BAE in the News

L2ca04fy4lcazcj1r2carq2sueca1x2lf1c "Col Lang,

I wanted to flag your attention, and the attention of your readers, to some new dramatic developments in a story you reported last year. The U.S. Department of Justice is agressively pursuing their case against BAE Systems, the British arms company, which is accused of paying billions of dollars in bribes to Saudi officials, including the former Ambassador in Washington, Prince Bandar. Bandar alone is said to have received over $2 billion in BAE kickbacks, for his role in the "Al Yamamah" deal between Britain and Saudi Arabia (I hear that the actual figure paid to Bandar and some of his henchmen was closer to $10 billion). On May 12, two top executives of BAE, Chairman Mike Turner and an outside director who is also vice chairman of Barclay’s Bank, were detained by U.S. officials as they arrived at Houston and Newark airports, respectively. They were handed grand jury subpoenas, and had their laptops, cell phones and papers temporarily confiscated. The latest from the DOJ is that the career prosecutors are so furious at the British government’s stonewalling, that they are threatening RICO prosecutions against BAE. Remember, that the real story behind the BAE "Al Yamamah" scandal is that, under the arms-for-oil barter deal, the British accumulated well-over $100 billion, in off-the-books, offshore funds, that have been used to finance covert operations, for the past 23 years (the deal was first signed in 1985, and has been regularly updated ever since). The other nagging matter around the BAE case is that Prince Bandar "inadvertently" helped finance the 9/11 attacks, through funds provided by him and his wife to two Saudi intelligence operative in California, who, in turn, bankrolled two of the hijackers. This sordid tale is spelled out in Philip Shenon’s admirable expose of the 9/11 Commission investigation, in the 2008 book, The Commission–The Uncensored History of the 9/11 Investigation. My own sources have independently corroborated much of what Shenon reports. For their part, the Saudis and the British are not at all happy about what is going on at the DOJ. The Sunday Telegraph and other British papers have been ranting about the "heavy handed" treatment of the BAE execs, and they worry about a deeper rift, going into the upcoming G-8 summit in Japan in early July. A treaty is pending before the U.S. Senate, that would give British arms manufacturers equal access to Pentagon contracts, and a hearing was held this past week on the treaty at the Senate Foreign Relations Committee. Biden, Lugar and Feingold all expressed apprehension over the treaty, and there is fear that the BAE flap will further complicate its passage. Again, the biggest aspect of the BAE/"Al Yamamah" story is the offshore fund. To summarize: BAE delivered about $40 billion in arms and services to Saudi Arabia. BAE padded the bills substantially, up to nearly $80 billion. The pad was used, in part, to bribe Saudi officials who helped swing the deal, including Bandar and Prince Turki bin-Khaled, a top official of the Saudi Ministry of Defense. That part is fully detailed in the Guardian and other British coverage of the BAE scandal, going back three or four years. What is not covered in the British press is the fact that Saudi Arabia paid for the arms with oil. The oil was sold on the spot market, and this generated an estimated (in current dollars) $160 billion in cash. I am told by former U.S. Treasury Department officials that the funds generated from the oil sales, after BAE got their cut, went into offshore bank accounts. Those funds were invested by the usual hedge funds, etc. in places like the Cayman Islands, BVI, etc., and the profits over the past 23 years from those investments, multiplied the size of the fund tremendously. I look forward to any comments on this very big story, that has never gotten adequate media or Congressional attention, in my humble opinion.


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18 Responses to BAE in the News

  1. david says:

    Thanks, harper. Question: who is providing political cover for the investigation and why?

  2. Alexandre Stavisky says:

    Mon Dieu! Quelle scandale.

  3. pierre says:

    I’m curious, but how does the Department of Justice have jurisdiction to pursue this case? The affair seems to be between a British firm and Saudi nationals.

  4. wyatt says:

    Do your posters not understand how to make a paragraph break?

  5. Albertde says:

    Another case of US extraterritoriality.

  6. Matthew says:

    Col: I don’t understand why we have a role is in a British-Saudi corruption story. Please advise.

  7. Patrick Lang says:

    BAE is both a British and a US corporation in its various manisfestations. Therefore, it is subject to the US Foreign Corrupt Practises Act.
    It is also a company that has been given huge US defense contrcts in this coountry on a “no-compete” basis. It has not done a good job with those contracts.
    To quote H. Rap Brown, “the chickens are coming home to roost.” pl

  8. Richard Whitman says:

    Col, can you give us the contract types that BAE has done poorly on. The only thing I remember about them were the terrible civilian pssenger jet planes they made about 35 years ago. They would groan loudly when you put them into even a shallow turn.
    The best quote from H.Rap Brown was “Violence is American as apple pie”.I guess, according to him ,the NeoCons are AllAmerican

  9. John Howley says:

    ‘Loren Thompson, a prominent consultant for a number of arms makers, including BAE, played down the possibility BAE could end up being barred from U.S. government business.
    As the sole supplier of Bradley Infantry Fighting Vehicles and other systems used in Iraq and by U.S. intelligence, “severing their business ties would almost immediately undercut U.S. forces in the field,” he added.’
    The statute at issue is the Foreign Corrupt Practices Act, which, hard as it is to believe, actually forbids overseas bribes by U.S. corporations (which includes BAE).

  10. walrus56 says:

    “Big corporation pays bribe to secure Arab business”.
    What’s new? Furthermore, all intelligence services, CIA, Deuxieme Bureau, and British intelligence have been facilitating such deals for years.

  11. Tom Griffin says:

    One place the Saudi oil aspect was covered was in a 1995 book called ‘In the Public Interest’ by Gerald James, the former chairman of the arms company Astra. His source was an anonymous, partially blacked out corporate memo that had been sent to Jeff Rooker MP, which suggested that some of the money found its way to the Conservative Party.
    Very interesting book. James reckoned his company was steered towards covert deals by the British security services and then made a scapegoat for the bigger players after the Iraqi invasion of Kuwait.
    I see that one of the journalists who investigated his story has a blog post on it here:

  12. zanzibar says:

    I am highly skeptical that anything will come out of this . The whole defense contracting business is rife with corruption and double dealing with benefits only accruing to contractor executives and politicians. Taxpayers always get screwed and the military – well many of the decision makers are part of the revolving door scam while those who pay are usually on the front lines.
    Hey, when the Pentagon cannot even get out audited financial statements and billions of dollars go missing routinely if anyone is held to account it means they are paying for a political sin. Its possible that BAE, the Brits and Saudis are getting their pockets cleaned a bit since maybe Cheney did not get his cut or Bandar was not sharing his loot.

  13. Montag says:

    Loren Thompson might as well quote Dr. Samuel Johnson–“Patriotism is the last refuge of a scoundrel.”

  14. Mike G says:

    BAE used American banks for money transfers, hence the US legal jurisdiction.
    Rather than a thirst for justice, I smell US defense contractors with political clout maneuvering to hobble BAE.

  15. Yohan says:

    It is quite interesting how the DoJ is pursuing this case so aggressively when the exact same kinds of deals are cut by US arms merchants in Saudi, all without investigation.
    I am curious who is allowing DoJ to be this aggressive with BAE since the White House would be expected to crush any embarrassing investigation on behalf of the Brits(also to avoid shedding any light on identical US practices). So who and why is my question? Or, has the hammer already come down on the bureaucrats and we just haven’t heard about it yet? Also, was something like this responsible for Bandar’s abrupt leaving of Washington?
    People should know that those palaces on the French Riviera and the multi-million dollar gambling trips to Monte Carlo are not financed with salaries. The big princes finance themselves through leveraging their control over state oil money for billions of dollars in bribes, and no bribes are fatter than those handled by the defense ministry. The same mafia-style security contract overinflation that has been the hallmark of the Iraq War has been going on in Saudi for generations now.

  16. arabist says:

    The real scandal may be that the Saudis used their BAe account as a slush fund / off-the-books bank not only to finance kickbacks to various princelings but also fund black ops and other operations where they wanted flexible, unnofficial banking service (which BAe provided). In other words, something reminiscent of the BCCI scandal.

  17. harper says:

    I appreciate the response to my posting. Let me reply to some of the key questions raised. First, the jurisdiction question is based on the fact that the alleged $2 billion in payments to Prince Bandar came through U.S. banks. You may recall that there was a big scandal back around 2000-2001 involving embassy accounts at Riggs Bank in Washington. DOJ and Congress investigated and ultimtely, Riggs was bought by PNC Bank, after paying millions of dollars in fines, etc. One of the embassy accounts covered by the probe was Bandar’s account at Riggs. So the U.S. Foreign Corrupt Practices Act covers bribes that occurred on American soil.
    The politics of the case are complicated. Yes, for certain, some big American defense contractors are put off by the fact that BAE has gotten away with bribing their way into lucrative government contracts all over the world. The OECD, which has an anti-bribery convention, has been probing BAE’s operations for several years. The British Serious Fraud Office is probing BAE activities in other parts of the world, specifically in Africa and Eastern Europe. The no-no was “Al Yamamah” because it gets into the secret slush fund issue directly. When the SFO probe was shut down, with much fanfare at the end of 2006, the Justice Department clearly came under pressure to pick up the investigation, centered on Bandar’s bribes. The target, in my view, is bigger than the $2-10 billion in payoffs to Bandar, but the Bandar crime, committed on US soil, and run through American bank accounts, is the jurisdictional entry point.
    This issue is going to have political traction, for some time to come, in my view–regardless of who is elected President in November. The British cannot afford to be forthcoming about the BAE “Al Yamamah” case, because of the implications of the offshore MI6 slush fund, which no one in the British media has dared to touch, despite the fact that the evidence is out there, like the Purloined Letter. And I do not believe that the U.S. institutions, represented here by some of the career DOJ and FBI people working the case, are going to back off easily either. This could be a serious rift in the Anglo-American special relationship, as the British press, especially the Telegraph and the Times, are warning.
    The other aspect that I mentioned is the US-Saudi rift. It is not just the neocon crowd here in the US that is anxious about the Saudis. I speak to serious US military and intelligence types, who understand the complex relationships between some Saudi princes and “businessmen” (frontmen for royals), who finance Al Qaeda and other Salafi groups. I encourage people who want to pursue this matter further to read the new book The Commission, which is based on accounts of key investigators for the 9/11 Commission, and highlights the close ties between some “lowlevel” Saudi intelligence officers and the 9/11 hijackers. This, too, is a really big sore spot for some intelligence and law enforcement career officers.
    So, stay tuned. The action is just beginning.

  18. David Habakkuk says:

    Wyatt asked whether posters on this site do not understand how to make a paragraph break.
    This is, I think, not a failing of the posters — but a very odd Typepad glitch.
    The response of mine to harper which the Colonel put up as the next thread but one was drafted in Word and pasted into Typepad.
    In the process, the paragraphing was eliminated — as also on the two previous occasions when a comment of mine has been used to start a thread.
    I imagine harper had the same problem — and I think this has also happened with comments by Sidney Smith (although in his most recent post, the paragraphs seem to have made it through.)
    This seems a new glitch, and is a very irritating one, as a dense mass of text is very difficult to read.
    If anyone more technically competent than I knows of some simple means of ensuring that Typepad retains one’s paragraphing, I would be glad to hear of it.

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