Feeds

BAE shares tank as US feds break cover

The hunt is on

Build a business case: developing custom apps

UK arms colossus BAE Systems is under investigation by US authorities for alleged corruption.

According to The Guardian, BAE Systems last night received formal notification that the US Department of Justice was investigating "the company's compliance with anti-corruption laws, including the company's business concerning the Kingdom of Saudi Arabia".

BAE shares immediately plunged 10 per cent during morning trading, down 45.2p to 397p.

The language of the BAE announcement to the London stock exchange suggests that the feds may indeed have a remit to investigate the company's affairs beyond the long-running al-Yamamah deal between the UK and Saudi Governments, as has previously been hinted. It's widely believed that convictions regarding al-Yamamah would be difficult to obtain, as the Saudi officials who have received allegedly corrupt payments are firmly backed by their relative the king. The Saudi state's position is that all payments were entirely legitimate, and thus no crime has taken place.

Convictions regarding Saudi payments may be difficult to obtain; but other governments in Eastern Europe and Africa might well cooperate, especially with US diplomatic clout backing the feds.

BAE, meanwhile, says it has done nothing wrong in following the terms negotiated by the British Government. The Ministry of Defence agreed that large amounts of the Saudi oil credit used to pay for jets and other weaponry under al-Yamamah would be returned to specified Saudi royals in the form of hard cash in Western bank accounts. If BAE had failed to pay up, it would have been guilty of defaulting on a contract.

The fact that the UK Government has been entirely complicit in the handling of al-Yamamah has no doubt contributed to its decision to close down its own Serious Fraud Office investigation into the Saudi backhanders. Not to mention pressure from the House of Saud, who want no public discussion of the way they handle their country's revenues. Last year's announcement by the Saudis that they would purchase a large number of Eurofighters from BAE has no doubt furnished the desert princes with additional leverage.

But the bloodhounds of the SFO, disgruntled at being whipped off a promising scent at the behest of foreign despots and their UK Government and arms-biz puppets, have had their revenge. It was almost certainly insiders at the SFO who leaked details of huge BAE/MoD payments to Saudi Prince Bandar via Riggs bank in Washington.

That gives the American feds an in to the case, and it seems that not even Tony Blair's close chumship with George Bush, nor BAE's traditionally privileged status in DC, has been enough to keep the federal hounds on the leash. The hunt is on.

Where it will lead remains to be seen. The smooth passage of BAE's push to buy US manufacturer Armor must surely now be in doubt. And if people at BAE actually start to go down - the US Government has already used the new US-UK anti-terror extradition arrangements very creatively against suspect Brit businessmen - the arms execs will be reluctant to take the fall alone. They've had government approval for everything they've done - in particular, from officials at the MoD arms-sales-encouragement agency. Some of the trails may lead a surprising distance up the British corridors of power; there will be worried faces along Whitehall this morning.

Tony Blair may be getting out just in time, leaving a massive time bomb for his successor.®

Build a business case: developing custom apps

More from The Register

next story
'Stop dissing Google or quit': OK, I quit, says Code Club co-founder
And now a message from our sponsors: 'STFU or else'
Top beak: UK privacy law may be reconsidered because of social media
Rise of Twitter etc creates 'enormous challenges'
Uber, Lyft and cutting corners: The true face of the Sharing Economy
Casual labour and tired ideas = not really web-tastic
Ex US cybersecurity czar guilty in child sex abuse website case
Health and Human Services IT security chief headed online to share vile images
Don't even THINK about copyright violation, says Indian state
Pre-emptive arrest for pirates in Karnataka
The police are WRONG: Watching YouTube videos is NOT illegal
And our man Corfield is pretty bloody cross about it
Oz biz regulator discovers shared servers in EPIC FACEPALM
'Not aware' that one IP can hold more than one Website
prev story

Whitepapers

Gartner critical capabilities for enterprise endpoint backup
Learn why inSync received the highest overall rating from Druva and is the top choice for the mobile workforce.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.