BAE Settlement Outrages Anti-Corruption Campaigners

The settlement reached with BAE Systems on Friday by both the UK Serious Fraud Office and the US Department of Justice has outraged many anti-corruption campaigners. Essentially BAE Systems has admitted guilt but avoided prosecution by settling out of court and campaigners believe that this sends the wrong message to the industry.

Nicholas Hildyard, social justice campaigner with The Corner House said “The company’s admission obviously calls into question its repeated denials of wrongdoing.” As one commentator pointed out, the US part of the settlement means that they have only admitted that they lied to authorities about corrupt practices and have not been punished for the acts themselves.

Whilst the $400 million fine is lower than other fines imposed by the DoJ, the sums involved are nonetheless significant. Credit Suisse AG paid $536 million in penalties to settle charges of violating federal and state law related to transactions with countries sanctioned by the US.  In the UK BAE has pleaded guilty to one charge stemming from a payment to a former consultant in Tanzania and is settling for £30 million, a small sum given that some had thought that the fines could reach over a billion pounds. To put things in perspective BAE’s turnover in 2008 was £18.5 billion, and the firm’s order book stood at £45.5 billion. 

This is the first time the SFO has entered into a plea bargain of this kind and it is a sign of things to come. The SFO are clamping down on foreign corruption and it is a trend that is marked around the globe and highly evident in the increase of US Foreign Corrupt Practices Act prosecutions in the last year. 

Although the settlement leaves many campaigners disappointed and frustrated that the case will never really see the light of day in court, it does serve to highlight the importance of having a corporate culture which does not tolerate corruption and the importance of having strict controls in place to manage corruption risk. The fact that BAE has followed the recommendations of Lord Woolf has been a mitigating factor in their case.

Further Information:

UK SFO Press Release http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2010/bae-systems-plc.aspx

Woolf Report: http://ir.baesystems.com/investors/woolf/

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