MPs criticise BAE Systems in Tanzania corruption inquiry

The British arms and aircraft firm BAE Systems have received a severe rebuke by UK MPs for its actions relating to corruption in Tanzania.

Sixteen months ago, BAE agreed to pay £30 million to Tanzania as part of its settlement with the Serious Fraud Office (SFO), but has yet to pay any of the money.

MPs on the International Development Committee accused the company of "procrastinating" and called the "advisory board" the company set up to ensure the money reached the best possible causes in Tanzania a "complete sham".

Committee chairman Malcolm Bruce MP asked whether it was not "offensive" for the company to suggest it knew better how to spend the money than the government of Tanzania, according to the BBC.

The money was due to be paid in March as a single payment, but BAE has said it would prefer to pay it in smaller amounts, and that it is ready to release £10 million in coming weeks.

“BAE's arrogance is breathtaking,” Bruce was quoted in the Financial Times as saying.

“They won't call the money a fine or reparations. They're acting as if they were making a kindly gesture. They want to pay it in tranches instead of handing it over under an internationally agreed system meant to ensure transparency and proper auditing. It is beyond belief.”

The case relates to the supply of an air-traffic radar control system in 1999. BAE admitted to not keeping full accounting records of £8 million it paid to an agent who brokered the deal.

While both BAE and the SFO said they cannot say whether the £8 million was used illegaly to secure BAE the radar sale, the judge in the original court case said it was “naïve in the extreme” to think that the money was used legitimately.

It has also been argued that the military-style air-traffic system that BAE provided to Tanzania was unnecessarily complex and expensive, and the £30 million that BAE agreed to pay was effectiviely a compensation payment, according to the BBC.

BAE said it could not release the payment until the precise settlement had been finalised by a judge. In a statement on Tuesday 19th July, BAE said it would "consider" the views of the MPs "with a view to making the payment in a responsible and timely manner".

SFO Director, Richard Alderman, who was at the hearing, made it clear that he would take BAE back to court if the payment was not made soon.

A subsidiary of BAE, Armor Holdings Inc, has also experienced trouble to do with corruption investigations recently, as it agreed to pay about US$16 million to settle charges in the US that it paid bribes to a UN procurement official in return for contracts to supply body armour for peacekeeping missions.

The US Justice Department announced on Wednesday 13th July that Armor Holdings admitted that from 2001 to 2006, a UK subsidiary paid more than US$200,000 in commissions to a sales agent who then passed some of money to an unnamed procurement official, according to the Wall Street Journal.

Armor admitted to falsely recording the payments and hiding another US$4.4 million, which was used to pay intermediaries who helped gain business with foreign governments.

BAE acquired Armor Holdings in 2007, after the conduct took place, and according to BAE spokesman Brian Roehrkasse, they had "cooperated extensively" with the government since the investigation began in 2007.

Investigated under the US Foreign Corrupt Practices Act (FPCA), Armor Holdings agreed to pay US$10.3 million in criminal fines and US$5.7 million in civil penalties as part of the Securities and Exchange Commission (SEC) settlement.

Sources: BBC News, Bloomberg, Financial Times, the Telegraph, Wall Street Journal

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