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Mr Justice Bean tells Southwark Crown court it appeared that BAE had paid 'whatever was necessary' to get contract
BAE has steadfastly argued that it did not make corrupt payments to secure a contract from the Tanzanian government. Photograph: Murdo MacLeod for the Guardian
A controversial deal between prosecutors and Britain's biggest arms firm, BAE, was today challenged by a judge who said the company appeared to have been engaged in bribery.
BAE had reached a deal with the Serious Fraud Office earlier this year in which it agreed to plead guilty to a relatively minor accounting offence. BAE steadfastly argued that it did not make corrupt payments to secure a £28m contract from the Tanzanian government.
But today, Mr Justice Bean questioned the heart of the agreement, repeatedly saying that payments originating from the company appeared to be "corrupt" and for "bribing decision-makers in Tanzania". He told Southwark crown court that it appeared that BAE had paid "whatever was necessary to whomever it was necessary" to get the Tanzanian contract. He added that it appeared that the payments were disguised so that BAE "would have no fingerprints on the money". "They just wanted the job done hear no evil, see no evil," he said. The judge is due to sentence BAE tomorrow .
In February, BAE struck the plea deal with the SFO and American prosecutors to end years of corruption investigations into its business methods. The arms giant agreed to pay £3 m in corporate penalties in return for admitting accounting irregularities over a radar contract with Tanzania. Anti-corruption campaigners have argued that the deal is too lenient and cosy.
Today, Victor Temple, the QC for the SFO, told the court that BAE had set up a system of "covert" and "overt" agents to sell their arms around the world. The "overt" advisers "conducted their work openly as BAE's in-house representatives", he said, while the "covert" agents' work was "highly confidential".
He said Sir Richard Evans, BAE's chairman, had "personally approved" the use of a businessman, Sailesh Vithlani, as its "covert" agent to secure the Tanzanian radar contract. Approval was also given by Mike Turner, then a board member who later became BAE's chief executive.
Temple said BAE paid $12.4m (£7.7m) to Vithlani between 2000 and 2005 around a third of the radar contract's value.
BAE had paid much of this money through its front company based in the British Virgin Islands (BVI), known as Red Diamond, to a Panama-based company controlled by Vithlani.
Today the court heard that the SFO and BAE had agreed a series of "carefully- worded" statements to put before the judge. These included:
The admission by BAE that "there was a high probability that part of the $12.4m would be used to favour BAE" while the contract was being negotiated;
"It was not now possible to establish precisely what Vithlani did with the money which was paid to him";
That the SFO did not say that any of this money was "in fact improperly used";
That the SFO accepted that BAE had not engaged in corruption.
The judge called these statements the "critical part" of the case, repeatedly asking barristers for the SFO and BAE what the money had actually been used for.
He said: "I have to establish what has happened. If there is no money to be used for corrupt practices, why is 97% of it paid through a BVI company controlled by BAE to another [offshore] company controlled by Vithlani?"
When Temple said Vithlani had been hired to lobby for BAE, the judge questioned why the businessman was paid so much for his work.
Temple said that lobbying was legitimate work. "To lobby is one thing, to corrupt another".
Temple added that BAE had committed the accounting offence as Vithlani had been recorded in its books as performing "technical services", but he had no knowledge of any technical matters.
David Perry, QC for BAE, argued that the firm had not admitted any corruption and should only be sentenced for the one offence they had confessed to in the plea bargain.
The judge had threatened to call witnesses to testify as he wanted to established the purpose of the payments, but later decided to go ahead with passing sentence tomorrow.
BAE has steadfastly argued that it did not make corrupt payments to secure a contract from the Tanzanian government. Photograph: Murdo MacLeod for the Guardian
A controversial deal between prosecutors and Britain's biggest arms firm, BAE, was today challenged by a judge who said the company appeared to have been engaged in bribery.
BAE had reached a deal with the Serious Fraud Office earlier this year in which it agreed to plead guilty to a relatively minor accounting offence. BAE steadfastly argued that it did not make corrupt payments to secure a £28m contract from the Tanzanian government.
But today, Mr Justice Bean questioned the heart of the agreement, repeatedly saying that payments originating from the company appeared to be "corrupt" and for "bribing decision-makers in Tanzania". He told Southwark crown court that it appeared that BAE had paid "whatever was necessary to whomever it was necessary" to get the Tanzanian contract. He added that it appeared that the payments were disguised so that BAE "would have no fingerprints on the money". "They just wanted the job done hear no evil, see no evil," he said. The judge is due to sentence BAE tomorrow .
In February, BAE struck the plea deal with the SFO and American prosecutors to end years of corruption investigations into its business methods. The arms giant agreed to pay £3 m in corporate penalties in return for admitting accounting irregularities over a radar contract with Tanzania. Anti-corruption campaigners have argued that the deal is too lenient and cosy.
Today, Victor Temple, the QC for the SFO, told the court that BAE had set up a system of "covert" and "overt" agents to sell their arms around the world. The "overt" advisers "conducted their work openly as BAE's in-house representatives", he said, while the "covert" agents' work was "highly confidential".
He said Sir Richard Evans, BAE's chairman, had "personally approved" the use of a businessman, Sailesh Vithlani, as its "covert" agent to secure the Tanzanian radar contract. Approval was also given by Mike Turner, then a board member who later became BAE's chief executive.
Temple said BAE paid $12.4m (£7.7m) to Vithlani between 2000 and 2005 around a third of the radar contract's value.
BAE had paid much of this money through its front company based in the British Virgin Islands (BVI), known as Red Diamond, to a Panama-based company controlled by Vithlani.
Today the court heard that the SFO and BAE had agreed a series of "carefully- worded" statements to put before the judge. These included:
The admission by BAE that "there was a high probability that part of the $12.4m would be used to favour BAE" while the contract was being negotiated;
"It was not now possible to establish precisely what Vithlani did with the money which was paid to him";
That the SFO did not say that any of this money was "in fact improperly used";
That the SFO accepted that BAE had not engaged in corruption.
The judge called these statements the "critical part" of the case, repeatedly asking barristers for the SFO and BAE what the money had actually been used for.
He said: "I have to establish what has happened. If there is no money to be used for corrupt practices, why is 97% of it paid through a BVI company controlled by BAE to another [offshore] company controlled by Vithlani?"
When Temple said Vithlani had been hired to lobby for BAE, the judge questioned why the businessman was paid so much for his work.
Temple said that lobbying was legitimate work. "To lobby is one thing, to corrupt another".
Temple added that BAE had committed the accounting offence as Vithlani had been recorded in its books as performing "technical services", but he had no knowledge of any technical matters.
David Perry, QC for BAE, argued that the firm had not admitted any corruption and should only be sentenced for the one offence they had confessed to in the plea bargain.
The judge had threatened to call witnesses to testify as he wanted to established the purpose of the payments, but later decided to go ahead with passing sentence tomorrow.
