BAE accused of £100m secret payments to seal South Africa arms deal David Leigh and Rob Evans The Guardian, Saturday December 6 2008 More than £100m was secretly paid by the arms company BAE to sell warplanes to South Africa, according to allegations in a detailed police dossier seen by the Guardian yesterday. The leaked evidence from South African police and the British Serious Fraud Office quotes a BAE agent recommending "financially incentivising" politicians. In the arms deal, the new ANC government in South Africa agreed to spend a controversial £1.6bn buying fleets of Hawk and Gripen warplanes. Critics said the country, beset by unemployment and HIV/Aids, could not afford it. The Hawks, rejected by the military, cost twice as much as Italian equivalents. But the then South African defence minister Joe Modise and a key official, Chippy Shaik, insisted on the purchase. BAE is accused in the reports of corrupt relationships with an arms tycoon, John Bredenkamp, recently blacklisted in the US for his links with Robert Mugabe of Zimbabwe. Bredenkamp's blacklisting freezes his assets in the US. BAE's former marketing director for southern Africa, Allan McDonald, has been speaking to police, the leaked files say. He allegedly told them Bredenkamp "gave progress reports directly to Mike Turner". Turner, who has been interviewed under caution by the SFO, stepped down last year as BAE's chief executive. Bredenkamp-linked companies were paid £40m by BAE to promote the arms deal. According to McDonald, "Bredenkamp suggested identifying the key decision-makers, with a view to 'financially incentivising them' to make the right decision". The Bredenkamp team claimed he said, "We can get to Chippy Shaik". A seized memo also referred to "third world procedures". An SFO affidavit says: "I believe that a reference to 'third world procedures' is a veiled reference to the payment of bribes." Offshore financial advisers of the Thatcher family are also named as potential witnesses in affidavits. Jersey accountant Hugh Thurston, who advised the former Conservative prime minister and her family, has given information to SFO investigators. He was involved, according to the police report, in setting up offshore companies for a South African politician's aide. The aide, Fana Hlongwane, was adviser to Modise. Hlongwane's cash was allegedly covertly distributed to accounts offshore and in China. Another member of the former Thatcher circle, and a potential witness, named in the files is businessman Alan Curtis. Curtis, sometime chairman of Lotus Cars, was a business associate of the late Denis Thatcher and his son Mark. A British Virgin Islands-registered, Swiss-based, offshore company linked to him received £8.5m, the report says, for its part in helping promote the 1999 arms contract. Curtis, at home in Farnham, Surrey, yesterday denied to the Guardian that he operated Brookland Management, the company concerned. He said he was only involved in promoting "social programmes and job creation". A lengthy affidavit from the SFO in London, leaked to the Mail & Guardian newspaper in South Africa, accuses BAE of "covert" behaviour and of withholding information. SFO principal investigator Gary Murphy says in the affidavit, sworn on October 9: "I believe that BAE have sought to conceal from the SFO the involvement of [Joe Modise aide] Fana Hlongwane." BAE is also alleged to have drawn up an untruthful "line" about Hlongwane for its press office in 2003. A seized document says that if asked if BAE had ever had any relationship with Hlongwane, it was to say: "No, never - we knew him only as a member of the minister's entourage." It is alleged that in fact, the company was paying him millions of pounds, through a variety of secret routes. A Swiss bank, HSBC in Geneva, has now frozen $11.4m of Hlongwane accounts and sums of £400,000 and 3m controlled by him at Liechtenstein banks have also been discovered and frozen. A letter from a Leichtenstein judge is quoted in the dossier, saying: "It is suspected that frozen assets belonging to Hlongwane ... are linked with active and passive bribery and corruption by the company operating as BAE Systems PLC, using a system of international representatives." The contents of all these documents have surfaced after being presented to a South African judge as grounds for issuing search warrants on seven premises last week. The Scorpions, the special police unit working on the case in South Africa, currently faces disbandment because of political hostility to their work. This follows the closedown of the SFO's own inquiry in London into BAE's multimillion pound payments to members of the Saudi royal family. Tony Blair, as prime minister, forced the SFO to call off the inquiry on alleged grounds of "national security". Bredenkamp has denied all wrongdoing. BAE would not respond to the specific allegations, but said: "We continue to support the SFO in its inquiries, with access to people, information and premises whenever requested and wholeheartedly support a rigorous approach, in the hope that it brings to a conclusion inquiries which are now in their fifth year."