By John Donovan

In September 2009, we published an article headlined: BAE Systems whistleblower accuses Shell & BP of money laundering Al-Yamamah proceeds

Al-Yamamah was the Saudi/UK corruption scandal investigated by the UK Serious Fraud Office until the investigation was stopped in its tracks by the then PM, Tony Blair, a man not known for being incorruptible or honest. Blair gave in to threats from the repressive Saudi regime. In my lifetime, this was a low point in the UK’s international reputation, along with the Suez fiasco.

The scandal involved bartering oil for arms. The proceeds were laundered through Shell and BP.

Our story came from a Saudi BAE Systems insider. I met the individual a number of times. He said that he had already been interviewed in the USA by the US Justice Department, who were carrying out their own investigation after the UK investigation was terminated in the dubious and shameful circumstances I have mentioned.

I spoke to a source in Washington who confirmed the basics of the information the BAE whistleblower had supplied to me about his contact with the US authorities.

In our article, we named Prince Turki Bin Nasir as being a key player/beneficiary in the corruption scandal, along with Shell and BP.

The scandal is now beginning to unravel because of WikiLeaks. See:

Revelations in BAE Saudi case prompt inquiry call: The Telegraph 12 March 2011

Leaked US diplomatic cable disclosed the full case against BAE Systems, the defence contractor: The Telegraph 12 March 2011

Years of bribery investigations into BAE Systems by the Serious Fraud Office were brought to a close today, when the company was fined after pleading guilty to failing to keep proper accounting records in Tanzania. Here is a timeline of investigations of the defence company:

(ADDED BY JOHN DONOVAN: SHELL PLAYED A KEY MONEY LAUNDERING ROLE IN THE BAE CORRUPTION DEAL PRINTED IN RED TEXT)

U.K. Judge Throws Curveball in BAE Agreement

By Dionne Searcey: DECEMBER 20, 2010

Bringing closure to foreign-corruption cases has generally become a formulaic process.

The company pays a bribe overseas, law enforcement finds out, the two sides reach some kind of a settlement deal, a judge approves it, and everyone goes their separate ways. Any deviation from this pattern tends to generate headlines.

But a judge in the U.K. on Monday threw a wrench into the Serious Fraud Office’s plans for winding down the long and tangled corruption investigation into British defense contractor BAE Systems. Click here for the FT story.

BAE and the SFO had reached an agreement that the company would plead guilty not to a bribery charge, but to a less serious charge that it failed to account for $12.4 million in payments to Tanzania-based businessman Shailesh Vithlani.

But the judge said that — contrary to claims by both the Serious Fraud Office and BAE — it looked as if the company had funneled money to Vithlani who had then bribed Tanzanian officials to win a radar contract, the story said.

The SFO has not alleged corruption and BAE has always denied it.

According to the FT story, the judge said BAE “didn’t want to know how much money would be paid and to whom. They just wanted the job done. Hear no evil and speak no evil, and so on.” The judge said he wasn’t prepared to sentence BAE without clarification of what the money was used for.

The judge is slated to determine BAE’s fine tomorrow. BAE says it is awaiting the outcome and welcomes the opportunity to put the case behind it.

In the U.K., the BAE case has dragged on for about seven years and cost millions to investigate.

In March, BAE pleaded guilty to misleading the U.S. government about the steps it took to comply with an antibribery law.

As part of a plea agreement, BAE admitted that it made payments to intermediaries even though there was a “high probability” some of the money would be used to curry favor with foreign governments that granted defense contracts. DOJ had launched its probe in July 2007.

According to court filings, BAE had used secretive offshore entities and shell companies, and its efforts to conceal where payments were going, in 1999 transactions to lease fighter jets to Hungary and the Czech Republic. Justice’s probe also concerned payments in Saudi Arabia.

WSJ ARTICLE

SEE: SHELL INVOLVEMENT WITH SAUDI REGIME IN AL-YAMAMAH OIL FOR ARMS SCANDAL

The Sunday Telegraph

November 15, 2009

Ministry cannot account for where £1bn went in Saudi oil-for-jets affair

DAVID HENCKE

DETAILS OF a damning secret report into Britain’s biggest ever arms deal, which raises questions over how the Ministry of Defence spent more than £lbillion, can be disclosed for the first time by The Sunday Telegraph.

A National Audit Office (NAO) investigation into the controversial £20 billion al-Yamamah arms deal between Britain and Saudi Arabia found that:

• The MoD could not properly account for nearly £1billion of cash it paid to British Aerospace (now Bae Systems) at the time of the deal;
• Bae also “failed to account” for the £1billion;
• A£30.3 million management fee was paid to Bae even though there was no “legal or contractual obligation” to do so – a payment described by auditors as “irregular”.

Documents also outline how auditors demanded that the Govemment investigate Bae accounts to find out what had happened to the money, and reveal the fears that led to the report being kept secret for 17 years.

The deal, agreed in 1985, saw British Aerospace-built warplanes exported to Saudi Arabia in exchange for oil, which was sold on the open market by the British Government. The deal has long been at the centre of corruption allegations.

The disclosures are certain to raise new questions as to whether millions of pounds were paid in secret commissions to middlemen.

The revelations could not come at a worse time for Bae Systems, which is facing a Serious Fraud Office investigation over other arms deals.

The al-Yamamah deal involved a series of complex transactions. Saudi oil was given to the Government, which then sold it on the open market. The money raised was then used to buy Tornado fighter and ground attack air-craft and Hawk trainer jets
from Bae, which were then exported to Saudi Arabia.

While the NAO report is still secret, correspondence between the MoD and the NAO has been seen by The Sunday Telegraph.

An internal NAO memo, written by auditor J Parsons on July 12, 1991,reveals that “payments of £30.3 million (redacted) have been netted off in a suspense account.  This is contrary to the fundamental principle of gross accounting and as such is irregular.”

It added that “the department have not accounted in their suspense payments for nearly $ 1.5billion [£1billion] of receipts and payments.

“By any definition, failure to account for $1.5billion indicates a certain weakness in control.” In a draft letter, Sir John Bourn, the former auditor general, urges Michael Quinlan, the then permanent secretary at the MOD, to push Bae to account for the money it had been paid.

He demands that the ministry’s auditors go to the company and insist on seeing its accounts.

The letter to Mr Quinlan goes on: “A thorough investigation into the profitability of the sale would reveal whether substantial commissions have been paid. There are, of course, guidelines to cover such circumstances. We would need to see evidence that these have been followed.”

At the time, the NAO had no power to examine the accounts of a private company.

The documents reveal why the report was kept secret.

Under normal circumstances, the ministry’s accounts would have had to be published and qualified by Sir John, leading to a hearing by MPs on the Commons public accounts committee, then chaired by Sir Robert (now Lord) Sheldon.

Such a scenario provoked panic in Whitehall, since the Government had agreed with the Saudis to keep all the details of the deal secret and it could have led to the cancellation of the order for the jets.

By any definition, failure to account for $1.5billion indicates a  certain weakness

One letter from an auditor warns that it could “blow up”. Another says that the whole business was “a murky area”.

Whitehall invoked national security reasons to prevent public reporting of the accounts. Instead, a secret hearing attended by Lord Sheldon, his deputy Michael Shaw, Mr Quinlan and Sir John was held. In that way, the obligation to inform Parliament had been fulfilled, even though the report itself had not been made public.

The hearing must have raised concerns because it led to Sir John’s demand for an audit of Bae’s al-Yamamah accounts, though it is not clear whether this ever happened.

Information on the deal is to be published under Freedom of Information rules this week.

However, many documents are still being kept secret and the NAO has told the Information Commissioner that an entire file on the contract, dating between 1995 and 2002, has been destroyed.

ARTICLE ENDS (Link will be added when available)

RELATED ARTICLE

BAE Systems whistleblower accuses Shell & BP of money laundering Al-Yamamah proceeds

SHELL INVOLVEMENT IN SAUDI ARABIA / AL YAMAMAH BAE ARMS SCANDAL

ROYAL DUTCH SHELL INVOLVEMENT IN SAUDI ARABIA / AL YAMAMAH BAE ARMS SCANDAL

There is also an oil element. There was an oil barter arrangement whereby oil was marketed, initially by Shell and BP, and the proceeds were routed through the MOD to BAE Systems.”

But the biggest case was always the Al Yamamah probe, which became even more explosive after it emerged that the SFO was investigating allegations that the company had paid more than £1bn to Prince Bandar bin Sultan, the former Saudi ambassador to Washington. Prince Bandar has also always denied wrongdoing. The scrapping of the Saudi case on national security grounds proved a pyrrhic victory for BAE, however, as it triggered a wave of criticism of the company and was followed by the launching of other investigations around the world.

This follows the closedown of the SFO’s own inquiry in London into BAE’s multimillion pound payments to members of the Saudi royal family. Tony Blair, as prime minister, forced the SFO to call off the inquiry on alleged grounds of “national security”.

…partner States were particularly incensed by the decision to terminate the Serious Fraud Office’s investigation of allegations of bribery involving BAE Systems and the UK-Saudi Al Yamamah arms deal.