More on BAE in the news

080125f1234j034 "A Department of Defense Inspector General [DoD IG] report, unearthed yesterday and first reported by DANGER ROOM, said that "the advanced aviation and weapons technology for the JSF [Joint Strike Fighter] program may have been compromised" because procedures for securing classified material weren’t fully followed. In particular, the report called into the question the relationship between BAE and government overseers from the Defense Security Service. The civil servants failed to identify a number of "security weaknesses" at company facilities, the audit alleges. And BAE rebuffed Defense Security Service attempts to examine their internal security audits."


There is a pattern of sloppiness in the way this company (BAE) has administered contracts given to it by the US Department of Defense.

The FBI and DoJ career people have become very aggressive in the last few years in prosecuting cases that they have been building for long periods of time.  The AIPAC espionage case comes to mind as another example.  There are others and the only thing many of these cases seem to have in common is civil service frustration over an inability to prosecute them earlier.  I have the impression that these public servants have been frustrated for a long time because politicians of both parties have blocked prosecution of some of these cases.  Why now?  I do not know, but there has probably been some "horse trading" in deciding what will be allowed to be prosecuted and what not.

Several commenters have made off hand comments to the effect that they think American companies routinely bribe overseas officials to obtain defense contracts.  On the basis of many years of listening to such companies complain bitterly of how much they are disadvantaged by the Foreign Corrupt Practices Act and by subsidies provided by many overseas governments to their manufacturers, I doubt that it is true that US defense contractors do this.  pl

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19 Responses to More on BAE in the news

  1. par4 says:

    To the contrary Col.I think U.S.corps.complain publicly to cover their bribery such as the Columbian info coming out now.

  2. Patrick Lang says:

    Anything to back that statement of your belief? pl

  3. JohnH says:

    I need some clarification: is DOJ prosecuting for security breaches or for bribery? My guess is that Bush might tolerate prosecution of companies for security breaches as a way of slapping their hands and showing that they are not above the law.
    However, prosecuting them for bribery and corruption? That’s simply unimaginable in Bush/Cheney’s world of crony capitalism. Plus, if DOJ were serious, corruption cases could clog the courts for a generation, given how rampant the looting of the Treasury has become.

  4. Mad Dogs says:

    “Several commenters have made off hand comments to the effect that they think American companies routinely bribe overseas officials to obtain defense contracts. On the basis of many years of listening to such companies complain bitterly of how much they are disadvantaged by the Foreign Corrupt Practices Act and by subsidies provided by many overseas governments to their manufacturers, I doubt that it is true that US defense contractors do this.”
    I’m wondering whether the angst of the US Defense companies is because their foriegn competitors are bribing these foriegn governments, or the whining is because US Defense companies aren’t allowed to do the same.
    Cynical me guesses that it’s the latter.

  5. Albertde says:

    The Foreign Corrupt Practices Act applies to any company listed on a US Stock Exchange. I worked for a large Canadian company listed on the NYSE and we had to document our compliance.
    The usual trick for Saudi and UAE contracts is to sign an agreement with a private company led by the influencer, who in turn then signs a contract with the government or national company. Some of us would interpret the difference in the amount paid by the government or national company and the private company as a bribe.

  6. David W. says:

    Perhaps the attitude of the US def contractors is ‘why pay the (foreign) middleman?’ It seems like the best racket is right here in the USA, home of over half of the world’s annual defense expenditures. And, where ‘no-bid’ contracts’ seem to have become all the rage.
    The Wilkes-Cunningham defense contract bribery scandal exposed a lot of this seaminess, but it appears that it was cleaned up to appear to be a ‘one bad apple’ incident, in the interests of other involved parties. Senior Appropriations Chairman Congressman Jerry Lewis has a busy part-time job defending himself in this area: to date, he’s spent over $1mil on legal fees, and is widely known to have instigated the removal of US Attorney Carol Lam, as her investigation was getting too close to hitting paydirt.
    The Boeing scandal was another big example, and it appears this is all becoming very systemic within the Pentagon:
    I’m sure that the US def contractors will be happy to throw BAE under the bus, as, being Brits and Saudis, they are convenient ‘others’ to blame. Yes, this is a very exotic and juicy scandal, with high tabloid potential, which is perfect fodder for the masses; I’m sure that Halliburton et al will be happy for this circus to take over the airwaves, drowning out the mundane testimony of Bunnatine Greenhouse:
    Finally, regarding the BAE scandal, I wonder how ‘Bandar Bush’ is going to be protected? Will his brother Georgie have to pardon him? Is this Iran-Contra II, the sequel with the same ending?

  7. zanzibar says:

    It looks like US shareholders are also getting into the act with a lawsuit against BAe executives and directors. Of course BAe executives want the British courts to have the jurisdiction so that the lawsuit can get a Tony Blair burial. When it gets hot there’s always national security to kill unpleasant issues.

  8. John Howley says:

    FRIDAY HEADLINE (5/23/08)
    MoD insists Nimrod ‘safe to fly’
    Defence Secretary Des Browne has insisted RAF Nimrod aircraft are safe to fly despite a coroner’s call for the entire fleet to be grounded.
    The coroner, Andrew Walker, was speaking at the end of an inquest into the deaths of 14 servicemen in a Nimrod crash in Afghanistan in 2006.
    He said the fleet had “never been airworthy” as he recorded narrative verdicts at the Oxford hearing.
    But Mr Browne said changes made to the Nimrod meant it was now safe for crews.
    ‘Unairworthy state’
    This week a senior engineer from defence and aerospace firm BAE Systems told the inquest that his predecessors, who made the Nimrod some 40 years ago, failed to fit a fire protection system on a key area of risk on the aircraft.
    And the firm’s head of airworthiness Tom McMichael said that if the evidence heard was correct, the Nimrod planes had, at the time of the tragedy, been flying in an unairworthy state for 37 years.
    Firms scoop £4bn carrier contract
    The Ministry of Defence is set to sign a £4bn deal to build two aircraft carriers in the UK in a move expected to provide 10,000 jobs at its peak.
    HMS Queen Elizabeth and HMS Prince of Wales will be built by a consortium to be formed between BAE Systems and its rival, VT Group.

  9. par4 says:

    Chiquita bananas for one Col.Domestically, Enron,Worldcom,ad infinitum

  10. Patrick Lang says:

    I see. You forgot to mention Commodore Vanderbilt’s scheming in Central America and the Teapot Dome scandal. pl

  11. Yohan says:

    I don’t have the book with me, but I remember that Robert Baer claims in Sleeping with the Devil that ALL major contracts in Saudi have some extra fat in them that go directly to the princes involved in the deal. That’s SOP for doing business in the kingdom. Those gold-plated palaces don’t fund themselves, and they’re not all funded with BAE kickbacks. The money has to come from somewhere.
    US defense contractors are hardly above bribery, the Duke Cunningham case being a prime example. Though to be fair, it’s definitely not just Americans or Brits, and it’s not just defense contractors, it’s everybody.
    On another note, I’m still very curious why the Bush administration is allowing these investigations to continue. Would Bush have allowed this sort of thing to happen during his good friend Tony Blair’s time?

  12. par4 says:

    Kermit Roosevelt also

  13. Patrick Lang says:

    Well… If Bob Baer said it, it must be true. Hear that, Bob? I am astonished to learn that Saudi mediation in business deals results in reward for the Wasit. I guess I missed that in the years that I served in Saudi Arabia and later did business there. Duke Cunningham took bribes? Wow! What news! I stand by my original point which is that American business are very cautious about this kind of thing. As for the government “allowing” such an investigation, this is a much more complex situation than that. pl

  14. Paul says:

    I spent 25 years of my life as a negotiator of major defense systems contracts with foreign governments all over world. Bribing by US contractors was rare, and when it was uncovered, it was usually minor and the act of a lower-level zealot. The Foreign Corrupt Practices Act was well understood by Americans who practiced this profession. The FCPA was policed and it was had the attention of Senator Robert Byrd. Since DOJ stopped policing things after 2001, bribery is probably “la soupe du jour”.
    There is, however, something strange about BAE’s (and others) ascendance and prominence in the defense business. Since 2000, BAE and a lot of Israeli companies have been allowed to buy American companies that developed sensitive technology for aircraft protection and intelligence gathering systems. I found it strange that CFIUS, the DOJ and DOD allowed some of these transactions.
    The U.S. Government spent billions during the cold war years developing and testing these systems and a solid corporate memory was fostered and maintained by and between American engineers and entrepreneurs. Everyone knew each other in this kind of technology. Much of that “memory” has gone by the wayside with the sale or absorption of these American companies. It is no surprise to me, at least, that new defense systems can’t pass most performance milestones. Boys trying to act like men, I suppose.
    All of this WTO-like trading in defense matters causes technical data “seepage”, and our secrets, over time, are revealed to potential adversaries. The much vaunted “Integrated Product Team” concept fostered by DOD procurement is nothing but non-stop lip locking at all levels of a given contract. All chiefs, no Indians.
    It is pathetic that BAE, a foreign company, ranks so high (in dollars and control) on the DOD procurement list. It’s another case of our health and wealth being hollowed out by external forces. The DOD doesn’t seem to give a rat’s ass about it. This subject is great fodder for those who believe there is a New World Order conspiracy afoot.

  15. Yohan says:

    Well pardon me if I don’t give defense contractors the benefit of the doubt based only on their own protestations of innocence. No, I don’t have a smoking gun, I’m simply making what I think is a logical point. Why would the Saudis only demand and receive bribes from non-American companies while allowing Americans to do major business “fee” free? Do you really think there is no padding at all in all those F-16, spare part, training, etc. contracts for American companies?

  16. cletracsteve says:

    I worked for a U.S. defense contractor which was trying to win some contracts with various Middle East countries during the 80s. This work included training and electronic surveillance systems. We would often have to sign papers that we understood various company policy positions. These company-wide signings were usually put in place to protect senior management, showing that everyone was directed to act ‘ethically’. Failure to sign obviously resulted in personal visits from the appropriate level.
    One such policy justified the need to develop/pay contacts in many countries. The intent of the memo, I believe, was to remind staff not to bring foreign business practices back to the U.S. In signing this policy, I stated that I disagreed with payments to foreign contacts. A few days later I was personally called into the division’s lawyer’s office to sign the document without any exceptions. It was pointed out to me that laws and customs were different across the globe and it was necessary to adapt to local policies to do business. Personal ethics have nothing to do with business ethics and that U.S. laws do not necessarily apply to foreign business practices.
    Despite the above attitude, the company never really won the big contract it was going after. Some marketing people had pictures of their camel rides. Some wore their gold bracelets (yes men), but the company’s resources were not significant to really play the game and company’s management was not truly sufficiently unctuous, nefarious or bold.

  17. Note that the DCAA (Defense Contract Audit Agency) is understaffed and underfunded. Guess who benefits?

  18. John Howley says:

    Some might suspect that internal accounting and contract auditing standards at DOD (and MOD?) are “systematically” lax.
    At any rate, the GAO has long had DOD at the top of their list of federal agencies at-risk for financial management failures.
    Here’s a recent and relevant one:
    Additional Personal Conflict of Interest Safeguards Needed for Certain DOD Contractor Employees
    What GAO Found
    Indications are that significant numbers of defense contractor employees
    work alongside DOD employees in the 21 DOD offices GAO reviewed. At 15
    offices, contractor employees outnumbered DOD employees and comprised
    up to 88 percent of the workforce. Contractor employees perform key tasks,
    including developing contract requirements and advising on award fees for
    other contractors.
    In contrast to federal employees, few government ethics laws and DOD-wide
    policies are in place to prevent personal conflicts of interest for defense
    contractor employees. Several laws and regulations address personal conflicts
    of interest, but just one applies to both federal and contractor employees.

  19. Eric Dönges says:

    I agree with Colonel Lang here – American companies as a rule are very careful to follow the letter of the law exactly, at home and abroad. However, not everything that I would consider corruption is actually against the law. Take the American practice of public officials doing some years of public service, and then switching to high-paying jobs at the very same companies they where involved with during their public service. Or the German practice of putting high-level politicians on a corporation’s board while they are still in office. I’m sure similar examples could be found in every other society on the planet.

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