BAE sentenced over payment records


BAE Systems will be sentenced for failing to keep proper records of payments to an adviser in Tanzania

Defence giant BAE Systems is due to be sentenced for failing to keep proper records of payments to an adviser in the east African country of Tanzania.

Payments totalling about 12.4 million US dollars (£7.7 million) were made to two companies controlled by Tanzania-based businessman Shailesh Vithlani between January 2000 and December 2005, Southwark Crown Court was told on Monday.

The company believes that Mr Vithlani was probably given the money for helping it win a contract to provide a radar system at Dar-es-Salaam international airport, the court heard. Some payments were through a company controlled by BAE plc, called Red Diamond, which was registered in the British Virgin Islands, Victor Temple QC, prosecuting for the Serious Fraud Office (SFO) said.

BAE pleaded guilty to one count of breaching its duty to keep accounting records contrary to section 221 of the Companies Act 1985 following a written settlement with the SFO on February 16, Mr Temple said.

During that time the company was also involved in plea negotiations with prosecuting authorities in the United States, and on March 1 it pleaded guilty to one offence of conspiring to impair and impede the lawful government functions of the United States, relating to its operations and business dealings in the Czech Republic, Hungary, Saudi Arabia and elsewhere. It was fined 400 million dollars (£280 million).

Mr Temple said BAE, in support of its overseas sales, would employ both “overt” and “covert” advisers, and the relationship with the latter was regarded as highly confidential.

Between September 1995 and September 1996 BAE executives were actively looking for ways to achieve maximum confidentiality with regard to the names of, and payments to, advisers, and Mr Vithlani was one such adviser.

Mr Temple said that BAE had accepted in the basis of plea that there was a high probability that part of the 12.4 million dollars would be used in the negotiation process to favour British Aerospace Defence Systems Limited (BAEDS), and that there was a high probability that the payments to Mr Vithlani were intended to compensate him for work done in seeking to persuade relevant persons to favour BAEDS in respect of the radar project.

“It is not now possible to establish precisely what Vithlani did with the money which was paid to him,” he added. However, it was no part of the Crown’s case that any part of those payments was improperly used in the negotiation process to favour BAEDS.

“To lobby is one thing, to corrupt another,” he said. “The SFO’s investigation ended with the plea agreement and the SFO has decided not to charge the company with any such offences. Further, the SFO readily acknowledges that the company has gone to very considerable lengths to ensure that the conduct giving rise to the offence is never again repeated and has instituted appropriate standards of compliance.”

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