WATCHING THE CORPORATIONS

The BAE bribery fiasco continues

Fresh allegations of misconduct have been made against arms company BAE Systems in relation to Saudi arms deals, as the Organisation for Economic Co-operation and Development (OECD) condemned the UK government for failing to tackle corruption.

The Serious Fraud Office (SFO) has accused BAE, the UK's biggest arms company, of "concealing the truth" about its £43bn arms deals with Saudi Arabia in order to fraudulently get government insurance cover. BAE got insurance for the deals from the Export Credits Guarantee Department (ECGD), the UK's official export credit agency. SFO witnesses told OECD investigators they "had supplied to ECGD the evidence of bribery-related fraud against it... involving alleged misrepresentations by the company to ECGD in connection with the issuance of insurance." ECGD officials refused to tell the international investigators why they had taken no action, claiming they were bound by "commercial confidence".

International anti-bribery monitors from OECD have recently published a report detailing allegations made during the aborted investigations in 2006 into BAE's Saudi arms deals. BAE allegedly concealed from the government the existence of Saudi intermediaries to whom it was making secret payments at the time. The 75-page report, written by a OECD team chaired by Swiss law professor Mark Pieth, also puts British ministers in the dock. OECD condemned the UK's "tolerance of corruption", saying it was "disappointed and seriously concerned" by British official behaviour. It also criticised the "lack of political will" to investigate companies accused of foreign bribery. The UK's record on prosecuting cases of corporate bribery is woeful compared to other Western countries.

Former UK Prime Minister Tony Blair forced the SFO in 2006 to drop its investigation into secret payments made by BAE Systems to Saudi officials through a slush fund. The Law Lords then overturned an initial ruling that the SFO had acted unlawfully in dropping the probe. The decision was defended by the government claiming that Saudi Arabia could withdraw co-operation over security and intelligence matters, which would "pose a threat to the country's national security."

The OECD expressed particular concerns about the role of the UK's chief legal adviser, the Attorney General, and whether the independence of the post holder is compromised by being a member of the cabinet. The Attorney General should not be able to give direct instructions to the SFO on individual cases, the OECD believes, nor should individual prosecutions require their consent.