BAE's Odd Behavior

Last week we talked about BAE's failure to appoint a compliance monitor within the 90-day period specified in its March 1 plea agreement. BAE blamed the Justice Department for rejecting six candidates and the DOJ blamed BAE for picking the wrong people.

The company asked Judge John Bates for a 90-day extension for appointing the monitor, which the DOJ "nominally" opposed, according to the judge, and which he ultimately granted.

But in his order the judge chided BAE for arguments it raised about his authority to modify the plea agreement. BAE said the judge could grant the 90-day extension for appointing the monitor, but couldn't change the description of the monitor's term to make sure he or she will serve three years, as called for in the plea agreement, and not three years minus 90-days. The judge called BAE's position "odd."

We'd call it quibbling, nit-picking, and pettifogging. Curious behavior from a company that admitted breaking several U.S. criminal laws and still managed to negotiate a favorable settlement with the DOJ. How favorable? Based on BAE's plea, the federal sentencing guidelines say it could have been penalized up to $720 million. Instead it paid $400 million. Yet, in the relatively small matter of appointing a monitor, BAE blasted the DOJ and hurled a half-baked challenge at the judge's authority.

What gives? Is BAE grateful for a settlement that saved its shareholders $320 million and preserved its ability to sell military gear to the U.S. government? Or is it resentful that it had to deal with the DOJ at all, pouting like a corporate Lindsay Lohan about the consequences of its own behavior?

Judge Bates' language in his order was judicious. Still, he was scratching his head, saying:

BAE disagrees, however, to the modification of other conditions of probation -- in particular, extension of the maximum term of engagement of the monitor by 90 days -- making the conclusory assertion that the latter condition is beyond the Court's authority under § 3563(c). But at the motions hearing, BAE offered no principled basis for drawing such a distinction among the conditions of probation subject  to modification by the Court. Indeed, BAE took the odd position that the Court could modify the period for engaging a monitor and even the term of probation imposed, but not the maximum term of the monitor. In the Court's view, that position is untenable.

Download a copy of the June 4, 2010 order in US v. BAE Systems plc here.