In mid-February the British High Court heard how Saudi Arabia threatened to end all anti-terrorism cooperation with the U.K. unless the Blair government quashed an investigation into alleged corruption. A social justice advocacy group called the Campaign Against Arms Trade and the Corner House has alleged that the government acted unlawfully in December 2006 when it told the Serious Fraud Office to stand down. After two days of hearings, the court is now considering whether to order the SFO to re-open its examination into BAE System's alleged illegal payments to Saudi Arabian officials in exchange for the sale of jet fighters.
The U.K. Guardian reported that the two-judge High Court panel "heard unchallenged allegations that it was Prince Bandar, the alleged beneficiary of £1bn in secret payments from the arms giant BAE, who threatened to cut off intelligence on terrorists if the investigation into him and his family was not stopped. Investigators said they were given to understand there would be 'another 7/7' and the loss of 'British lives on British streets' if they carried on delving into the payments. The government argued . . . that these threats were so 'grave' and put Britain's security in such 'imminent' threat that the head of the Serious Fraud Office had no option but to shut down his investigation immediately."
The U.K. government's decision to end the investigation drew criticism from the OECD and apparently spurred Swiss authorities to look into possible breaches of anti-money laundering laws and American prosecutors to examine whether there were violations of the Foreign Corrupt Practices Act. Both BAE and Prince Bandar have denied breaking any laws.
Meanwhile, the Associated Press reported on February 9 that a United States federal district court has temporarily blocked Prince Bandar -- the former Saudi ambassador to the United States and now head of Saudi Arabia's National Security Council -- from removing real estate sales proceeds from the U.S. pending resolution of a class-action lawsuit. "The suit filed last September by a tiny Michigan city retirement system accuses current and former directors of BAE Systems PLC, a giant British defense company, of breaches of fiduciary duties in connection with $2 billion or more in alleged illegal bribes paid to Bandar in connection with an $86 billion BAE arms sale to Saudi Arabia in 1985. Bandar also is named as a defendant in the suit, along with the former Riggs Bank of Washington and its successor, PNC Financial Group. BAE and Bandar have strongly denied that illegal payments were made to Bandar."
The AP story said U.S. District Judge Rosemary M. Collyer issued "a temporary restraining order, signed Feb. 5, that the suit by the City of Harper Woods Employees' Retirement System raises serious questions of law that warrant a temporary order keeping Bandar from taking the proceeds of real estate sales out of U.S.-based accounts. . . . The retirement system suit maintains that Bandar used funds illicitly obtained from BAE Systems to acquire U.S. real estate, including a Colorado ranch and mansion once placed on the market at $135 million and the former William Randolph Hearst mansion in California, offered for sale last summer at $165 million."
The same AP story reported developments in the U.K. this way: "In London, lawmakers disclosed last month that Britain's head of overseas intelligence had warned that Saudi Arabia probably would stop sharing vital information on terrorism if prosecutors pursued an investigation into alleged corruption in the arms deal. MI6, Britain's overseas intelligence service, believed Saudi Arabia would probably end information-sharing with Britain if investigators continued the inquiry, former Attorney General Peter Goldsmith told the committee. MI6 raised objections to the prosecution before Britain's Serious Fraud Office decided to end the case, he said."
View the February 16, 2008 report from the Guardian here.
View the February 9, 2008 report from the Associated Press here.
View prior posts about BAE Systems here.