by Jack Kelly on March 2, 2010
By Dan Margolies for Reuters, March 1, 2010
BAE Systems Plc, Europe's biggest military contractor,
pleaded guilty in U.S. court to conspiring to make false statements in
connection with foreign arms contracts and will pay a $400 million fine.
BAE had announced last month it would resolve a
long-standing inquiry by the U.S. Department of Justice into questionable
payments it made to secure arms contracts in Saudi Arabia, the Czech Republic,
Hungary and other countries.
The Justice Department said BAE had violated commitments it
made to the U.S. government in 2000, when it was seeking to expand into the
United States, to comply with the anti-bribery provisions of the U.S. Foreign
Corrupt Practices Act (FCPA).
The act makes it illegal to pay bribes to foreign officials
in order to secure or retain business.
U.S. District Judge John Bates said the company's conduct
involved "deception, duplicity and knowing violations of law, I think it's
fair to say, on an enormous scale."
As part of its plea, BAE will retain a corporate monitor for
up to three years and implement a program to ensure its compliance with the
David Parkes, BAE's company secretary, entered the plea on
Giving "yes" or "no" answers to the
judge's questions, Parkes did not elaborate on the company's conduct. He
declined to comment on leaving the court.
The $400 million fine is one of the biggest levied against a
defense contractor, comparable to the $402 million that engineering and
contracting group KBR Inc and its former owner Halliburton Co agreed to pay in
February of 2009 over its dealings with Nigerian officials.
BAE last month also agreed to pay $50 million to settle a
parallel action by Britain's Serious Fraud Office (SFO).
An earlier inquiry by the SFO into allegations BAE had paid
about 1 billion pounds over a decade to Prince Bandar bin Sultan in connection
with the al-Yamamah arms deal was halted in December 2006 by then Prime
Minister Tony Blair.
Blair cited possible harm to Saudi-UK relations, but the
move drew fierce criticism from anti-bribery campaigners and the British media.
BAE's settlement with the SFO relates to the sale of an air
traffic control system in Tanzania.
Court documents filed in the United States said BAE had set
up "an elaborate system" to conceal its relationships with marketing
advisors and to make secret commission payments to them.
BAE "was aware that some or part of those payments
would be passed on to others" to influence the award of defense contracts
to BAE, the documents stated.
The criminal information filed against BAE alleged that
BAE's contracts with third parties were held by "secretive legal trusts in
U.S. prosecutors calculated that BAE made about $200 million
in improper payments. Under the law, BAE was fined twice that amount.
Judge Bates said none of the company's current officials or
board members knew about or was involved in the payments in question.
Since the Justice Department launched its criminal
investigation in 2005, BAE has replaced its chief executive and chairman, and
hired a new chief legal officer.
In court documents, U.S. prosecutors said BAE also no longer
employs senior management implicated in its criminal misconduct, "although
it does continue financial and advisory relationships with at least one
individual involved in the criminal conduct and undisclosed payments."
The identity of the individual was not disclosed.