BAE sign
BAE sign - 


Lisa Napoli: We've been expecting this next one for a while now. Today, the Department of Justice launched a probe of the British defense contractor BAE. Allegations are BAE paid a $2 billion bribe through a Washington bank account to secure a major arms deal with Saudi Arabia. From London this morning, Marketplace's Stephen Beard told me this doesn't reflect so well on the British government.

Stephen Beard: This is hugely embarrassing for the British government. Not only because the British government stopped the British inquiry only to see it now resumed by the U.S., but because the original arms deal was between the British and Saudi governments. BAE was the sort of subcontractor. So here we have the Department of Justice essentially investigating the British government. This could blow up into a huge diplomatic row between the U.S. and one of its closest allies.

Napoli: And just while we're talking about this, the part of this that interested me as well Stephen is the idea that BAE is now trying to get approval to buy an armored vehicle maker. So this is a sensitive time for that?

Beard: It is. BAE, it's in the process of buying Armor Holdings in the U.S., the company that makes among other things the Humvee and it's also in the process of trying to turn itself virtually into an American corporation. It is already the Pentagon's fifth largest supplier. It's the largest foreign supplier and it is trying to increase its business in America, which is by far the largest and richest defense market in the world. So this corruption investigation will put something of a chill on those expansion plans.

Napoli: That's our Stephen Beard in London.