Prince Bandar bin Sultan bin Abdul Aziz Al Saud has kept himself busy with other activities since ending his post as Saudi ambassador to the US in 2005. Famously known as "Bandar Bush" in reference to his close connections to the Bush family, he has long exploited his power brokering abilities elsewhere. Unfortunately for him, one of the things that has attracted scrutiny is his role in arranging an earlier arms deal for Saudi Arabia with Great Britain known as al-Yamamah [yo mama?], then worth 40B pound sterling. This matter has surfaced again as Saudi Arabia now attempts to conclude another deal worth 20B pound sterling for 72 Eurofighter Typhoon jets (pictured). According to the UK Guardian, Prince Bandar has received a billion pounds' worth ($1.97B) over the years in brokering the earlier deal. Where I come from, they call it kickback. Prince Bandar is a military man and an accomplished jet flier--according to his online biography at least. Let's get things rolling with this story:Des Browne, the defence secretary, held talks this week with a senior Saudi royal to try to secure a £20bn arms deal for BAE Systems, it emerged yesterday. Mr Browne met the Saudi crown prince, Prince Sultan bin Abdul Aziz - the father of Prince Bandar, the leading royal who received £1bn from BAE over 10 years for his part in the al-Yamamah deal - in Riyadh.Talk about CSR issues galore. However, a Guardian commentator says this is the nature of the dog-eat-dog arms industry:The MoD insisted the meeting was part of a regular round of talks between ministers and Middle East leaders [yeah sure, and you can call me "Jools Holland."] But diplomats in Saudi Arabia said the two men were discussing armament deals.
Britain has been anxious to seal the deal to deliver 72 Eurofighter Typhoon jets, which it feared was put in jeopardy by the Serious Fraud Office investigation into allegations of bribes by BAE. When the fraud invesitgation collapsed last December, ministers hoped the deal, outlined in a memorandum of understanding between King Abdullah and the then defence secretary, John Reid, in December 2005, could be finalised.
Whitehall sources said yesterday that they believed the contract could be signed as early as next week. But city analysts warned that the risk of further delay had increased as a result of the Guardian's story this week. And a local MP said nervousness about the deal had increased.
Either side of his Riyadh visit, Mr Browne met Sultan Qaboos Bin Said, the leader of Oman, in Muscat on Sunday, and the crown prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al-Nahayan, in the United Arab Emirates on Tuesday.
The MoD denied the Saudi meeting had been arranged hurriedly or specifically to discuss the BAE deal. A spokesman said: "The secretary of state for defence made a routine visit to the Middle East, which was widely reported in the media of the region at the time. He met with a number of senior individuals in Saudi Arabia, Oman and UAE, as part of a long planned visit designed to maintain excellent bilateral defence relations."
The MoD refused to discuss the state of the Typhoon deal, other than to confirm the negotiations were continuing. On the Guardian's stories this week, a spokesman said: "The Ministry of Defence will not comment on these allegations, because commenting would require us to discuss confidential information about al-Yamamah that would cause precisely the damage that ending the investigation was designed to prevent."
A spokesman for BAE said: "Negotiations for the procurement of Typhoon aircraft by the Kingdom of Saudi Arabia are being conducted by representatives from the respective governments..."
MP Michael Jack, who has 3,000 Eurofighter workers in a BAE Systems factory in his Fylde constituency in Lancashire, said: "People at BAE will be concerned what it means for them. Obviously there is a lot of relief from the workforce that the deal with Saudi Arabia seems to be on the cards, but ... there is uncertainty about what is happening."
Mr Jack said his employers were waiting to see whether the Saudi deal would be in addition to, or instead of, the British government's commitment to buy 232 Eurofighter aircraft. Britain has bought 55 and is committed to a further 83 but because the Saudi deal is "government to government", Mr Jack fears that the MoD will include that in its commitment.
BAE Systems seems confused about how to respond to the furore over allegations that it paid £1bn to Saudi Arabian Prince Bandar to secure the al-Yamamah war planes contract. There is said to be a fresh division in the boardroom between chairman Dick Olver, who wants the company to set out new ethical standards, and chief executive Mike Turner, who will not brook any criticism, actual or implied, of past behaviour.In any event, BAE may have asked an independent party to review its business practices after several high-profile incidents, including this one:Despite the dirt thrown, BAE's share price has been armour-plated. How come? Well, you don't put your money into an arms manufacturer if ethical investment is your top priority. Analysts believe the latest allegations are unlikely to derail the £[20]bn al-Yamamah III deal for Typhoon fighter jets.
The big question is whether BAE is vulnerable in the lucrative US market, where it is adding to its interests with the £2bn acquisition of Armor Holdings.The Americans take a tough line on corruption claims. Shareholders know full well the arms business involves an amount of realpolitik. But they will start to care about ethics if they are hit in the pocket.
BAE Systems is understood to have asked Lord Woolf, the former chief justice of England and Wales, to head an independent review of business practices.Lord Woolf, who retired as chief justice in October 2005 and is highly regarded for his independence, is currently in the Gulf state of Qatar. Sources close to Lord Woolf dismissed as "nonsense" suggestions that the approach was made in response to recent allegations.Europe's largest arms company has been hit by allegations reported in the Guardian that it paid £1bn to Prince Bandar of Saudi Arabia in connection to the £43bn al-Yamamah arms deal that began in the 1980s.
According to weekend reports, an ethics committee is to look into how the defence giant conducts its arms deals. The Guardian understands that BAE has asked Lord Woolf to head the review. BAE declined to confirm, but said: "The board of BAE Systems regularly reviews its policies and processes related to its business practices."
BAE has said it has not broken any laws and its current chairman, Dick Olver, told the company's AGM this year that there had been "no bribes" paid.
Mr Olver and the company's non-executive directors are under pressure to provide independent verification that the company's business practices are above board, especially at a time when it is seeking big contracts in the US, where it is awaiting regulatory approval to buy Armor Holdings.
BAE's activities were the subject of a two-year Serious Fraud Office investigation. But it was abruptly cut short by the attorney general, Lord Goldsmith, after Tony Blair said pursuing the investigation could harm national security.
The move was criticised by anti-corruption campaigners and the Organisation for Economic Cooperation and Development, the world's anti-corruption watchdog.
Lastly, the Ministry of Defence (MoD) seems to have been implicated as well in this growing scandal of sorts. The Guardian suggests that the MoD directly paid the billion pounds to Prince Bandar:
Pressure was mounting on ministers for full disclosure of the government's role in Britain's biggest arms deal last night after claims that the Ministry of Defence directly administered payments of more than £1bn to Prince Bandar of Saudi Arabia.
The MoD refused to address the specific allegations, made in BBC's Panorama, while the attorney general, Lord Goldsmith, continued to stonewall questions over his role in the affair. BAE, the weapons manufacturer at the centre of the controversy, remained silent.
Last week, the Guardian revealed how the payments had been made to Prince Bandar with the full knowledge and authorisation of the MoD. However, last night, the BBC went further and accused the MoD of having a much more direct involvement in the transfers of money, which were uncovered by investigators for the Serious Fraud Office (SFO).
According to the BBC, MoD officials in Whitehall themselves processed quarterly "invoices" from the Saudi prince, who was seeking payment for "support services" for his role in the al-Yamamah arms deal. The invoices were passed on to BAE executives, who would then wire the latest instalment of cash to accounts at Riggs bank in Washington.
The transfers from an account held at the Bank of England went in batches of £30m a quarter for at least a decade.
The officials involved in handling any such payments are based at Deso, the MoD's arms sales unit. It is headed by Alan Garwood, a former BAE executive himself, and supervised by Paul Drayson, a businessman appointed by Tony Blair as arms sales minister. BAE has already said it made the payments with the "express approval" of the MoD.
The MoD arms sales department said last night that disclosing confidential information about the al-Yamamah contract, which was signed in the mid-1980s, would cause damage to national security. It also refused to say if payments to Prince Bandar were continuing today. Vince Cable, the Liberal Democrats' deputy leader, said last night: "If the Ministry of Defence was actually directly involved in running the payment system, this is absolutely shocking and reveals the depths of the government's complicity in this scandal.
"We must know if BAE's payments to Prince Bandar are still going on today".
Prince Bandar said in a statement yesterday that the allegations in the Guardian were "not only untrue but are grotesque in their absurdity". The account in Washington where the money went was "a Saudi government account and not my personal account", the Prince said.
He said the money was not "a corrupt personal benefit" from BAE but "Saudi government money from start to finish". He added: "BAE was not a party to any of these accounts."
UPDATE 1: Tony Blair has already taken the role of convenient fall guy for this mess since he's about to leave office anyway according to the Guardian. Blair's (rather amoral) argument goes like this: "yes, well, so we may have made some side payments to get things going, but see how many jobs we've created. Don't blame my ministers--blame me. The reason we don't want to pursue this matter is because so many jobs will be lost." Put simply, the ends (jobs) justify the means (alleged side payments):
Tony Blair said today that he accepted responsibility for the BAE affair, and refused to implicate other ministers.
After being asked at prime minister's questions about the £43bn arms deal between BAE Systems and Saudi Arabia by the Liberal Democrat leader, Sir Menzies Campbell, Mr Blair said: "If you want to blame anyone for this, blame me. I am perfectly happy to take responsibility for it."
But Mr Blair would not name any ministers. He repeated the government's defence of the attorney general's move in December last year to drop the Serious Fraud Office investigation into the affair.
Such an investigation would take years, damage the national interest and cost thousands of jobs, Mr Blair said...
Mr Blair also said criticisms of the attorney general, Lord Goldsmith, in relation to the investigation into the alleged payments to the prince were "unfair and wrong".
The Guardian has claimed that British investigators were ordered by Lord Goldsmith to conceal from the OECD the existence of the payments - the attorney general has denied this claim. Robert Wardle, head of the SFO, has since said he made the decision.
The paper has also disclosed that payments had been made to the prince over Britain's biggest arms deal with full knowledge of the Ministry of Defence. Earlier this week, BBC Panorama went further, alleging that the MoD directly administered the payments to the prince.
Yesterday, Des Browne, the defence secretary, refused to say whether payments allegedly processed by MoD officials and wired to an American bank via BAE were still continuing.
The arms company does not dispute making the payments, which it says were with the "express approval" of the MoD. Prince Bandar has denied any impropriety.
Sir Menzies had asked which minister was responsible for withholding information from the world's anti-corruption watchdog, the Organisation for Economic Cooperation and Development, about secret payments to Prince Bandar of Saudi Arabia. The Guardian has disclosed that the prince received payments totalling more than £1bn to secure the al-Yamamah deal.
UPDATE 2: The US Department of Justice (DoJ) is now on this case under the Foreign Corrupt Practices Act (FCPA). Now, BAE is alleged to have made payments to Prince Bandar through the US banking system--a big no-no at a time when BAE is soliciting more business from the Pentagon by making acquisitions Stateside. Ooh the dirt, ooh the corruption. Such is frequently the nature of the arms trade:
The US department of justice is preparing to open a corruption investigation into the arms company BAE, the Guardian has learned. It would cover the alleged £1bn arms deal payments to Prince Bandar of Saudi Arabia.Washington sources familiar with the thinking of senior officials at the justice department said yesterday it was "99% certain" that a criminal inquiry would be opened under the Foreign Corrupt Practices Act (FCPA). Such an investigation would have potentially seismic consequences for BAE, which is trying to take over US arms companies and make the Pentagon its biggest customer.
The sources say US officials were particularly concerned by the allegations in the Guardian that UK Ministry of Defence officials actively colluded in the payments. One said: "The image of all these Bob Cratchits in Whitehall sitting at their high stools processing invoices from Bandar has been a startling one to us."
The Guardian has revealed allegations that BAE used the US banking system to transfer quarterly payments to accounts controlled by Prince Bandar at Riggs Bank in Washington. Another senior US source said this brought the payments within the ambit of the FCPA. "Prosecutors have previously taken the view that the FCPA does reach that far," the source said.
Any decision to investigate BAE would be taken by assistant attorney general Alice Fisher, who heads the criminal division. An investigation would most likely be handled by the chief prosecutor of FCPA cases, Mark Mendelsohn, deputy chief of the justice department's fraud section.
The department does not officially announce investigations, Washington sources say, but the company could be expected to make public announcements to the stock market if it happened. In past cases, US companies have often agreed to cooperate with criminal investigations rather than embark on litigation to defend themselves. Last night, BAE spokesman John Neilson repeated the company's denials of any impropriety. He added: "This question is one which should be addressed to the US department of justice". Prince Bandar has issued a statement denying any wrongdoing. He says the payments represented official Saudi government funds and were used for purposes approved by the Saudi ministry of defence.
This story is still unfolding. Keep track of it at the Guardian's online hub for BAE news.
