British Arms Manufacturer Faces Bribery Charges

Britain's Serious Fraud Office announced today it will seek to prosecute the world's No. 2 defense contractor on charges of corruption in dealings on foreign contracts. BAE Systems is accused of paying out millions of dollars to win arms contracts from a number of countries, including Tanzania, the Czech Republic, Romania and South Africa.

A company sign of BAE Systems is seen at a plant building in Guildford, England, 01 Oct 2009
Today's announcement comes after an-ongoing investigation by the Serious Fraud Office into BAE that dates back to the 1990s.

In 2006, the SFO dropped an investigation into allegations that Saudi Arabian officials were bribed by BAE, after then British Prime Minister Tony Blair said the probe threatened national security.

But now, the SFO says it is ready to bring the arms manufacturer to court.

Chandrashekhar Krishnan, executive director of Britain's anti-corruption agency Transparency International, says in the past Britain has been slow to bring legal action in bribery cases. But he says today's move marks an important step.

"We are seeing progress. It's probably not as fast as we would like it to be but certainly the direction of travel is positive. Certainly the international regulatory environment is changing - more governments now are cracking down much harder on foreign bribery," he said.

He says the defense industry has particular problems with corruption.

"The industry is traditionally very prone to keeping things in secrecy," added Krishnan. "Because quite often the arguments that a defense deal is essential on national security grounds then that becomes justification for shielding it from public scrutiny."

For many years BAE has denied wrongdoing. Today the company said it is seeking to resolve the matters under investigation by the SFO.

If found guilty, BAE may face huge charges - but lawyers say the case may be very difficult to prove.

The Anti-terrorism, Crime and Security Act 2001 extended British corruption law to cover bribery of overseas officials. But lawyers say the SFO may find it hard to get a conviction on accusations of bribery before that date.

Krishnan says bribery by western companies can be disastrous to developing countries. Often already high levels of corruption are made worse and much-needed finances are channeled in the wrong direction.

"Invariably, the victims of corruption by and large tend to be the poorest and most vulnerable people in the poorest developing countries," he added. "Because of corruption in defense deals, countries either end up getting defense equipment which they don't really need or they get defense equipment which they may legitimately need but which costs much much more than it should be costing them."

Corruption probes have become increasingly widespread in recent years. The United States has brought 120 similar cases to court.

Last year German industrial group Siemens agreed to pay just over $1.3 billion to settle corruption probes in the United States and Germany.