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Legal Challenge Launched of UK Serious Fraud Office's BAE settlement

(The Cornerhouse, Dorset UK, 12 February 2010) As part of its continuing efforts to press the UK government to stop turning a blind eye to the corrupt activities of British corporations abroad, The Corner House this week joined Campaign Against Arms Trade (CAAT) to request a judicial review of a recent controversial plea bargain that would let arms manufacturer BAE Systems off the hook for alleged bribery in several European and African countries.

[Update: 26 February 2010 - Campaigners lodge BAE corruption papers]

Nicholas Hildyard, for The Corner House, said of the decision by the UK's Serious Fraud Office (SFO) to allow the deal:

'Plea bargains should only ever be entertained when companies have really come clean. BAE has not. Once again, an SFO decision has reinforced the UK's reputation for letting big companies get away with bribing.'

He added:

'The SFO's blatant disregard for the rule of law is damaging lives and democracy abroad. We are undertaking this action in solidarity with all those affected.'

Lawyers acting on behalf of The Corner House and CAAT wrote to the SFO Director on Friday 12 February to signal their intention to request the judicial review of the SFO-BAE settlement.

Under the SFO settlement, announced on 5 February 2010, BAE would plead guilty to minor charges of 'accounting irregularities' in its 1999 sale of a radar system to Tanzania for which the SFO proposed it should pay penalties of 30 million pounds sterling. The SFO would not bring charges relating to alleged bribery and corruption in BAE's arms deals elsewhere.

The basis for the legal challenge is that, in reaching this settlement, the SFO failed properly to apply prosecution guidance (including its own guidance). In particular, the plea agreement fails to reflect the seriousness and extent of BAE's alleged offending, which includes corruption and bribery, and to provide the court with adequate sentencing powers.

The groups also argue that the SFO has unlawfully concluded that factors weighing against prosecuting outweigh those in favour.

Kaye Stearman, CAAT's spokesperson, says: 'It is in the public interest that BAE should not be let off the hook.'

The groups' lawyers also requested that the Serious Fraud Office delay applying for court approval of its settlement with BAE Systems. If it does not do so, the two groups will seek an injunction against the court application.

Click on the link below to read the letter, background and legal grounds which provide the details:
http://www.thecornerhouse.org.uk/pdf/document/JRLetterBeforeClaim.pdf

BACKGROUND

1. In December 2006 the SFO dropped its bribery and corruption investigations into BAE's arms sales to Saudi Arabia, following pressure from BAE and Saudi Arabia and a direct intervention from then Prime Minister Tony Blair. The decision was subject to severe criticism and prompted CAAT and The Corner House to launch a Judicial Review of the decision. In April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation; that decision was subsequently overturned by the House of Lords in July 2008, which ruled that he acted lawfully because he was faced with a threat to national security.

For background and key documents, see: http://www.controlbae.org/jr

2. On 1 October 2009 the SFO began drawing up legal papers to recommend prosecution of BAE, following its six-year investigation into alleged bribery in BAE arms deals with several other countries (Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to 'advisers' to clinch the deals.

For a summary of these investigations, see: www.caat.org.uk/issues/bae/bae_investigations.php

Campaign Against Arms Trade (CAAT) and The Corner House welcomed this decision: http://www.thecornerhouse.org.uk/item.shtml?x=565973

3. Under the SFO settlement announced on 5 February 2010, however, BAE would plead guilty to minor charges of 'accounting irregularities' in its 1999 sale of a radar system to Tanzania for which the SFO proposed it should pay penalties of 30 million pounds sterling. The SFO would not bring charges relating to alleged bribery and corruption in BAE's arms deals elsewhere.

This settlement was announced in conjunction with a much larger settlement made by the US Department of Justice with BAE. Under this settlement, BAE admitted making false statements in 2000-2002 in relation to BAE's arms deals with Saudi Arabia and passing covert payments through the United States in regard to its arms deals in Central European countries. It will be fined $400 million (256 million pounds sterling). Because it has not pleaded guilty to corruption charges, BAE can continue to bid for US military contracts.
CAAT and The Corner House expressed outrage at the settlement: http://www.thecornerhouse.org.uk/item.shtml?x=565972

4. The Corner House website:
http://www.thecornerhouse.org.uk/subject/corruption