The biggest probe into BAE focused on a £43bn contract to supply more than 100 fighter jets to Saudi Arabia. The deal began in 1985 but a National Audit Office investigation was suppressed in 1992. The SFO launched an investigation in 2004 into the allegations – including claims BAE was running a “slush fund” that offered sweeteners to Saudi royals and their intermediaries in return for lucrative contracts

1. Decemeber 2006 – This was dropped two years later amid political pressure from the UK and Saudi Arabia. BAE always denied any wrongdoing
2. June 2007, BAE said it was being investigated by the US authorities over deals with Saudi Arabia
3. July 2008, BAE pledged to implement recommendations from an independent review into its conduct
4. October 2009 – The SFO began new probes into whether BAE had used corruption to win contracts from countries including Tanzania, the Czech Republic and South Africa. Last year it asked the Attorney General to prosecute BAE as the sides could not agree what the firm would admit or the fine to be paid
5. February 2010 – BAE Systems says it will admit two criminal charges and pay fines of £286m to settle US and UK probes into the firm. However the pleas stop short of admitting to corruption or bribery. No further action over any other investigations is expected.

February 2010 – comments

1. BAE Systems’ settlement with the UK and US authorities over wrongdoing closes a chapter in a long-running saga over whether the company was involved in bribery and corruption. But is this the end of the story?
2. In agreeing to settle, BAE is pleading guilty to criminal charges in both the US and the UK. This could have consequences for the company as it tries to win future defence contracts in the US and Europe.
3. the company has not admitted to any corruption allegations, the impact on future contracts is likely to be minimal.
4. BAE always argued that any indiscretions it may have committed were relatively minor – technical breaches of accounting rules or a failure to fully disclose commissions.
5. the Serious Fraud Office (SFO) has seemingly failed to come up with evidence supporting the more outlandish allegations levelled at the company.
6. the £30m BAE will pay in the UK is still thought to be a record for criminal activity by a British company.

‘Slush fund’

1. Allegations that BAE was engaged in bribery and corruption have been around for years.
2. Some of the claims, such as over the £43bn al-Yamamah arms deal with Saudi Arabia, date back decades. Others, like the controversial contract to provide Tanzania with an air traffic control system, are more recent.
3. There was outrage in 2006 when the SFO dropped its investigation into al-Yamamah, arguing that Britain’s national security was at risk.
4. The SFO had launched the probe in 2004 into claims that BAE ran a “slush fund” that offered sweeteners to Saudi royals and their intermediaries in return for lucrative contracts.
5. The SFO was accused of caving in to political pressure from the UK government, which was worried about the impact on relations with Saudi. But the SFO denied coming under pressure.
6. If BAE hoped this was the end of the matter, it was wrong.
7. Rather than drop its inquiries, the SFO stepped up investigations into other BAE contracts. Controversial arms deals in Tanzania, the Czech Republic, Chile, Romania and South Africa all came under the spotlight.
8. None of the allegations, though, involved current management, who have tried to introduce new ethical processes and procedures – without ever admitting that BAE committed wrongdoing in the first place.

Woolf review

1. As part of this process, BAE chairman Dick Olver asked Lord Woolf, a former Lord Chief Justice, to review the company’s ethical practices.
2. His year-long review made 23 recommendations on the way BAE could adopt stronger anti-bribery measures and a global ethical code of conduct.
3. Critics condemned the Woolf report as a whitewash because it looked only at current conduct, not alleged past misdemeanours.
4. BAE introduced all 23 recommendations, but any good publicity was swept aside as the SFO’s investigation widened and the US Department of Justice stepped up its probe, even briefly detaining two BAE executives who travelled to the US.

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

Negotiations

1. Last October the SFO dealt BAE a severe blow by announcing that it would ask Attorney General Baroness Scotland to prosecute the company.
2. The two sides had been trying to negotiate some sort of plea bargain. Although BAE was prepared to accept a limited fine, the company stood firm against admitting guilt for fear of its impact on winning future contracts.
3. While Baroness Scotland weighed up the sensitive issue of launching criminal proceedings against one of Britain’s most important companies, BAE and the SFO continued to negotiate.
4. Prosecuting BAE through the courts would not just have been damaging for Britain’s biggest manufacturing company, but also intensely embarrassing for the government and Ministry of Defence.
5. All this has now been avoided.
6. BAE, the SFO, and the UK government will no doubt hope that one of the most controversial episodes in corporate British history has been resolved.
7. BAE’s critics – and there are many – are unlikely to let the matter rest.

Story from BBC NEWS: http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/8500742.stm