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British bribery allegations won’t go away

Stephen Beard Jan 17, 2007

KAI RYSSDAL: You hear all the time about economic corruption and political sleaze in big multinational business deals. And every now and then, something actually comes of it.

But wouldn’t it be refreshing if once, just once, a politician confessed to pulling strings? Admitted that he did this or that because there was a big pile of money on the table. Someone like, say, British Prime Minister Tony Blair.

European officials are trying to figure out whether the U.K. broke a treaty on economic corruption and political sleaze. From London, Marketplace’s Stephen Beard has more.

STEPHEN BEARD: The case concerns the murky world of multibillion-dollar arms deals.

VIDEO NARRATOR: Even in recent conflicts, the only way to guarantee destruction of a target in the air was to engage it at relatively short range.

The U.K. exports a vast array of weapons, including this missile advertised in an arms-fair video. But it’s an aircraft deal dating back to the early 1980s. A deal with Saudi Arabia that’s now blown up in Britain’s face.

VIDEO NARRATOR: There are no second prizes. Kill or be killed.

Twenty years ago, BAE sold $80 billion worth of fighter planes to the Saudis. Three years ago, Britain’s Serious Fraud Office began investigating the deal. The allegation is the company bribed members of the Saudi Royal family.

Last month, Prime Minister Tony Blair halted the inquiry. Yesterday, he reaffirmed it had to be quashed.

TONY BLAIR: The result would have been devastating for our relationship with an important country with whom we cooperate closely on terrorism, on security, on the Middle East peace process and a host of other issues. And that is leaving aside the thousands of jobs that we would have lost.

The Saudis had warned that unless the corruption inquiry was halted, they would not award BAE a new $12 billion fighter aircraft contract. Up to 50,000 British jobs might have been lost.

But Mark Piet is not impressed. It’s his job to insure that OECD countries comply with the antibribery convention. He thinks Britain may have put that convention in jeopardy.

MARK PIET: What we’re fearing is that immunity is given to those bribing . . . to put it very bluntly . . . and that would mean that competitors would probably seek likewise. And that would be the end of this convention.

Piet’s committee is expected to say within the next few days whether Britain has breached the anti-bribery convention. But the U.K. now faces another even more humiliating possibility, says Alexandra Wrage of the U.S. anti-corruption group TRACE.

ALEXANDRA WRAGE: What’s most likely to happen is that the U.S. Department of Justice will open a file and investigation into this matter now. BAE trades on the U.S. Stock Exchange, and as a result, the U.S. Department of Justice has jurisdiction over this matter.

And if the U.S. does get its teeth into the BAE/Saudi inquiry, there seems little chance the Saudis would dare threaten their most powerful ally. Or that the Justice Department would cave in, like Britain’s Serious Fraud Office.

WRAGE: I can’t imagine the Department of Justice closing a file because of political pressure or because of commercial pressure.

BAE, which denies the bribery allegations, has now clinched the deal to supply the Saudis with more fighter aircraft.

[Sound of a plane roaring by]

But for BAE, there’s now an alarming prospect on the horizon. The company was banking on building up its business in America, the biggest arms market in the world. Any major legal problems in the U.S. would prove far more costly than the loss of the Saudi contract.

In London, this is Stephen Beard for Marketplace.

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