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FCPA Blog Daily News

Entries in Serious Fraud Office (242)

Sunday
Feb242008

BAE And Prince Bandar Stay In The News

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.

Sunday
Dec092007

Enforcement Sans Frontières

By most counts, U.S. authorities are now investigating between 50 and 60 companies for possible violations of the Foreign Corrupt Practices Act. That's a record number. How many of them will face enforcement actions is anyone's guess. But three investigations worth watching have this in common: the targets are industry-leading multinationals headquartered outside the United States. The U.S. government hasn't said much about the cases, but the message seems clear: if other countries won't police their corporate citizens, American authorities will do it for them -- at least when it comes to international public corruption.

Panalpina (Switzerland) -- In February 2007, the Department of Justice said in connection with the Vetco case that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .” Since then, about a dozen leading oil and gas services companies have announced FCPA investigations resulting from their relationship with logistics leader Panalpina. By mid year, the DOJ and the Securities and Exchange Commission had extended the investigation into Panalpina's activities in Nigeria, Kazakhstan and Saudi Arabia, and had sent letters to its customers, “asking them to detail their relationship with Panalpina . . . ." Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries are among those involved. In September, Panalpina said it is cooperating with U.S. prosecutors and exiting the Nigeria logistics and freight forwarding market for all oil and gas services customers. With crude prices near triple digits, can the U.S. government afford to cripple output anywhere in the name of FCPA enforcement? Probably not. But the DOJ may have made special arrangements directly with the Nigerian government for customs clearance and permitting on behalf of the oil services companies. That will allow them to keep working but still comply with the FCPA. Meanwhile, the investigation of Panalpina continues. Prior posts about Panalpina are here.

Siemens (Germany) -- In early October 2007, the German engineering and industrial giant settled global corruption charges with Munich prosecutors. Siemens paid a fine of €201 million and at the time admitted to questionable payments around the globe of approximately €420 million. But the settlement didn't resolve the FCPA investigation by U.S. authorities, and Siemens later disclosed that its internal review, run by a U.S. law firm, has identified questionable payments of up to €1.3 billion. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. When Siemens finally reaches a deal with U.S. prosecutors, it will likely pay the highest penalties ever for FCPA offenses. The current record of $44.1 million is held by Baker Hughes. Prior posts about Siemens are here.

BAE Systems (United Kingdom) -- The defense contractor is accused of paying £1 billion to Prince Bandar (who allegedly passed money to other officials) in return for help selling Typhoon jet fighters to the Saudi government. The Serious Fraud Office started an investigation but Prime Minister Tony Blair shut it down last year, citing national security. That darkened the OECD's tenth anniversary celebration of its Anti-Corruption Treaty, to which the United Kingdom is a signatory. Meanwhile, the U.S. Department of Justice picked up the investigation and started gathering evidence about possible FCPA violations directly from British witnesses. The U.K. government has already complained about U.S. investigative tactics. And Prince Bandar has lawyered up big time -- retaining Freeh Group International, whose partners include former FBI director Louis Freeh, former head of enforcement at the SEC Stanley Sporkin, and a retired British high court judge, Sir Stephen Mitchell. Prior posts about BAE are here.

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