BAE pays hefty fines, but ducks full trial

LONDON, Feb. 9 (UPI) -- BAE Systems, Britain's biggest defense company, has accepted guilt in a scandal concerning bribery of a large scale in an $85 billion arms contract with Saudi Arabia and got itself off the hook after a bruising six-year investigation that threatened it and the Saudi royal family.

BAE, after years of denying allegations of corruption and bribery, agreed Friday to pay $400 million in fines after it admitted "defrauding the United States" over the sale of fighter aircraft to Saudi Arabia and Eastern Europe.

Analysts say BAE got off lightly by being able to draw a legal line under a case that has plagued it for years.

Because of its plea bargain, there is unlikely to be a full trial on the original allegations of bribery on a massive scale in which details of who was responsible could be examined in open court.

London's liberal Guardian daily, which had led the campaign against BAE since it exposed the alleged bribery in 2004, declared: "To Britain's shame, these admissions have been forced out of BAE, not by the U.K.'s own prosecutors, but by those of another country."

The nature of BAE's settlement also means that it will not be banned from bidding for government contracts in the United States or Britain.

A separate British case against BAE concerning alleged bribes paid through a confidential BAE agent in Austria regarding European arms deals was dropped by Britain's Serious Fraud Office following the U.S. settlement of the case involving Saudi Arabia.

Some $17 million was allegedly transferred to the confidential agent, identified as Count Alfons Mensdorff-Pouilly, for the alleged bribes.

The case was taken before a U.S. court in Washington after Britain's SFO, which prosecutes white-collar crime, was forced to drop its investigation in 2006 by Prime Minister Tony Blair on the grounds of "national security."

That followed intense pressure on Blair's government by the Saudi royal family, who allegedly received large amounts of money in bribes in the 1985 contract.

Saudi Arabia is Britain's biggest arms customer and the so-called al-Yamahah (Dove) Contract was the biggest ever concluded by Britain's defense industry. It kept BAE going for two decades.

It involved the sale, along with technical support, weapons systems, training and supply of spare parts, of an initial batch of 72 Tornado strike jets, 30 Hawk trainers and 30 other aircraft, followed in the 1990s with two more tranches totaling 48 Tornados and 72 Eurofighter Typhoon aircraft.

BAE has a U.S. subsidiary that ranks sixth among U.S. defense contractors and is thus liable for prosecution under U.S. law.

The U.S. case emerged in June 2007 when the Justice Department, which is currently on the warpath against corporate corruption and bribing foreigners for fat contracts, opened its own investigation into BAE's compliance with the Foreign Corrupt Practices Act.

The U.S. prosecutors were able to claim jurisdiction because BAE allegedly paid more than $2 billion in bribes to Prince Bandar, the former Saudi ambassador to Washington and now security adviser to King Abdallah, through the now-defunct Riggs Bank in the U.S. capital.

A case initiated by a pension fund for employees of the town of Harpers Wood, Mich., was rejected by the U.S. appeals court in January.

But the Justice Department said in an indictment Thursday that BAE "used intermediaries and shell entities to conceal payments to certain advisers who were assisting in the … (Saudi) fighters deals."

The Justice Department also supported earlier British allegations that BAE had set up a global system of offshore companies through which it paid bribes to the Saudis and other governments with which it had dealings.

"BAE took steps to conceal its relationship with … advisers and its undisclosed payments to them," the indictment declared.

"For example, BAE contracted with and paid certain advisers through various offshore shell entities beneficially owned by BAE.

"BAE also encouraged certain of its advisers to establish their own offshore shell entities to receive payments while disguising the origins and recipients of such payments."

BAE agreed to plead guilty to charges of false accounting and to settle the al-Yamahah bribery allegations with fines totaling $400 million in the United States and $46.8 million in Britain.