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Sat, March 12, 2011 | WikiLeaks

WikiLeaks: U.K.’s Briefing on Terminated BAE/Saudi Arabia Foreign Bribery Case

During a three-day meeting in January 2007 of the OECD Working Group on Bribery, a separate session of the meeting was devoted to the U.K.’s termination of an investigation into the British BAE and the Al-Yamamah arms deal with Saudi Arabia. A US embassy cable (March 2007) provides a comprehensive readout of this OECD session.

Since February 2001 numerous allegations have been made that the Al Yamamah defense contracts were a result of bribes (“douceurs”) to members of the Saudi royal family and government officials. Some allegations suggested that BAE Systems has paid bribes to Prince Turki bin Nasser and Prince Bandar bin Sultan and also ran a secret £60 million slush fund in relation to the Al Yamamah deal. In 1992 the UK National Audit Office (NAO) investigated the contracts, but the results were never published which makes it the only NAO report ever to be withheld.

At the end of 2003 the Serious Fraud Office was reported to be considering opening an investigation into an alleged £20 million slush fund and in November 2004 the SFO made two arrests as part of the investigation.

As a result of the ongoing investigation Saudi Arabia (dec 2006) threatened to take the arms deal to France if the UK didn’t suspend the Serious Fraud Office investigation into the BAE/Saudi Arabian transactions. On 13 December 2006, the Director of the SFO wrote to the Attorney General to inform him that the SFO was dropping the investigation into the Al Yamamah oil-for-arms contracts and would not be looking into the Swiss bank accounts. On 14 December 2006, the Attorney General Lord Goldsmith announced that the investigation was being discontinued on grounds of the public interest.

Britain’s government was accused by the opposition and leading international lawyers of caving in to intense pressure from Saudi Arabia after the government intervened to end the Serious Fraud Office investigation.

Then British Prime Minister Tony Blair justified the decision by saying “our relationship with Saudi Arabia is vitally important for our country in terms of counter-terrorism, in terms of the broader Middle East, in terms of helping in respect of Israel and Palestine. That strategic interest comes first.” [BBC News, 15 December 2006]

On 26 June 2007 BAE announced that the United States Department of Justice had launched its own investigation into Al Yamamah. It was looking into allegations that a U.S. bank had been used to funnel payments to Prince Bandar. In March 2010, BAE Systems pleaded guilty to a United States court, to charges of false accounting and making misleading statements in connection with the sales and was sentenced to pay a $400 million fine. The BAE was not convicted of bribery, and is thus not internationally blacklisted from future contracts.

Al Yamamah is the name of a series of a record arms sales by the United Kingdom to Saudi Arabia, which have been paid for by the delivery of up to 600,000 barrels of crude oil per day to the UK government. The prime contractor has been BAE Systems and its predecessor British Aerospace. The first sales occurred in September 1985 and the most recent contract for 72 Eurofighter Typhoon multirole fighters was signed in August 2006. The Al Yamamah oil-for-arms agreement with Saudi Arabia is the UK’s largest ever export deal (wikipedia).

Source: WikiLeaks

Reference ID: 07PARIS829
Created: 2007-03-05 14:02
Classification: CONFIDENTIAL
Origin: Embassy Paris

VZCZCXYZ0000
RR RUEHWEB

DE RUEHFR #0829/01 0641434
ZNY CCCCC ZZH
R 051434Z MAR 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 5331
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHBR/AMEMBASSY BRASILIA 1806
RUEHBU/AMEMBASSY BUENOS AIRES 1366
RUEHLJ/AMEMBASSY LJUBLJANA 0397
RUEHSG/AMEMBASSY SANTIAGO 0441
RUEHSF/AMEMBASSY SOFIA 0492
RUEHTL/AMEMBASSY TALLINN 0326
RUEHRH/AMEMBASSY RIYADH 0330
RUEHJI/AMCONSUL JEDDAH 0051
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPARTMENT OF JUSTICE WASHDC

C O N F I D E N T I A L PARIS 000829

SIPDIS

STATE FOR EB/IFD/OMA, EUR/ERA, INL/C, L/LEI AND L/EB
DOC FOR ITA/MAC/MTA/BARLOW, OGC/NICKERSON/MANSEAU
DOJ FOR CRIMINAL DIVISION/FRAUD SECTION/MMENDELSOHN/JACOBSON
USEU FOR MRICHARDS
PASS TO US SECURITIES AND EXCHANGE COMMISION/ENFORCEMENT/RGRIME,
INTL.AFFAIRS/TBEATTY

FROM USOECD

SIPDIS

E.O. 12958: DECL: 03/05/2012
TAGS: KCOR ECON EINV ETRD PREL OECD
SUBJECT: OECD: U.K.’S BRIEFING ON TERMINATED BAE/SAUDI ARABIA
FOREIGN BRIBERY CASE TO THE WORKING GROUP ON BRIBERY, JANUARY
16, 2007

Classified By: CHARGE D’AFFAIRES CURTIS STONE FOR REASONS 1.5 (B
AND D)

¶1. (SBU) The January 16-18, 2007 meeting of the OECD Working
Group on Bribery (WGB) included a separate session on January
16th devoted to the U.K.’s termination of an investigation into
BAE plc and a defense contract with Saudi Arabia. A condensed
readout of that session was included in an overall readout of
the January WGB plenary meeting transmitted septel. A more
comprehensive readout of the discussion is provided below.

U.K. BRIEFING

¶2. (C) The WGB’s Acting Chair opened the discussion by
observing that the termination of the investigation appeared to
constitute a violation of the OECD Anti-bribery Convention.
U.K. delegation head Jo Kuenssberg said the U.K. recognized the
level of interest of WGB members in the case and stressed the
need to respect the confidentiality of the information contained
in the U.K.’s briefing, which elaborated on the written reply
the U.K. had provided to the WGB on January 12 in response to
the Chairman of the WGB’s request for information. Kuenssberg
noted that the case would be part of the written follow-up of
the U.K.’s Phase 2 examination, scheduled for March, and
commented that the U.K. delegation had not requested that the
discussion of its decision to discontinue the BAE/Saudi Arabia
be held in restricted session (closed to non-WGB members).
Kuenssberg introduced members of the U.K. delegation, including
Jonathan Jones, Private Secretary to the Attorney General (AG);
from the Serious Fraud Office (SFO), Deputy Director Helen
Garlick, Case Controller Matthew Cowie, and Tony Farris; and
from the Ministry of Defense Police (MOD Police) Detective
Superintendent Robert Allen.

¶3. (C) Garlick started by underscoring the U.K. delegation’s
willingness to answer as much as possible the questions of the
WGB, bearing in mind pending litigation in the U.K. Garlick
reported that SFO and MOD Police investigators had expended more
than 2 million pounds sterling on the BAE investigations. She
said on December 14, SFO Director Robert Wardle had decided to
discontinue the joint SFO/MOD Police investigation based on his
personal, independent judgment. Garlick then described four
distinct parts of the BAE/Saudi Arabia investigation:

¶4. (C) First, the relationship between BAE plc and Prince Turki
Bin Nasir: evidence indicated payments had been made by two
subcontractors to Prince Turki, who, as Deputy Commander of the
Royal Saudi Air Force during the involved period, was in a
position to exert influence on the al-Yamamah contract.
Payments fell into three time periods: before the
implementation of the U.K.’s 2001 Act (effective February 14,
2002); during a transition period; and following full
implementation of the Act. Evidence indicated that payments of
up to 70 million pounds had been made to Prince Turki prior to
implementation of 2001 Act. SFO had evidence indicating BAE had
conspired to circumvent the 2001 Act and another 3 million
pounds were paid to Turki following implementation;

¶5. (C) Second, payments made to BAE’s overseas agents:
evidence indicated that substantial payments were made by BAE
through XXXXXX XXXXXX to marketing consultants employed at
the behest of the Saudi government after implementation of the
2001 act, but no documents were produced to substantiate the
provision of any genuine services by the consultants;

¶6. (C) Third, payments made under the al-Yamamah contract to an
unnamed senior Saudi official: Garlick advised that in October
2005, the SFO had demanded BAE produce documents including
payments related to the al-Yamamah contract. The company made
representations to the AG on public interest grounds (political
and economic considerations) as to why the investigation should
be halted. The AG undertook a Shawcross Exercise and sought
representations from various British officials regarding the
case. The SFO Director wanted to continue the investigation.
On January 25, 2006, the AG agreed that there was no impediment
to continuing the investigation. The SFO sought Swiss banking
records regarding agents of BAE. The SFO found reasonable
grounds that another very senior Saudi official was the
recipient of BAE payments. The SFO was poised to travel to
Switzerland in connection with its Mutual Legal Assistance (MLA)
request when the decision to discontinue the investigation was
made; and

¶7. (C) Fourth, potential fraud against the U.K.’s Export Credit
Guarantee Department: the SFO investigated potential fraud
against the EGCD and discovered false representations by BAE to
conceal the corrupt dealings, which would constitute conspiracy
to defraud under U.K. law.

¶8. (C) Garlick noted a number of difficult legal issues
involved in the case, which put into question the sustainability
of corruption charges for payments made prior to 2002. Under
U.K. law, the informed consent of the principal to the agent’s
actions may be offered as a defense, making possible an
exception to the prohibitions on foreign bribery where the
individual receiving the bribe acts with the consent of the
principal. Evidentiary problems were also presented in a case
involving the Saudi absolute monarchy. Garlick said information
was being shared within the British government with a view to
the wholesale reform of UK law on corruption. She expressed
concern that the BAE investigation had not concluded, but said
while the Saudi Arabia case had been discontinued due to
unusual/extraordinary circumstances, other investigations
involving BAE activities in South Africa, Tanzania, Romania,
Chile, and the Czech Republic continued.

¶9. (C) Jones cited public interest as the reason for
discontinuation of the investigation, based on risks to
international and national security and to the lives of U.K.
citizens. He said the U.K. was not seeking to avoid giving
offense to another State or harming diplomatic relations with
another State, and “still less” to avoid harming British
commercial interests. Jones said U.K. authorities do not
believe the Anti-bribery Convention requires parties to pursue
cases if doing so would compromise the fight against terrorism
or the safety of citizens. He said U.K.-Saudi cooperation was
critical and that Saudi Arabia was the source of unique strains
of intelligence on al-Qaida. If Saudi Arabia were to withdraw
such cooperation, the UK would be deprived of a key source of
information. Jones also cited UK-Saudi cooperation related to
the Middle East Peace Process.

¶10. (C) Jones noted Britain had suffered one terrorist incident
in July 2005 (London bombings) and other terrorism cases were
under trial. He said the conviction of one suspect had occurred
because of international cooperation. He noted the release of a
report indicating 30 active terrorist plots in the U.K. and
spoke of the real risk of terrorism at home and abroad. The SFO
Director was advised of risks posed if the investigation were
continued. Jones noted that if judicial review of the decision
were brought, it would be defended. He said the U.K. remains
fully committed to tackling international corruption and stated
that the decision to discontinue the investigation was not a
comfortable one. He asserted the decision was based on
exceptional factors and did not set a precedent, commenting that
other cases continue to be investigated. Jones said the U.K.
accepts that the decision sends out a negative signal and the
U.K. intends to redouble its efforts to tackle remaining cases.

WGB DISCUSSION

¶11. (C) As co-lead examiner of Britain’s Phase 2 examination,

the Canadian delegation said Canada considered that
prosecutorial discretion remains valid, and is not limited to a
determination of sufficiency of the evidence, but also of public
interest. She noted the U.K. Phase 2 report identified specific
concerns regarding the U.K.’s definition of public interest
(e.g. failure to exclude national economic interest or impact of
relations with another State) and concerns regarding obstacles
to the U.K.’s ability to start investigations of the foreign
bribery offense. The Canadian delegation said nothing in the
U.K.’s explanation answered these concerns. Garlick responded
that prosecutorial discretion includes public interest and is
guided by the Code of Crown Prosecutors, which lists matters
which prosecutors may take into account in determining whether
to bring prosecution. She said the list is merely guidance and
does not include specific reference to obligations under the
OECD Anti-Bribery Convention. She noted that in a prosecution
under the common law bribery offense, with its broader
definitions, the prosecutor would not face the obstacle
involving the principal-agent issue, but would still have to
consider the public interest.

¶12. (C) As co-lead examiner, the French delegation highlighted
the Secretary General’s comment that it was an important time in
the life of the Convention. They noted that the systemic nature
of the current case may impact future WGB work. The French del
criticized the U.K.’s apparent limitation of what could be
subject to prosecution (payments made before 2001), noting the
issue was raised in the U.K.’s Phase 2 examination, and
questioned the material nature of the cited national security
grounds. The French del stressed that Article 5 of the
Convention prohibits consideration of the impact on relations
with another State in decisions regarding enforcement,
questioned what safeguards were available to assess invocations
of national security, and highlighted the impact of such a
decision on reciprocal commitments under the Convention. The
French delegation enquired further about the procedure used in
this case, the identity of the real author of the decision, the
scope of the AG review, and responsibility for assessing the
public interest. The delegation sought to clarify conditions
under which a decision may be reached independently, the impact
of representations of ministers and technical experts on that
decision, and British industry views regarding the risks posed
to cooperation by continuation of the investigation. The French
delegation also noted its interest in considering a Phase 2 bis
examination (a second on-site evaluation of a country whose
implementation of the Convention has appeared to be inadequate
in practice) of the U.K. following discussions of the U.K.’s
written Phase 2 follow-up report in March.

¶13. (C) Following the Acting Chair’s statement that the U.K.
had conceded that considerations involving relations with
another state appeared to constitute a breach of Article 5 of
the convention, the UK delegation objected and stated that it
did not accept that there was a breach of Article 5 in this
case. The U.S. delegation took note of the experience and
professionalism of U.K. delegation members. The US del inquired
into what appeared to be inconsistent accounts relating to
differences in views of the SFO Director and Attorney General
regarding the merits of the case, reports alleging British
intelligence agencies had not joined the government’s assessment
that the case raised national and international security
interests, and whether the SFO could provide WGB members with
assurances that BAE would not continue to make corrupt payments
to senior Saudi officials. Garlick responded that it was her
belief that SFO Director Wardle had given no credence to claims
of commercial interests, jobs, or to diplomatic relations, but
had been prompted solely by his belief, based on the
representations of various government officials, that British
lives and the lives of other nationals would be put at risk by
continuing the investigation. She conceded that given the
investigation was terminated before charges were brought and a
conviction obtained, there were “unpalatable economic and
commercial results that will have to be resolved in another
forum.” She said it was an unfortunate result of a decision
taken properly. Jones said there were shades of difference
between the views of the AG and the SFO Director and that the AG
doubted the prosecution’s ability to overcome the legal hurdle
regarding the principal-agent issue. In the end, Jones
contended, the decision had been based on public interest
considerations, rather than an assessment about the sufficiency
of the evidence. Jones said press accounts reporting MI6’s
disagreement about the presence of national security interests
in the case were incorrect and asserted that all intelligence
agencies in the U.K. had agreed to the government’s account
finding national and international security risks present in the
case.

¶14. (C) The Italian delegation commented that it was important
that the WGB understood whether the decision to discontinue the
investigation was based on specific information regarding the
safety and security of the U.K.
The Acting Chair questioned whether all international
obligations should be read to imply a national security
exception. If so, she questioned who would determine such an
exception was merited and what safeguards existed to ensure the
exception was not raised without merit. She speculated that any
such exception would be invoked frequently. She questioned
whether the case should be viewed as one of necessity requiring
exceptional measures and commented that it was not in the
interest of the WGB or of the U.K. to be seen throwing the
Convention out the window. She noted the March WGB meeting would
include a review of institutional issues that may have
influenced the U.K. decision.

¶15. (C) Secretariat Legal advisor Niccola Bonucci noted the SFO
statement did not mention that no weight had been given to the
potential effects on relations with another State or the
identity of legal or natural persons involved, as prohibited by
Article 5 of the Convention. Garlick said she wished the SFO
statement had made reference that the SFO had not considered
relations with another State in reaching the decision to
discontinue the investigation. She asserted that severance of
diplomatic ties was never a consideration for the SFO Director.
Bonucci questioned whether paragraph 10 of the U.K. delegation’s
written statement of January 12 regarding UK/Saudi security,
intelligence and diplomatic cooperation could be distinguished
from the consideration of relations with another State
prohibited by Article 5. Garlick replied that the SFO drew a
clear line between diplomatic cooperation generally vs.
diplomatic cooperation affecting national and international
security. Bonucci asked whether the U.K. had taken into account
the Commentary to Article 5, which stresses prosecutors’
professional judgment regarding enforcement decisions and that
such determination not be subject to improper influence prompted
by concerns of a political nature. Garlick noted Director
Wardle’s three meetings with the U.K. ambassador to Saudi
Arabia, who had a unique perspective regarding consequences of
continuing the investigation, had a profound effect on his
views.

¶16. (C) The Australian delegation stated that it fully
supported proper prosecutorial discretion and considered valid a
distinction between relations with another State and national
and international security interests. The U.S. delegation
commented that it was not appropriate at this juncture to
conclude that Article 5 does not contemplate the proper
invocation of national security interests. The WGB would hear
more about the U.K. system of implementation of the Convention
and this particular case in the context of the U.K.’s follow-up
written review in March. As such, it appeared inappropriate to
end consideration of the case prior to that further discussion
or to conclude now that the case was exceptional. The Acting
Chair acknowledged that further discussion of continuing
questions required follow-up. The French delegation supported
the U.S. statement and reiterated continued concerns regarding
the U.K.’s position on prosecution of corrupt payments made
prior to 2001 and the apparent consideration of the impact of
diplomatic relations with another State, clearly proscribed by
Article 5. The French del requested more complete answers by
the U.K. del to questions posed by the Secretariat’s Legal staff
and argued that the WGB should not bring the discussion to a
premature end. What one party considers an exceptional security
interest today may be raised by another party in the future.
The WGB would need to define the limits of a national or
international security interest and it was essential that this
discussion continue in March.

¶17. (C) The Acting Chair noted that experience gained from this
case should be taken into account in revising anti-bribery
instruments, including the Revised Recommendation. She added
that at the next meeting, the WGB would consider all possible
appropriate actions, including a Phase 2 bis examination, if
additional questions regarding the U.K.’s implementation of the
Convention remained. The Acting Chair noted that the Management
Group would draft a written press statement for the Working
Group’s consideration. The Canadian delegation expressed
concern about procedures used in recent actions taken by the
Chair, including issuance of press statements. While the
statement of the Chair may be made in his personal capacity, he
should not characterize it as reflecting the position of WGB
members.

¶18. (C) During a subsequent discussion of the press statement,
several other delegations commented on the U.K.’s action in this
case. The Italian delegation remarked that the U.K. decision
seemed to be exclusively supported by economic interests. The
Chilean delegation commented on the gulf between the U.K.’s
actions and the Convention. The Norwegian delegation
underscored the WGB’s mandate to monitor implementation of the
Convention. The Netherlands, U.S., Canada, France, Switzerland,
Spain, Sweden, Chile, Italy, Norway, Greece, Estonia and
Argentina joined a WGB consensus that the case raised serious
concerns and should be considered further in March in the
context of the U.K. written follow-up review of its Phase 2
examination. They agreed that a clear public statement
expressing this view, without disclosing confidential
information, was necessary to maintain credibility. The German
delegation joined consensus regarding concerns raised by the
case and the need for confidentiality, and suggested, but did
not receive support for, a weaker public statement. The
Australian delegation stressed the need for further discussion
of the national security issue and that the WGB had not yet
reached any decision in the case, but did not block consensus on
issuance of the public statement, despite an attempt by the U.K.
to weaken the draft statement. A WGB public statement on the
matter was issued on January 18, 2007 and posted on the OECD
website.

STONE