BAE and Corruption - Back in Black

The ongoing story of BAE and the corruption scandal which has dogged it for years never seems to go away. Some two years after the SFO started an investigation into alleged bribery payments relating to an arms deal with the Saudis, Tony Blair successfully intervened in late 2006 in order to stop the process, citing reasons of national security. However, this did not stop the US Department of Justice from launching its own enquiries - the US authorities not seeming to have the same national security sensitivities as the UK.  Or were there more commercial pressures at work?  BAE certainly is a major contributor to UK exports and is also trying to establish a beachhead in the US.

Three years on and BAE once again finds itself centre stage with revelations that the SFO had been trying to press BAE into accepting a US-style plea bargain in which the company would plead guilty to limited corruption charges in exchange for less severe treatment.  The allegations this time relate to deals involving other countries such as Tanzania, South Africa and Romania.  BAE clearly feel that there is mileage in contesting these allegations and appear to not want to compromise their position, even if this does result in more limited action.  The commercial ramifications could be important if they were to agree to a plea bargain, leading to potential exclusion from many national procurement programmes - especially in the US.

What is of interest in this case is the extent to which the SFO are prepared to adopt a more US-style, results orientated approach to corruption cases, which represents a marked change in tactic. Instead of trying to secure the gilt-edged, all encompassing convictions which have often led to the failure of cases prosecuted by the SFO, a more pragmatic approach which short circuits much of the procedural rigmarole but results in a more limited acknowledgement of guilt seems to be in favour.  The key issue here is that it doesn't appear as though BAE want to play ball - whether this is due to the fact that they believe there is no case to answer or whether the risk/reward outcome by refusing to accede to the SFO is worth it is something only known to BAE.

What is clear is that corruption continues to be a hot topic on this side of the Atlantic as well as on the other side.

For more information see the UK SFO Press Release.

Ed Shorrock is the Director of Forensic & Regulatory Services at BakerPlatt ( www.bakerplatt.com ), an offshore law firm specialising in litigation, financial crime, regulatory and insolvency matters.  Ed has been heavily involved in a variety of regulatory, criminal and civil actions with a focus on the restraint, custody, realisation and confiscation of assets. Having qualified as a chartered accountant in 1998, Ed has managed a range of projects involving asset seizures under drug trafficking and criminal legislation and been involved in regulatory investigations and complex liquidations. He delivers on training programmes focusing on financial crime and compliance issues and is a regular speaker at conferences on these topics and how they affect offshore financial centres.

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