BAE Systems Subject to Investigation Regarding Their Past Dealings

BAE Systems PLC said Tuesday that the U.S. Department of Justice has begun an investigation of the company's dealings with Saudi Arabia.
BAE's brief announcement said the investigation related to the company's compliance with anti-corruption laws
BAE shares opened 6 percent lower on the London Stock Exchange at $8.30.
The company has denied accusations that it paid illegal kickbacks to members of the Saudi royal family as part of the $86 billion Al-Yamamah aircraft deal negotiated in 1985.
Prince Bandar bin Sultan, former ambassador to the United States and now head of Saudi Arabia's National Security Council, has also denied that he personally profited from the deal.
The investigation comes at a sensitive moment for BAE, which is seeking U.S. approval for a $4.1 billion buyout of armored vehicle maker Armor Holdings Inc., based in Jacksonville, Fla.
Last week the companies announced that the Treasury Department had concluded that the takeover did not pose any security threats. BAE, which hopes to conclude the deal later this year, is waiting for the Justice Department to finish its investigation of possible antitrust issues.
BAE's North American subsidiary proposed the acquisition on May 7 in a bid to tap into heavy demand from the American military for vehicles in Iraq and other war zones.
In December, Prime Minister Tony Blair called off a Serious Fraud Office investigation of BAE's dealings with the Saudi royal family.
The move followed media reports that the Saudis were threatening to pull out of a pending $20 billion deal to buy fighter jets from BAE.
Blair said his decision was based on national security.
"Our relationship with Saudi Arabia is vitally important for our country, in terms of counterterrorism, in terms of the broader Middle East, in terms of helping in respect of Israel/Palestine, and that strategic interest comes first," Blair said.
He also said British jobs were at stake, but said that was not the reason for the decision.
The U.S. government formally protested the British decision to call off the probe, and the move has also drawn criticism from the Organization for Economic Cooperation and Development.
Earlier this month, The Guardian newspaper alleged that Prince Bandar was paid more than $2 billion as part of the Al-Yamamah deal.
At the time, BAE said all payments made as part of the contract were done with government approval.
"The Al-Yamamah program is a government-to-government agreement and all such payments made under those agreements were made with the express approval of both the Saudi and the U.K. governments," a company statement said.
Bandar issued a statement through a London law firm denying that he received improper commissions through accounts at Riggs Bank in Washington.
"The accounts at Riggs Bank were in the name of the Saudi Arabian Ministry of Defense and Aviation (MODA). Any payments into those accounts made by BAE were pursuant to the Al-Yamamah contracts and as such would not in any way have been secret from the parties to those contracts," the statement said.
"Whilst Prince Bandar was an authorized signatory on the accounts any monies paid out of those accounts were exclusively for purposes approved by MODA. In addition, the accounts in question were audited on an annual basis by the Saudi Arabian Ministry of Finance on behalf of MODA."

BAE bought £75m Airbus for Saudi Prince Bandar

BAE gave Prince Bandar of Saudi Arabia an airliner as part of Britain's al-Yamamah arms deal, and the arms firm is still paying the expenses of flying it, the Guardian can disclose. The top of the range, four-engine Airbus 340, worth £75m, was painted in the silver and blue colours of Bandar's favourite American football team, the Dallas Cowboys, and is said to have been presented to him on his birthday in 1998.

According to his most recent approved biographer William Simpson, the aircraft, described as Bandar's "private plane", is heavily used. He says the aircraft flight log includes such destinations as St Lucia in the Caribbean, Rio de Janeiro, Casablanca, Cape Town and Honolulu.
Prince Bandar's lawyers said last night the aircraft was purchased and fitted out by BAE for the Saudi ministry of defence "pursuant to the al-Yamamah programme". It was part of the deal, they said, that "BAE continues to be responsible for the operation and maintenance of the plane".
The lawyers said the plane was owned by the Saudi air force and had been used by other Saudi dignitaries including King Abdullah and the foreign minister Prince Faisal. It would be wrong to suggest it was a "corrupt gift", the legal representatives said.
Prince Bandar denies any impropriety in allegations that he has been paid more than £1bn by BAE for his part in arranging the al-Yamamah deal, which was under investigation by the Serious Fraud Office until Tony Blair halted the inquiry on "national security" grounds.
The prince says payments consisted of Saudi official funds and were used for purposes approved by the Saudi ministry of defence. BAE also deny any impropriety, saying all payments were made with UK government "express approval", and were confidential.
Yesterday, the attorney-general, Lord Goldsmith, officially admitted that facts were withheld from the international anti-corruption watchdog, the Organisation for Economic Cooperation and Development, about Bandar payments. He said the "national security" cover-up was to prevent leaks to other foreign countries.
The OECD panel is monitoring Britain's compliance with its anti-bribery treaty, and expressed "serious concern" after a police inquiry was halted. Lord Goldsmith says he was ignorant of the OECD cover-up move, made by Serious Fraud Office officials. Writing to Menzies Campbell, leader of the Liberal Democrats, Lord Goldsmith said: "Indeed, I did not know the judgment the SFO had reached about this issue until it arose in the media last week."
He added: "I gave no orders, instructions or advice to the SFO about that." He said Jonathan Jones, his director-general, was present at the Paris meetings "to deal with ... the national security aspects". He said Mr Jones "was aware generally of what the SFO proposed to say and participated in discussions in preparation for the working group meeting".
But he said "what level of detail to give about particular payments" never arose in those discussions
At the Paris meetings of the OECD anti-bribery panel, where prosecutors from the US department of justice were present, the SFO assistant director voluntarily "disclosed ... that they were investigating a series of payments to a senior Saudi official". But "the individual was not named, nor were details provided of the payments".
Lord Goldsmith said: "The OECD did not ask for any more details."
He added: "The SFO would have been cautious about unnecessarily revealing information which could have gone widely into public circulation, leading to the very damage to national security which the decision to stop the investigation was designed to avoid."
Sir Menzies said last night: "These events get curiouser and curiouser. Major decisions ... were taken by officials and not by those with direct ministerial responsibility. The plain unvarnished truth is that Britain did not reveal significant information to the OECD."
The US department of justice is understood to be "99% certain" to open an investigation in Washington into use of the US banking system for the alleged payments.
Prince Bandar's aircraft, which he is said to frequently lend to other members of the Saudi royal family, has often been seen by plane spotters landing at RAF Brize Norton, the airfield closest to his 2,000-acre country estate at Glympton in Oxfordshire, and at an airfield in Colorado near his US ranch at Aspen.

The chief of Saudi National Security Council and former Saudi ambassador to the US, Prince Bandar bin Sultan, currently at the centre of allegations in the British media regarding ‘unauthorised’ funds by the UK defence giant BAE, issued a rare press statement insisting that all the funds diverted to the account at Riggs Bank in Washington DC had been received on behalf of the Saudi government.“The allegations in The Guardian have nothing to do with the truth and reality but represent a pinnacle of slander and lies,” the former envoy to US said in a statement carried by the SPA.Prince Bandar explained: “Last week the Guardian newspaper published stories alleging that secret payments totalling one billion British pounds had been paid to my personal account at Riggs Bank in Washington DC. Readers were encouraged to believe that the monies in question came from funds belonging to BAE and that the payments represented corrupt inducements to my personal benefit while I was serving as ambassador of my country to the USA.”He said that allegations as stated above were not only untrue but were ‘grotesque’ in their absurdity because the funds mentioned were Saudi government money from start to finish.