BAE’s US$450 million bribery settlement

British aerospace company BAE Systems has agreed to pay nearly US$450 million in fines to settle longstanding bribery allegations in the US and UK.

The US portion of the settlement, which has been hailed as an example of increasing willingness of US federal authorities to impose the country’s tight ethical standards on foreign defence contractors, includes a fine of US$400 million to settle a charge of conspiring to make false statements in connection with regulatory filings and undertaking – about whether the company had created an anti-corruption programme. BAE also agreed in its agreement with the US Department of Justice (DoJ) to strengthen its compliance programmes.

It will also pay a penalty of £30 million to settle a charge by the UK’s Serious Fraud Office (SFO) of breach of duty to keep accounting records in relations to payments made to a former consultant in Tanzania. Part of the UK fine will be made to an as-yet unnamed Tanzanian charitable foundation. The agreements also stipulate that BAE will plead guilty to both the US and UK charges. For the SFO, the case represents a victory of sorts. The agency in 2004 had initially launched an investigation into BAE’s alleged bribery payments in Saudi Arabia, a case that spilled over into Czech Republic, Romania, South Africa, and Tanzania. The case was then scuttled in 2006, causing widespread public criticism for the office.

Both settlements are in connection with allegations that the company made commission payments to a marketing consultant related to the sale of a radar system to Tanzania in 1999. BAE admitted that it failed to accurately record the payments in its accounting books, and that it failed to thoroughly examine the records to make sure they were reasonably accurate and permitted them to remain uncorrected.

Richard Alderman, director of the SFO, said in an interview with the Wall Street Journal: “The SFO has been totally vindicated.”

“This is a first and it brings a pragmatic end to a long-running and wide-ranging investigation. I’d … like to acknowledge the efforts made by BAE to conclude this matter and I welcome its declared commitment to high ethical standards,” he said separately in a statement.

“These settlements enable the company to deal finally with significant legacy issues,” BAE chairman Dick Olver said in a statement. He added that the company has systematically enhanced its compliance policies and processes in recent years, and regretted and accepted full responsibility for its past failings.