohio-based O'Gara Group, which told The Independent on Sunday that the two men were acting alone and have been sacked. The fourth man charged is Pankesh Patel, director of London-based Quartermasters Limited.

A new bribery law currently going through Parliament will make operations like Birchwood possible in the UK.

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