BAE Systems handed £286m criminal fines in UK and US

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BBC

BAE Systems will admit two criminal charges and pay fines of £286m to settle US and UK probes into the firm.

It will hand over more than £250m to the US, which accused BAE of "wilfully misleading" it over payments made as the firm tried to win contracts.

BAE will pay about £30m in the UK - a record criminal corporate fine - for separate wrongdoings.

The firm said the pleas did not relate to accusations of corruption or bribery but that it "regretted" shortcomings.

BBC business editor Robert Peston said that pleading guilty to criminal charges in Britain and America was "a serious embarrassment" to BAE, the UK's largest manufacturer.


The US Department of Justice's charge is serious and damaging to BAE's reputation
Robert Peston

Read Robert's blog

"Although the fines will be seen by some as damaging to one of the UK's most significant companies, BAE's directors are relieved at what they see as a final settlement of a controversy that has dogged the company for years," he added.

'Anti-bribery failures'

US and UK authorities have been investigating the case for about eight years, and it is believed to be the first time the two countries have coordinated such a corporate corruption "plea bargain".


ANALYSIS
By Joe Lynam, BBC Business Correspondent

The sense of relief on the face of SFO director Richard Alderman was almost tangible.

His organisation has been wrestling with BAE since 2004 and had been subject to quite a bit of corporate, legal and political pressure. None more so than in 2006 when it was ordered to drop its investigation into BAE's arms deal with Saudi Arabia.

In the end the SFO can take some comfort in slapping a record £30m fine albeit for the innocuous offence of "breach of duty to keep accounting records".

The fine for BAE though is mere loose change given it enjoyed revenues of nearly £20bn ($32bn) in 2008.

A line has been drawn under the affair from the British point of view but will it restore the SFO's battered reputation for inscrutable independence?

How are arms deals done?
End of the story?

In a deal with the US Department of Justice (DoJ), BAE admitted a charge of conspiring to make false statements to the US government.

A charge filed in a District of Columbia court contains details of substantial secret payments by BAE to an unnamed person who helped the UK firm sell plane leases to the Hungarian and Czech governments.

The DoJ also details services such as holidays provided to an unnamed Saudi public official and cash transfers to a Swiss bank account that it says were linked to the £40bn Al-Yamamah contract to supply military equipment to Saudi Arabia.

The DoJ gave a damning condemnation of BAE which it said had accepted "intentionally failing to put appropriate, anti-bribery preventative measures in place", despite telling the US government that these steps had been taken.

It then "made hundreds of millions of dollars in payments to third parties, while knowing of a high probability that money would be passed on to foreign government decision-makers to favour BAE in the award of defence contracts", the DoJ said.

There was also an infringement of restrictions on the supply of sensitive US technology in deals to supply aircraft in Hungary and the Czech Republic.

The British charge stems from an $39.5m contract signed in 1999 to supply a radar system to Tanzania, and relates to payments to a former marketing adviser in the east African country.

BBC business editor Robert Peston: "This is a very serious embarrassment"

Part of the fine will be a charity payment which will go to Tanzania.

BAE has also reached agreement with the UK Serious Fraud Office (SFO) to plead guilty to breach of duty to keep accounting records.

The SFO said the settlement brought an end to its probe into BAE.

'Satisfied'

The last of the offences was committed in 2002, and BAE says it has since reformed the way it conducts business.

"We're satisfied with that global settlement," said chairman Dick Olver.

"It allows us to draw a very heavy line under the legacy, the historical issues. We're obviously pleased to see uncertainty removed for our shareholders."

Transparency International UK, which campaigns against corporate and government corruption welcomed the announcement.

"It's important for companies to receive large fines if they have engaged in unethical behaviour," said executive director Chandrashekhar Krishnan.