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Shell money laundering role in Saudi/BAE Systems corruption scandal

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

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