BAE Systems' plea bargain deal to bring to a close criminal investigations into its past business activities should "draw a line under the past", the company says. But will everyone agree to move on?
Details of the global settlement with the UK Serious Fraud Office and US Department of Justice were released on 5 February, and cover payments of around £286 million ($446 million).
FALSE STATEMENTS
The bulk of this total stems from "one charge of conspiring to make false statements to the US government in connection with certain regulatory filings and undertakings", says BAE. Expected to cost it $400 million, the settlement is linked in part to aspects of the company's Al Yamamah arms deals with Saudi Arabia.
"In 2000, the company gave a commitment to the US government that it would establish and comply with defined regulatory requirements within a certain period," says BAE chairman Dick Olver. "It subsequently failed to honour this commitment or to disclose its shortcomings."
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Following investigations into several other equipment sales in Africa, Europe and Latin America, the SFO agreed a £30 million settlement linked to a deal to supply military-spec air traffic control equipment to Tanzania in 1999. Launched more than five years ago, its investigation culminated with BAE pleading guilty "to one charge of breach of duty to keep accounting records in relation to payments made to a former marketing adviser".
BAE has allocated £30 million, to cover a fine yet to be determined by the courts, "with the balance as a charitable payment for the benefit of Tanzania". The original deal - described by Liberal Democrat MP Norman Lamb as "outrageously unethical" - was worth £28 million.
Olver, who joined BAE from petroleum giant BP in 2004, says the company "very much regrets and accepts full responsibility for these past shortcomings".
He adds: "In the years since the conduct referred to, the company has systematically enhanced its compliance policies and processes with a view to ensuring that it is as widely recognised for responsible conduct as it is for high-quality products and advanced technologies."
This process has included reforms to business practices made using the recommendations of an independent review led by former Lord Chief Justice Lord Woolf. Now under the leadership of Ian King, the company has turned its attention to ensuring ethical conduct by its employees; an issue that is given the highest attention by its US rivals.
The SFO has itself come in for criticism as a result of the agreement, for dropping investigations into BAE's past activities in Chile, the Czech Republic, Qatar, Romania and South Africa.
Its decision included scrapping a less than week-old charge against Austrian Count Alfons Mensdorff-Pouilly. He was accused of having "conspired with others to give or agree to give corrupt payments to unknown officials and other agents of certain eastern and central European governments". It had alleged that these were linked to BAE-backed efforts to supply Saab Gripen fighters, but it now argues that "it is no longer in the public interest to continue the investigation into the conduct of individuals".
SFO director Richard Alderman says BAE's recent good conduct weighed on the agreement over past "control failures".
"I've been very impressed by the changes that new management have made over the last few years," he says, while warning other companies to adopt such reforms: "They must look at their corporate culture, to see if they live up to the very high expectations that society has.
"If they find there are failures I want them to come and talk to us at the earliest stage. If they don't, and continue with a culture that's out of date, we'll go after them."
PAST FAILINGS
For some of BAE's critics, its contrition will only drive them to probe deeper into its past failings. "Given BAE's admission of guilt in the US, the UK should re-open its own Saudi Arabian investigation immediately," argues Nicholas Hildyard from social justice campaign body The Corner House. "Far from drawing a line under the allegations, the announcement simply raises far more questions."
BAE hopes that shareholders and international customers will focus on its current efforts. The initial indications are good; BAE shares outperformed the FTSE 100 during the week of the SFO/DoJ announcement.
Source: Flight International
