Arms dealer BAE pleads guilty to hiding bribes

A British Magistrates Court heard on Tuesday how Europe’s largest defence company wilfully failed to keep proper accounting records of payments. The notorious BAE Systems is the largest arms manufacturer in Europe and the fourth biggest in the world with annual military sales of $15 billion. In a Magistrates Court hearing in London BAE lawyer David Perry said the company would enter a guilty plea at a higher court next month in a plea deal with the Serious Fraud Office. (Photograph: Paul Ellis/AFP/Getty Images)

The indictment charges BAE is charged with knowingly not keeping proper records that explain payments that relate to two contracts. The statement of offence against BAE read “between 01 Jan 1999 and 31 Dec 2005 BAE knowingly...failed to keep accounting records which were sufficient to show and explain payments made pursuant to (a) a contract between Red Diamond Trading Limited and Envers Trading Corporation, (b) a further contract between British Aerospace (Operations) Limited and Merlin International Limited.”

After the guilty plea, District Judge Caroline Tubbs said sentencing should be approved by a higher court. She sent the case to Southwark Crown Court. The next hearing will take place on December 20. At this unprecedented hearing a judge will be asked to confirm the final settlement. However, many believe the timing of the Crown Court hearing is deliberately close to Christmas in order to bury the bad news.

The legalese around the trial charge did not state the dodgy accounting was hiding bribes to procure the sale of a military radar system to Tanzania. BAE covertly channelled bribes through the Panama-registered Envers from its company, Red Diamond, to secure a contract in 1999 to supply Tanzania with a military radar system costing $40 million. However BAE avoided more serious charges after it struck an agreement with the SFO in February.


The deal splits jurisdiction with the US Department of Justice over the company’s misdeeds. The SFO got Tanzania and the DoJ got the rest. As a result BAE agreed to plead guilty in the Crown Court to an offence under section 221 of the Companies Act 1985 of failing to keep reasonably accurate accounting records in relation to its activities in Tanzania. The company had to pay $50 million comprising a financial order to be determined by a Crown Court judge with the balance paid as an ex gratia payment for the benefit of the people of Tanzania.

In return the SFO will drop all investigations into BAE deals in South Africa, the Czech Republic and Romania as well as Tanzania. An NGO called The Corner House have expressed deep concern the plea bargain means SFO has agreed to fetter its future prosecutorial discretion. “If further evidence came to light that was sufficient to mount a prosecution against individuals that necessitated making allegations concerning BAE’s conduct, the SFO would not be able to bring such a prosecution as it has undertaken not to do so,” said The Corner House.

The Campaign Against Arms Trade has also been implacable foes of BAE. They have joined The Corner House in trying to bring to the Court’s attention over the plea bargain’s apparent undertaking never to prosecute any individual in future if doing so involves alleging BAE Systems was guilty of corruption. CAAT’s Kaye Stearman said the new hearing date is so close to Christmas that “in the hackneyed phrase, this will be a good day to bury bad news.” “Yet there is still much about this whole sorry saga that the public deserves to know,” she said.

CAAT are responsible for much of what we do know about BAE’s arms dealings. They scored a major victory over BAE in 2007 after the High Court ordered the weapons dealer to produce a sworn affidavit divulging how it obtained a confidential and legally privileged document from CAAT. In 2003 the Sunday Times revealed how BAE paid a company to carry out an elaborate spying operation on its critics and infiltrate CAAT.

The 2007 affidavit followed the failed police investigation a year earlier of BAE’s illegal activities in Saudi Arabia. BAE chair Dick Evans had easy access to PM Tony Blair and the government bought pressure on the SFO to drop the corruption investigation into BAE's Saudi arms in December 2006. Former British Foreign Secretary Robin Cook said the relationship between BAE and the government was too close. "In my time I came to learn that the Chairman of British Aerospace appeared to have the key to the garden door to Number 10,” he wrote. “Certainly I never once knew Number 10 to come up with any decision that would be incommoding to British Aerospace".