BAE Gets a Slap on the Wrist

What began as a serious investigation into mind boggling claims that Europe’s largest defense contractor, BAE systems, had literally paid a billion pounds (so much more in dollars….) in bribes and corruption — on a scale that would be difficult for a person accustomed to living in a democracy to begin to fathom outside the context of a Saturday Night Live sketch — concluded yesterday with the firm pleading guilty to, well, not a hell of a lot.

BAE will pay a meager $400 million to the United States Department of Justice and will plead guilty to “conspiring to make false statements to the United States Government” in relation to its sales of arms, including the then top of the line Tornado fighter jet, to the government of Saudi Arabia in the 1980s and 1990s as well as far smaller sales to the Hungarian and Czech governments. To the comically named Serious Fraud Office (SFO) in Britain, BAE will put up a meager £30 million and admit to “accounting irregularities” in relation to its sale of a rather pricey air traffic control system to the not so wealthy government of Tanzania. Most appalling, and most laughable of all, by striking this deal, BAE will avoid having to admit to what considerable evidence suggests they did, which is pay out massive bribes to a wide range of people. Had they pled or been found guilty of bribery, BAE systems would have been prohibited from competing for any future defense contracts throughout Europe and the United States.

The tale of the BAE “investigation” is a sordid and sketchy affair that has formed the basis for a massive series of revealing articles published by The Guardian and eventually a PBS Frontline documentary by Lowell Bergman: Black Money. The investigation became particularly ugly in Britain, where the government’s handling of it was… sketchy.

The SFO commenced investigating BAE back in 2004 over allegations relating to the al-Yamamah arms deal with Saudi Arabia. This deal was brokered by then Prime Minister Margaret Thatcher. The almost comedic allegations included the funneling of more than £1 billion to members of the Saudi royal family. There was a suspicious jet that was given to former Saudi Ambassador to the US and buddy of Presidents Carter, Bush, Clinton, and younger Bush that was painted in the colors of his favorite American football team, the Dallas Cowboys. There was also allegations of a considerably slush fund used to “entertain” (i.e. purchase prostitutes and clothes) members of the Saudi royal family.

In 2006, Prime Minister Tony Blair put a halt to the SFO’s investigation of these allegations, not because the SFO felt it would not be able to muster enough evidence to bring charges or because the SFO had investigated and found them guilty.  Instead, then Prime Minister Blair shut down the investigation of the al-Yamamah deal out of fear that it might upset the Saudis so much that they would cease to cooperate with the British government on issues vital to its national security.

While the Brits shut down their investigation, the United States Department of Justice (DOJ) laudably did not. The DOJ investigated all of the charges that the SFO had been looking into, including another incident in which BAE forked over $12 million to middlemen that conveniently helped land BAE a contract with the Tanzanian government to sell a complex air traffic control system.

Over the past 25 years, the al-Yamamah deal made BAE a figure in excess of some £43 billion. The Foreign Corrupt Practices Act explicitly prohibits bribing foreign officials. As I mentioned earlier, the punishment for such a conviction, beyond any monetary penalties that may be assessed, would be a permanent ban from competition from all European and American defense contracts. Instead, they managed to plead guilty to some gimmick charges and pay some £300m in penalties.

So just to make sure I’m getting this right: the al-Yamamah deal alone made BAE more than £43 billion over the past quarter century…..and, for both the al-Yamamah deal and the other sketchy transactions, BAE systems will pay a total of £300 million combined to the US and Britain and face no sanctions that affect their ability to do business in Europe or the United States.

I’m no math genius, but £43 billion minus £300 million still equals a lot of billions. Great settlement for BAE. Not so much for everyone else. Hell, the only lesson that this settlement teaches is that apparently, corruption pays.