BAE Systems Settles Illegal Payments Probes in U.S., UK

 - February 19, 2010, 5:06 AM

BAE Systems agreed to pay a $400 million fine to settle a U.S. Department of Justice (DOJ) investigation into commission payments made to secure arms contracts. BAE also made an out-of-court settlement with the UK Serious Fraud Office (SFO), which has been investigating the company since 2004. The DOJ alleged that BAE had made payments from offshore accounts to agents and officials with respect to the Al-Yamamah contracts with Saudi Arabia, and deals to lease Gripen fighters to the Czech Republic and Hungary. BAE Systems was in a marketing partnership with Saab at the time. BAE said it was pleading guilty to one charge of conspiring to make false statements to the U.S. government in connection with certain regulatory filings and undertakings.

The SFO’s investigation into BAE’s dealings with Saudi Arabia was halted by the UK government in 2006. However, the SFO continued to investigate the Gripen deals, including another to South Africa; BAE’s dealings in Chile, Qatar and Romania; and the sale of an air traffic control radar system to Tanzania. The UK settlement involves BAE paying a fine of just £30 million for “breach of duty to keep accounting records in relation to payments made to a former marketing advisor in Tanzania,” according to BAE.

BAE chairman Dick Olver said: “These settlements enable the company to deal finally with significant legacy issues. In the years since the conduct referred to in these settlements occurred, the company has systematically enhanced its compliance policies and processes with a view to ensuring that the company is as widely recognized for responsible conduct as it is for high quality products and advanced technologies.”