Bribery Newsflash: UK Court decision on BAE Systems Plc settlement
22 December 2010
The Serious Fraud Office has demonstrated its ability to enter into flexible settlement agreements with organisations accused of corruption. Today, Mr Justice Bean, sitting at Southwark Crown Court, provided the long awaited decision on the penalty for BAE Systems plc over payments it made to a middle man in Tanzania.
The SFO's investigations focused on allegations that BAE paid bribes to win contracts from several nations in Africa and Eastern Europe including Tanzania, the Czech Republic, Romania and South Africa. In 2001, Tanzania purchased a military air traffic control system from BAE. Suspicions were aroused because Tanzania did not have military aircraft. In January 2007, it was reported that $12.4m had been paid into the Swiss bank account of a middle man involved in the Tanzanian deal by a BAE subsidiary, Red Diamond. The payment amounted to approximately a third of the value of the contract.
In February 2010, as part of a wider settlement coordinated by the UK SFO and the US Department of Justice, BAE agreed to plead guilty in the UK to one offence of failing to keep proper accounting records contrary to Section 221 of the Companies Act 1985 and pay £30 million comprising a financial order to be determined by a Crown Court judge with the balance paid as an ex gratia payment for the benefit of the people of Tanzania. The fine imposed by the court today was £500,000. It is expected therefore, that BAE will pay £29.5 million as an ex-gratia payment to Tanzania. In return, the SFO agreed not to investigate or pursue criminal proceedings against BAE or its subsidiaries for any conduct prior to the date of the settlement agreement.
Commentary
The SFO has faced criticism for its decision to prosecute BAE for a 'books and records' offence as opposed to a more serious corruption offence. Mr Justice Bean acknowledged the court's lack of power to set aside or challenge the basis for the settlement agreement. In particular, it was acknowledged that it was for the SFO and not the Court to decide who should be prosecuted and for what offences. Today's judgment demonstrates that the prosecutor continues to have discretion as to the charges that businesses will face in relation to inappropriate payments. It also reinforces the SFO's flexibility to deal more leniently with organisations which 'self-report' a transgression. That leniency can include the SFO agreeing not to pursue criminal investigations into other historic issues that might exist which have not been self-reported.
Ndugu zangu Chenge amepona alivuta pesa za BAE lakini hakuna wa kumshtaki maana hata jaji wa UK amesema itakuwa ngumu