UK defence firm probed over 'kickbacks' paid to secure US government contract

Exclusive: Court documents allege British company paid $200,000 to US company director's off-shore account

Jonathan Owen
Saturday 07 November 2015 22:30
Soldiers in Helman
Soldiers in Helman

A British defence company which includes the Ministry of Defence and the police among its clients is the focus of an international criminal investigation into alleged kickbacks paid to secure a multimillion-dollar US government contract.

Court documents obtained by The Independent on Sunday testify that the British firm paid almost $200,000 (£133,000) to a US company director in payments which were wired to an off-shore bank account.

They declare that kickbacks were paid by two directors of the British firm – described as “co-conspirators” – and resulted in the company winning a $6m contract to supply US and British forces in Afghanistan with bomb disposal equipment, according to the US government.

The details emerged after Robert W Gannon, a US citizen, pleaded guilty in the US on Wednesday to conspiracy to solicit and accept kickbacks – illegal payments made for help in getting contracts. The offence was committed in 2009, according to a statement issued by the US Department of Justice (DoJ).

Gannon, a former director of operations of a Department of Defense contracting company in Washington, admitted soliciting and receiving $193,665 in kickbacks in return for helping the British company get the US government subcontracts, said the statement.

Gannon, 54, who now lives in Bangkok, Thailand, will be sentenced in January. He used his position “to arrange with executives of a UK-based company” that they would make payments to him “in return for a series of purchase orders his company awarded in August 2009 with a total value of nearly $6m,” states the US DoJ.

“Those orders called for the provision of explosive ordinance disposal equipment to US and Nato forces in Afghanistan.”

Gannon admitted that the British company “wired funds with a total value of almost $200,000 from bank accounts in the United Kingdom to Gannon’s account in Singapore.”

The case is being investigated by the FBI, the Defense Criminal Investigative Service and the Special Inspector General for Afghanistan Reconstruction. The DoJ statement adds: “The Criminal Division’s Office of International Affairs and the City of London Police provided significant assistance.”

As part of Gannon’s deal with US prosecutors, he “agrees to co-operate with certain law enforcement agencies in the United Kingdom”, according to a plea agreement filed at the US District Court for the Eastern District of Virginia. This co-operation will “include but not be limited to the Specialist Fraud Division of the Crown Prosecution Service and the City of London Police (UK)”, it states.

Although the British company is not named in the court documents, it is understood to be Dorset-based Mondial Defence Systems. The company, which manufactures and supplies equipment ranging from explosives to bomb disposal suits and mine detectors, “has completed substantial logistic support for the UK and US governments in overseas deployments”, according to its website. Two of its directors, Robert Gillam and Simon Davies, were arrested in the UK in December 2014, under “the UK Bribery Act” according to a report by the Special Inspector General for Afghanistan Reconstruction (Sigar) to the US Congress and US Secretaries of State and Defence earlier this year.

HSBC in Singapore

The men were arrested by City of London Police accompanied by agents from the FBI, Sigar, and the Defense Criminal Investigation Service (DCIS). They were questioned about an alleged “kickback” scheme in 2009 which involved payments to secure contracts worth around $5.9m, stated the US government report.

A “statement of facts” agreed by the US government and Gannon, and among the new court papers filed last week, refers to a “defense contracting company based in the United Kingdom” and persons #1 and #2 who it describes as British citizens and executives of the company. The document details email exchanges between Gannon and the British company directors. He gave them “competitor pricing information” related to a bid from a rival company and “coached” the Britons to ensure their company got the contract from his firm.

In one email, sent in May 2009, he said: “This will cost you!” At the end of that month, one of the two directors asked Gannon: “by how much should we be below [another company] for you to have a clean decision?” And months later, in August that year, one of the British directors wrote to Gannon: “We had put you in for 3% of the gross for payments at the end but we are able to do that upfront at the amount stated if that is your preference. Do you want $, £ or €?” The two directors subsequently arranged for £72,000 to be wired to an HSBC bank account in Singapore belonging to Gannon. They made another payment of $75,000 in December 2009, to which Gannon responded: “santa left his parcel. much appreciated” [sic].

British police officers, accompanied by colleagues from US federal agencies, arrested two men in the Dorset area last December, in connection with allegations of bribery offences arising in the US, according to the City of London Police. “I can confirm there have been no charges and the investigation is ongoing,” said a spokesperson for the force.

And in a statement, a spokesperson for the Crown Prosecution Service (CPS) said: “I can confirm that the CPS has received a full file for consideration of a charging decision.”

The Ministry of Defence refused to comment. Mondial Defence Systems referred requests for comment to its lawyers. Hannah Laming, partner and business crime specialist at Peters and Peters solicitors, said: “We have no comment to make.”

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