New SFO director gives arms giant until midnight on Wednesday to come to a settlement over bribery allegations

BAE Systems construction hall in Barrow-in-Furness. Photograph: Paul Ellis/AFP/Getty Images

The arms giant BAE tonight appeared to be ready to defy an ultimatum from the Serious Fraud Office to accept a plea deal over corruption allegations, or face prosecution.

The SFO, under its new director, Richard Alderman, gave BAE until midnight tomorrow to come to a settlement over bribery allegations that surfaced during six years of investigations in more than nine countries. But in a display of brinkmanship, BAE, Britain’s biggest weapons firm, refused to say whether it intended to come to terms. A spokesman, John Neilson, repeated a recent statement that BAE wanted to “allow the ongoing investigations to run their course”.

The standoff between the head of the SFO and Dick Olver, BAE’s chairman, is unusually public. Having allowed his 30 September “ultimatum” to be widely reported, Alderman must now act, if BAE does not settle by the deadline.

He will have to seek formal consent from the attorney general to prosecute. If not, BAE and the outside world will conclude that his threats are hollow.

Last week, senior SFO staff were in a bullish mood, after securing a ground-breaking bribery conviction against Mabey & Johnson, which makes bridges. The deal, in which the company replaced several directors, paid penalties of more than £6m and vowed to turn over a new leaf, was a legal first for the SFO and marked the start of what is hoped to be a series of anti-corruption breakthroughs.

BAE has already seen off one SFO director. Robert Wardle stepped down after he was pressured in 2006 to drop investigations into allegations that hundreds of millions pounds were secretly paid by BAE through Swiss banks to prominent Saudis. The then prime minister, Tony Blair, caused international uproar when he admitted interfering with the investigation, claiming it threatened “national security” as well as British aerospace jobs. Wardle too, wanted BAE to agree a deal under which they pleaded guilty to relatively minor charges, but he was refused permission by Blair to make the offer.

Alderman inherited four other “live” BAe cases, which continued to be investigated. These concern a secret 30% commission on sales of a military radar to Tanzania; alleged bribes behind a Czech deal to lease Anglo-Swedish Gripen warplanes; commissions paid on a sale of two obsolete frigates to Romania; and £100m in secret commissions in a £1.5bn weapons deal with South Africa.

A BAE lobbyist, Count Alfons Mensdorff-Pouilly, was temporarily arrested by Austrian authorities, and continues to be under investigation there.

The US justice department is carrying out a parallel investigation of BAE.

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