Britain's government is facing international pressure over its decision to halt its probe into a controversial arms deal between British defence group BAE Systems and Saudi Arabia during the 1980s.

The Organisation for Economic Cooperation and Development, a grouping of 30 industrialised nations, confirmed Thursday that it had written to the British government asking it to explain why it dropped the investigation last month.

http://www.middle-east-online.com/english/?id=19040

Arms Deal investigators probe BAE payments to South African
Link

http://www.guardian.co.uk/armstrade/...983976,00.html

looks like it

Arms Deal investigators probe BAE payments to South African
Link

http://www.guardian.co.uk/armstrade/...983976,00.html

looks like it

Arms Deal investigators probe BAE payments to South African
Link

http://www.guardian.co.uk/armstrade/...983976,00.html

looks like it

Arms Deal investigators probe BAE payments to South African
Link

http://www.guardian.co.uk/armstrade/...983976,00.html

looks like it

DAILY MAIL TAKE ON THIS DRAMA

http://tinyurl.com/y68ezp

Lost jobs, a threat to security and a Premier too tainted to end this fraud probe

By PETER OBORNE Last updated at 22:39pm on 24th November 2006

When I was a teenager, my parents lived for a time in Khartoum, the capital of Sudan. The most notable of the relatively few amenities on offer was the Sudan Club, a colonial building with some tennis courts, a swimming pool and a rudimentary bar serving the poisonous local beer.

I would occasionally encounter, either at the bar or the pool, a cheerful Englishman in his mid-30s. He was a salesman for British Aerospace and made monthly visits to the Sudan in an endeavour to sell planes to the government.

It was firmly believed in Khartoum — I have no means of knowing whether this was genuinely the case — that the Sudanese Minister of Aviation doubled up as the local agent for Boeing, which was bidding for the same contract.

When it was put to the British Aerospace salesman that this might prove an insuperable obstacle, he became indignant. He insisted that the Minister of Aviation was a man of integrity and discernment who would perceive that British planes were vastly superior to the product being peddled by Boeing.

Some 18 months later I chanced to meet the same chap at Inverness Station, where he was eating breakfast. I asked him whether he had sold his planes. He shook his head mournfully. Boeing had won the contract, and he had lost his job.

I have no special knowledge about how the arms trade works, beyond a general impression that it is probably a murky affair.

Like most people, I would prefer that it did not exist at all, and, like most people, I have a hunch that British Aerospace's standards of conduct would compare pretty favourably to those found among our competitors, be they the French, Americans, Russians or Chinese.

For the last three years, the Serious Fraud Office (SFO), egged on by the Guardian newspaper, has been carrying out a corruption investigation into the relationship between BAE Systems (formerly British Aerospace) and Saudi Arabia, by far its largest foreign client.

At the heart of the investigation, which has lasted for three years, are allegations that BAE set up a 'slush fund' to make secret payments to members of the Saudi royal family in return for their support.

In recent months, in a move that has enraged the Saudi royal family beyond measure, the police have made an attempt to force disclosure of Swiss bank accounts.

The Saudis are at last threatening retaliation. As the Daily Mail reveals today, it now looks possible that BAE Systems will lose the massive contract to supply the Saudi airforce with the Typhoon eurofighter, and that France will pick up the business instead.

The move — a direct result of the SFO investigation — would bring about the loss of some 50,000 British manufacturing jobs.

Meanwhile, the rupture with the Saudi government places a giant question mark over whether BAE Systems can survive as an internationally significant defence manufacturer for the medium term.

This strikes at the heart of our national interest. We are in danger of losing highly skilled manufacturing jobs at Rolls Royce in Bristol and at Avionics in Scotland and elsewhere.

They are the crème de la crème of the diminished British industrial base. And the police investigation raises other fundamental questions.

Saudi Arabia is are our most important ally in the Middle East. The kingdom provides vital intelligence to the British government in the shadowy fight against al-Qaeda. This intelligence now looks likely to be compromised.

Diplomatic relations between London and Riyadh are very close to breaking point this weekend. Two weeks ago, the Saudi ambassador in London, Prince Mohammed bin Nawaf, had a tense meeting with Jonathan Powell, the Downing Street chief of staff.

He warned Powell that if the SFO continued its inquiry, not merely would the eurofighter deal be cut off, but also that all diplomatic and defence ties should be suspended.

Similar messages have been issued in the kingdom itself to the British ambassador, Sir Sherard Cowper-Coles. Friends say that he is under very heavy pressure from the Saudi government and that support from the Foreign Secretary, Margaret Beckett, has been 'non-existent'.

Tony Blair's role in all this has been exquisitely characteristic. I am assured that he is extremely sympathetic to the BAE Systems position, and fully grasps what a break with Saudi would mean for his 'war against terror'.

On a trip to Riyadh last summer, he left his Saudi hosts with the overwhelming impression that there was nothing to worry about and that the SFO investigation would soon be called off.

As so often with Tony Blair, a promise delivered with passionate sincerity in private — and believed at the time by everyone in the room, most of all by the Prime Minister himself — has subsequently turned out to be meaningless.

Whitehall sources say that Tony Blair and his aide Jonathan Powell are so preoccupied by the danger of arrest in the cash for peerages scandal that they have little time to attend to others.

The only person who can bring a halt to the SFO inquiry is the Attorney General, Lord Goldsmith.

Unfortunately the Prime Minister feels he no longer possesses the moral credibility to exert pressure on Goldsmith because of his critical role in making the final decision about prosecution in the cash for honours crisis — as well as the painful allegations that Goldsmith was lent on to give favourable legal advice in the run-up to the Iraq War.

The decision, therefore, is up to the Attorney General alone — and this weekend he is dithering.

Many sensible and decent people would take the view that there is no question on the basis of national interest — after all our country's security and industrial base is under threat here — there is a compelling case for thwe Attorney General to order the SFO to drop its inquiries. I'm not sure that's right. If BAE Systems executives really have engaged in bribery and corruption with Saudi officials, it may well be right to carry on the investigation.

However, we should do so in the full knowledge that this country is doing itself massive damage, that our commercial rivals probably all behave worse than us, and that our enemies must be laughing their socks off.

But nothing that I've read about this inquiry suggests that BAE Systems have broken British law. The SFO, despite an incredible three years on the case, has not provided any evidence.

Even if the accusations being made are true, it seems that any payments being made were made to Saudi citizens on Saudi territory with Saudi money.

It's extremely hard to see what all this has got to do with the Serious Fraud Office. It may well be that these Saudi practices would not be legal in Britain, but that’s not the point.

There's a brilliant series of advertisements currently being put out by the HSBC bank which warn us against making assumptions about foreign cultures.

They tell us that other countries apply radically different standards of judgment to that same types of behaviour.

The Muslim world is generally more comfortable with the practice of paying people who introduce business. That does not mean they are corrupt and open to bribes, simply that they have different values and practices that are as equally valid as our own.

For example, under Islamic sharia law, the practice of paying interest on loans is prohibited. Yet when Arab businessmen come to the UK, they do not refuse to pay interest on loans — they simply accept that is our way of doing business.

Equally, when we wish to do business in their countries, we should accept their local rules.

Failure to do so amounts to the same 'moral imperialism' and arrogance which, according to the government minister Margaret Hodge, brought about the calamity of the Iraq War.

I think the SFO, by applying British standards in cultures where they do not apply, is in danger of falling into the same trap.

More crucially, it risks inflicting appalling damage on British interests at home and abroad. The Attorney General must act now to stop this foolish and destructive inquiry.





aint this interesting?

The Tories have backed government plans for new attorney general powers to halt inquiries in the national interest.

The move comes after the High Court said the Serious Fraud Office acted unlawfully by dropping its corruption inquiry into the al-Yamamah arms deal.

The SFO is now considering whether to or not to re-open its investigation.

Shadow foreign secretary William Hague said the question remained whether the al-Yamamah investigation was called off for reasons that were exceptional.

But he strongly backed the principle that governments should be able to set aside an investigation if there is a serious threat to national security.

Increasing the attorney general's power to do so is an element of the government's new Constitutional Renewal Bill.

Health Secretary Alan Johnson told the BBC's Any Questions programme that continuing the SFO investigation would have jeopardised the lives of British citizens and the Army.

Asked whether the investigation should be reopened, Defence Secretary Des Browne said it was a matter for the court.

He said while he accepted a letter from the then Prime Minister Tony Blair to the Attorney General would have affected the SFO's decision, he did not accept the government alone had stopped the original investigation.

The Liberal Democrats maintain that the attorney general should not get new powers, and want the SFO's investigation re-opened.

The High Court case over the £43bn BAE arms deal with Saudi Arabia was brought by The Corner House and the Campaign Against Arms Trade

They said the SFO decision was influenced by government concerns about trade and diplomatic ties with Saudi Arabia.

Lord Justice Moses said that the SFO and the government had given into "blatant threats" that Saudi co-operation in the fight against terror would end unless the probe into corruption was halted.

'Serious damage'

The al-Yamamah deal with Saudi Arabia was first signed in 1985 but ran into the 1990s and involved BAE selling Tornado and Hawk jets, other weapons and long-running maintenance and training contracts.

BAE was accused of illegal payments to Saudi officials, but the defence company maintains it acted lawfully.

In December 2006, the then-Attorney General, Lord Goldsmith, announced that the SFO was suspending its inquiry into the deal, saying it would have caused "serious damage" to UK-Saudi relations and, in turn, threatened national security.

Saudi Arabia is also reported to have threatened to cancel last year's £20bn deal to buy 72 Eurofighter Typhoon jets from BAE Systems.







BBC NEWS | Politics | Conservatives back inquiry powers

Following the uproar over its halted Saudi investigation, the Serious Fraud Office is expected to decide whether to bring fresh corruption charges against arms manufacturer BAE within six weeks, over a second arms deal, this time with Tanzania.

A minister from the east African state has denied that more than $1m (£507,500) in his offshore accounts came from BAE.

Investigators involved in a three-year inquiry after the controversial deal to sell Tanzania a £28m radar system identified the money in Jersey accounts controlled by the poverty-striken country's infrastructure minister, Andrew Chenge.

Tanzania's anti-corruption bureau, which has been working with authorities in the UK, Switzerland and Jersey, wants to establish if the money is linked to multi-million pound secret commission payments made by BAE.

Chenge does not dispute the money in his Jersey accounts. But he told the Guardian: "The obvious inference [of the investigations] is that I have received for my benefit 'corrupt payments' from BAE. This is untrue."

He said he was only involved in minor aspects of the radar deal, which was promoted by other ministries and approved by the Tanzanian cabinet. His bank records, he said, would show investigators that "there is no connection to the BAE Tanzanian radar deal".

His US lawyer from Cleveland, Ohio, J Lewis Madorsky, added: "While the matters in question took place a number of years ago, we can state ... that any and all allegations of illegality, impropriety, misconduct and unethical behaviour made against our client are categorically and vigorously denied".

Investigators say Chenge could be a valuable witness. The target of their investigation is not him but BAE. The arms company made the commission payments to a local agent in Tanzania to promote the £28m radar sale, through an elaborate chain of offshore companies and a Swiss bank.

The agent has now left the country and is wanted by Interpol.

These developments come at a key moment in the BAE saga. A landmark high court ruling on Thursday said that the decision to drop the SFO's Saudi inquiry was wrong.

In a huge embarrassment for the British and Saudi governments, the court rejected the claims that the inquiry had to be closed down for reasons of national security and because lives would be at risk.

And it took the extraordinary step of naming Prince Bandar, the crown prince's son, as the man behind what it said could be characterised as an attempt to pervert the course of justice.

Former prime minister Tony Blair caused uproar by personally forcing a halt to investigations into the Saudi deal. The Guardian subsequently disclosed that £1bn had been paid into accounts controlled by Prince Bandar during the deal. Bandar says the payments were not improper.

Inspectors from the Organisation for Economic Co-operation and Development (OECD) grilled British officials in London last week about their failure to get results from any of their BAE investigations. Britain signed up to an international treaty to outlaw bribery, but there have never been any prosecutions.

The Tanzania deal, although smaller in cash terms than the Saudi deals, is equally controversial: Tanzania is one of the world's poorest countries, and the UK government is paying more than £100m this year to help the heavily-indebted country's budget.

It was Blair again who forced the radar deal through the British cabinet, despite protests from the then international development secretary, Clare Short. She said the sale, for which Tanzania had to borrow yet more from a commercial bank, was corrupt and "stank".

A lengthy SFO investigation in the UK subsequently discovered that 31% of the deal's contract price had been diverted via Switzerland.

BAE transferred the money to a subsidiary, Red Diamond Trading, registered anonymously in the British Virgin Islands.

Red Diamond then moved the cash to a Swiss account in the name of a Panama company, Envers Trading Corporation. This entity had two Panamanian nominee directors. But it was secretly controlled by a Tanzanian middleman, Shailesh Vithlani, according to Dar es Salaam court papers.

Investigators are now checking whether Vithlani arranged to pass any money in turn to Tanzanian politicians and officials.

Sources said the bank in Jersey had promptly frozen transactions and filed a suspicious activity report when the Tanzanian inquiries began.

Vithlani, who is of Indian extraction but holds a British passport, is listed as wanted by Interpol.

He has been charged by the Tanzanian anti-corruption bureau with lying to investigators, but has left the country. His whereabouts are unknown.

According to the charges, Vithlani falsely denied he was the owner of the Panama company, and falsely claimed he had only handled a separate commission of 1% on the deal.

The SFO's new director, Richard Alderman, former head of UK tax investigations, is due to take over this month. The SFO refused to comment yesterday.

BAE, which has previously denied wrongdoing, also declined to comment, or to explain its chain of offshore payments, other than to say "BAE Systems continues to fully co-operate with the SFO investigation".

The company has recently launched an extensive public relations campaign and last week unveiled a report commissioned from a commercial consultancy, Oxford Economics, which claimed BAE was of key value to the UK economy.

BAE corruption investigation switches to Tanzania | World news | The Guardian

Tanzania could seek radar refund

I have seen lots of articles in The Economist about corruption in Africa.

But isn't it corruption for the economics profession to not talk about the depreciation of durable consumer goods? Think about all of the automobiles manufactured and sold all over the world since World War II. Those cars got added to some counties GNP or GDP. But those cars wore out so they depreciated. Shouldn't that depreciation be subtracted from SOMEWHERE?

But the entire economics profession chooses to not talk about it.

Like that isn't corruption?

umbra