[A-List] UK arms industry: slush fund & Saudis

["Michael Keaney" <michael.keaney@xxxxxx>]

Homes for executive's mistress 'bought from BAE fund'

David Leigh and Rob Evans
Monday September 15, 2003
The Guardian

The mistress of an executive of the arms firm BAE has admitted that she
personally acquired two houses worth more than £300,000, which it is alleged
were fraudulently charged to a big arms deal contract as part of a £20m BAE
slush fund.

Sylvia St John admitted to the Guardian that she was the occupant of both a
house in Putney, south-west London, and a Northern Ireland holiday home in
Ballygally.

Documents in the Guardian's possession suggest that both houses were charged
to the slush fund allegedly designed to bribe top Saudi officials involved
in the long-running Al Yamamah arms deals.

Ms St John's then lover, a retired RAF wing commander, Tony Winship, is
alleged to have been in charge of the slush fund on BAE's behalf.

The £300,000 payments were passed through the books as confidential
payments, purportedly to a member of the Saudi royal family, the deputy head
of the Saudi air force, Prince Turki bin Nasser.

But there is no evidence that Prince Turki was aware of the transactions,
and it is alleged that his name was fraudulently used.

Ms St John lives in the Putney house. She and Mr Winship used to live there
together. "We were in love," she said.

Although the house has been officially registered in the name of Prince
Turki, she told us she had the title deeds. The house in Northern Ireland,
where Ms St John told us she had family connections, is registered in her
own name; she claimed she had bought the house herself.

But in a signed statement, the owner of the front company used by BAE, known
as Robert Lee International, admits that BAE's alleged slush fund paid for
the houses. In the statement, John Sharp, managing director of RLI says
Prince Turki wanted Ms St John to have the houses as a gift and that "BAE
authorised and approved the expenditure".

In a letter obtained by the Guardian, Mr Sharp tells Ms St John how the
alleged slush fund will pay the council tax and utility bills for the
Northern Ireland house. Bills ranging from building renovation to the cost
of a "a pair of an tique brass firedogs" for the Putney house were also
charged to BAE.

Mr Winship, employed at the time as BAE's Saudi "customer relations
officer", has refused to comment on the allegation that he set up a love
nest for his mistress with money from BAE's slush fund.

BAE has not yet sought to rebut any of the detailed allegations about a
slush fund, which were secretly reported to the Serious Fraud Office (SFO)
in 2001 and disclosed by the Guardian last week.

Chief executive Mike Turner said BAE vigorously denied any illegality or
wrongdoing. The chairman, Sir Richard Evans, has remained silent about the
extent of his knowledge. A letter from the then head of the SFO, Rosalind
Wright, contained allegations that he might have been per sonally complicit
in the operation of the slush fund.

A former BAE security official, Martin Bromley, who was head of
investigations for BAE group security at their Farnborough headquarters,
told the Guardian yesterday that he had compiled a five-page report in 1996
on the fraud allegations.

The Guardian has a copy of the report. Mr Bromley gave the original to BAE's
head of security, Michael McGinty, he said. "Mr McGinty told me he had taken
it to Dick Evans personally who had reassured him that the situation was
under control."

Ms St John, a former film make-up artist, was given a salary by BAE's front
company and, in correspondence we have obtained, described herself as
"customer families offi cer, Saudi Arabian support department, British
Aerospace [Military Aircraft] Ltd". She said she had visited and comforted
in hospital a sister of Prince Turki, who was dying of cancer.

When it was put to her that BAE's alleged slush fund had paid for her house
she said: "Yes, but I had earned the money."

Investigations into the BAE allegations have so far been blocked by the MoD,
whose own officials are implicated in the scandal.

The MoD paid BAE for the allegedly fraudulent invoices, and then endorsed
them for repayment by the Saudi government, the ultimate losers in any
fraud.

Both the SFO and the national audit office have now been asked to
investigate.

-----

Greasy palms in pinstripe pockets

Why won't Whitehall investigate allegations of serious fraud and corruption
at BAE? Actually, there are a few good reasons

David Leigh
Tuesday September 16, 2003
The Guardian

There aren't normally too many laughs at a conference on economic crime, but
there was a moment of considerable black comedy at Jesus College the other
day, when the attorney general made a speech.

Lord Goldsmith, a clever commercial lawyer who used to earn £1m a year, was
up on his high moral horse, lecturing a throng of assembled prosecutors from
countries less fortunate than our own. He spoke of a war against
middle-class fraudsters and our duty to fight the good fight.

"Social equality requires that we bear down on white-collar crime as
effectively as on blue-collar crime," he said.

Ringingly, he went on: "To put it bluntly, the risk of detection,
investigation, prosecution and conviction of an offence of fraud is small."

Yet whose fault is that? The comedy in his speech was inadvertent, for Lord
Goldsmith was certainly unaware as he delivered this homily, of the stink in
his government's own backyard.

One of the largest departments in Whitehall, Geoff Hoon's Ministry of
Defence, has been resolutely blocking for the past two years any
investigation into allegations of a huge fraud, involving sums of up to
£20m.

As a result, the Serious Fraud Office (SFO), for which Lord Goldsmith
himself is nominally responsible, has been rendered even more impotent than
usual, and justice, however passionately the attorney general might be in
its favour, has been turned into a bit of a joke.

The allegations, which surfaced in the Guardian a mere 48 hours after Lord
Goldsmith's speech, are of arms firm BAE Systems operating a long-running
slush fund, designed to bribe Saudis.

The slush fund not only provided women, cars, yachts and freebies of all
kinds, but was also, it is alleged, plundered by some BAE staff and those
around them.

The sums of money potentially misused are, as Rosalind Wright, then head of
the SFO, pointed out to the MoD in 2001: "Very large indeed".

Yet absolutely nothing has been done to investigate or prosecute what are
alleged to be major criminal offences.

It is too simplistic to suggest, as Lord Goldsmith apparently does, that
this is merely a New Labour question of sorting out social unfairness - that
the wretched oik who commits a £70 benefit fraud should not go to jail,
while the public-school chap who embezzles a million gets a nod, a smile and
a suspended sentence from the judge.

The reasons why potential fraud on this scale goes uninvestigated is
actually because corruption of certain kinds is entwined into the fabric of
British political life.
BAE says it has committed no illegality or wrongdoing. It is alleged it is
helped by clever accountancy under which all its most questionable payments
were passed through the books of a front company, set up for the purpose.

The city editors of Sunday papers, and even the business editor of the BBC,
Jeff Randall, affect a blasé world-weariness about such deceptions, as
though corruption doesn't really matter.

Racism often goes to work as well. Johnny Foreigner, we are given to
understand, lives in a world of baksheesh and greasy palms. If we want his
business, we too must play his grubby games.

Yet if the slush fund allegations were investigated and all substantiated,
they would show crime on a massive scale, much of it committed not by Johnny
Foreigner, but by Johnny English.

The Saudi government handed over around £2bn a year to Britain for planes,
bombs, trained pilots and back-up maintenance for its air force. If a chunk
of that went on unacknowledged "sweeteners" for well-placed Saudi officials,
via false BAE invoices, then that is fraud.

If another chunk of the cash really did go on yachts and houses for BAE
staff and their other-halves, then that would simply be theft. If BAE's
board was aware of fraud and theft against its customers but didn't report
it or refund the money, wouldn't it be guilty of assisting fraud too?

The MoD doesn't want to investigate the BAE slush fund allegations, partly
because any proper inquiry might implicate its own officials in negligence.
It is allowed to cower behind Whitehall secrecy, and banked on the "strictly
private and confidential" warnings from the SFO never becoming public
knowledge.

The Al Yamamah arms contracts are run by the defence exports services
organisation, (Deso), a secretive group within the MoD, controlled by the
arms companies themselves, and with a history of actively conniving at
bribery to get arms deals.

Deso took BAE's invoices and gave them the British government's seal of good
housekeeping.

Embarrassingly, the current head of Deso, seconded from the arms industry as
usual - and his pay topped up to an undisclosed level - is Alan Garwood. He
is a former top missile salesman for, of all companies, BAE Systems itself,
and thus has a hopeless conflict of interest in this situation.

BAE has of course, innumerable powerful friends. The former Conservative
defence secretary Michael Portillo is on its payroll. Charles Powell, former
Thatcher adviser and brother of Tony Blair's chief of staff, appears in the
latest register of Lords interests as a consultant to Sir Richard Evans, the
BAE chairman.

The Labour government can effortlessly be suborned too by appeals to iconic
"jobs", allegedly at stake among John Prescott's voters in Brough, whenever
issues of bribery and corruption come up.

So powerful political forces in Britain can very easily trump any faint
cries from law enforcement agencies that certain major alleged fraudsters
have it too easy. Welcome to the real world, Lord Goldsmith.

· David Leigh is the Guardian's investigations editor