NEARLY 200 million pounds sterling (approx. 500bn/-) was wiped off the market value of BAE Systems yesterday morning, as the controversial UK arms manufacturer faced renewed allegations of channelling illegal funds to Saudi Arabian officials to win new contracts.
BAE Systems is the same company that sold the controversial $40m (50.7bn/-) military radar system to Tanzania, with $12m (15bn/-) in illegal kickbacks allegedly being paid out to key government officials in Dar es Salaam to approve the deal.
According to Times Online, the BAE group is now accused of making secret payments totalling one billion pounds sterling (approx. 2.5trn/-) to a Saudi prince over what is described as the UK’s biggest weapons deal.
Yesterday, shares in BAE Systems were the biggest faller on the FTSE 100 as the defence group denied allegations that it secretly channelled the money into an account controlled by Prince Bandar, the former Saudi ambassador to the US, in connection with the deal known as the al-Yamamah contract.
The BBC and The Guardian newspaper, citing insider legal sources, reported yesterday that the funds were paid into accounts held by Prince Bandar over a period of at least a decade.
The reports alleged that payments of up to 120 million pounds sterling a year were channelled into two Saudi embassy bank accounts in the US, and were made with the full knowledge of the ministry of defence.
The BBC reported further that the accounts were conduits to the prince’s private funds, quoting David Caruso, an investigator who worked for the American bank where the accounts were held.
Prince Bandar served as Saudi ambassador to the US for 20 years, and was the architect of the 43 billion pounds sterling (approx. 107trn/-) al-Yamamah deal for BAE Systems to sell warplanes to Saudi Arabia in the 1980s.
The latest reports come six months after the Serious Fraud Office dropped its investigation into possible wrongdoing in the deal.
BAE Systems said in a statement that it denied ’’all allegations of wrongdoing in relation to this important and strategic programme, and we will abide by the duty of confidentiality imposed on us by the agreement’’.
Chief executive Mike Turner was quoted by a British financial newspaper as saying: ’’I just think it’s very unhelpful for the British press and media to report in this way allegations against a very important customer, and more importantly a great ally in the Middle East’’.
Britain’s Serious Fraud Office (SFO) is reported to have uncovered the payments to Prince Bandar during its investigation into transactions related to the arms deal.
But it dropped the investigation in December last year after Lord Goldsmith, the British attorney-general, said it could jeopardise British national security.
According to the BAE statement, the al-Yamamah programme was a government-to-government agreement ’’and all such payments made under those agreements were made with the express approval of both the Saudi and UK governments’’.
It said it had made available to the SFO all information regarding the al-Yamamah contract in its possession over the last two and a half years.
’’After an exhaustive investigation, it was concluded, over and above the interests of national security, that there was and is no case to answer,’’ the statement said.
It added: ’’As the media itself has reported, a spokesman for the attorney-general has confirmed that nothing in today?s media reports alters this position.’’
The ministry of defence declined to comment on the allegations, saying in a statement that ’’to do so would involve disclosing confidential information about al-Yamamah, and that would cause the damage that ending the investigation was designed to prevent.’’
The British government’s decision to end the Saudi inquiry provoked international criticism.
The UK’s outgoing prime minister, Tony Blair, said yesterday that an investigation ’’would have involved the most serious allegations in investigations being made of the Saudi royal family’’.
According to Blair, such an investigation would have led nowhere, ’’except to the complete wreckage of a vital strategic relationship for our country in terms of fighting terrorism, in terms of the Middle East, in terms of British interests there, quite apart from the fact that we would have lost thousands, thousands of British jobs.’’
The Campaign Against Arms Trade said yesterday it was challenging the refusal of a judicial review of the government’s decision to abandon its investigation into alleged bribery by BAE.
The Organization for Economic Cooperation and Development said its working group on bribery had serious concerns about the decision, and the US government also issued a formal protest against it in January.
BAE confirmed last month that despite the abandoning of the Saudi investigation, it continued to face investigations into its dealings in six countries, including Romania, South Africa, Tanzania, Chile, the Czech Republic and Qatar.
In Tanzania, investigators from the SFO working jointly with the Prevention of Corruption Bureau (PCB) have been following a money trail from a Swiss bank account in which bribes were allegedly paid by BAE Systems to Tanzanian government officials as part of the radar deal.
British investigators also conducted their probe on Tanzanian soil and questioned a number of people, including businessman Shailesh Vithlani (42), who grew up in Mwanza Region but has British citizenship, and his business partner Tanil Somaiya, of the Shivacom Group.
At the time of the radar deal in 2001, the two businessmen used a Tanzanian-registered company which they co-owned, Merlin International Limited, as the commission agent.
