BAE the Latest to Pay the FCPA Piper

Nary a week seems to pass these days when we’re not reminded of just how serious the Justice Department’s taking allegations of foreign corruption.

Close off the heels of news of the “Catch 22″ sting, in which nearly two dozen munitions and firearms executives were arrested on foreign corruption charges comes another significant development for the feds chasing alleged Foreign Corrupt Practices Act violations: Britain’s BAE Systems late last week reached settlements totaling almost $500 million with the DOJ and the U.K. Serious Fraud Office to resolve longstanding corruption allegations that have dogged one of the world’s biggest defense contractors. Click here for the WSJ story;

Under the agreements, London-based BAE will plead guilty to charges in both countries, relating to transactions that took place before 2002. The investigations examined whether BAE had made illegal payments to officials in various countries to secure lucrative contracts. The accusations have cast a shadow over BAE’s business, even as it has expanded world-wide.

“It allows us to draw a very heavy line under the legacy of very historical issues,” said BAE Chairman Dick Olver. “We’re pleased to see the uncertainty removed.”

The U.S. plea deal, under which BAE will pay $400 million to settle one charge of conspiring to make false statements to the government, demonstrates the Justice Department’s ability to impose tight U.S. ethical standards for its defense contractors, even ones based overseas.

U.S. court documents detailed what prosecutors allege was BAE’s use of secretive offshore entities and shell companies, and its efforts to conceal where payments were going, in 1999 deals to lease fighter jets to Hungary and the Czech Republic. According to prosecutors, BAE avoided communicating with so-called “marketing advisers” in writing and maintained scant information about its payments.

After 2001, prosecutors allege, BAE made payments totalling more than £135 million and an additional $14 million-plus to marketing advisers through one offshore entity, according to the court documents.

The U.S. filing also alleges that BAE paid tens of millions of dollars to a Saudi government official and other associates, as well as to intermediaries, as recently as 2002. The payments were made as part of its management of a long-term agreement begun in the 1980s between the U.K. and Saudi Arabia to supply military hardware to the Saudis, U.S. prosecutors say.

Gary G. Grindler, acting deputy attorney general, said: “Any company conducting business with the United States that profits through false statements will be held accountable.”

Photo: Getty Images

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