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Wednesday, May 18, 2011     INTELLIGENCE BRIEFING

U.S. fines defense contractor BAE in settlement over Saudi corruption case

LONDON — The United States has fined BAE Systems in connection with a slush fund for Saudi princes authorized to purchase defense equipment.


BAE said it has agreed to pay a fine of up to $79 million as part of a settlement with the U.S. State Department, Middle East Newsline reported. In the settlement, BAE, a leading contractor for the U.S. military, was alleged to have secretly paid a senior Saudi official to facilitate a major weapons contract with the Gulf Arab kingdom.

"In addition, a limited number of the company’s UK-originated export programmes will be subjected to enhanced administrative review, which is not expected to adversely impact the company's current or future export programmes," BAE said on May 17. "The company will also make additional commitments concerning its ongoing compliance."

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In February 2010, BAE, acknowledging that it violated an anti-corruption accord, agreed to pay more than $400 million in connection with allegations that the company bribed the former U.S. ambassador to Saudi Arabia, Prince Bandar Bin Sultan. Bandar, responsible for the Yamama project, worth nearly $100 billion, was said to have received $2 billion from the company.

BAE said the $79 million fine would be paid over three years. The fine could also be reduced by up to $10 million, already invested by the company to enhance export control measures.

"The company looks forward to working with the State Department to ensure that it continues to make progress towards achieving its goal as being as widely recognized for responsible conduct as it is for high quality products and advanced technologies," BAE chairman Dick Oliver said.

In December 2006, British police were pressured to end an investigation of the alleged BAE slush fund. About two months later, Saudi Arabia signed an agreement to purchase 72 Eurofighter Typhoon combat aircraft from BAE in a deal reported at $8.9 billion.

The Justice Department said BAE used fronts to relay secret payments to Turki and others. BAE was said to have violated U.S. law by not reporting the transfers, made to a bank in Washington D.C.

So far, major BAE contracts with the U.S. military have not been not affected by the corruption scandal. The State Department, however, said three BAE subsidiaries — CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments — would face export restrictions.

"The company is grateful to the State Department for the time and effort its staff have invested over the last year in reviewing the company's present compliance systems and processes, which enabled them to conclude that the company has initiated appropriate steps to address the cause of the past civil violations and to mitigate any law enforcement concerns," BAE said.

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