[A-List] UK state: dubious exports policy

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

Minister, how far you've come

Big business pressure led Hewitt to emasculate anti-bribery laws

David Leigh and Rob Evans
Tuesday January 25, 2005
The Guardian

Patricia Hewitt is an honest woman and a nice person. Those who first met
her more than 20 years ago encountered an idealist. She was working for the
then National Council for Civil Liberties out of a miserable back room in
grim King's Cross, and targeted by the boneheads of MI5 as some kind of
subversive.
Now she is a cabinet minister, secretary of state for trade and industry no
less. And how she has changed.

Freedom of information is now beginning to reveal the raw mechanics of
government. And one of the latest batch of released papers tells a story of
brazen political corruption by big business, with which Patricia Hewitt
seems to have felt forced to collude. One can only feel for her.

It is one of the biggest scandals of modern Britain that large corporations
make sales to the third world by bribery. Time and again, examples have
surfaced of huge contracts, generally for arms, but often for civil
aircraft, bridges and dams, where suitcases of cash have gone into a Swiss
bank for the benefit of local politicians.
Poor countries are further impoverished under a mountain of debt, often for
shoddy goods they don't need. The British taxpayer routinely guarantees
these sales. When the dictator topples or the currency crashes, we pick up
the bill while the company cheerfully pockets its payment.

Three years ago this Labour government at long last made bribery of foreign
officials a criminal offence. One of Hewitt's agencies, the Export Credits
Guarantee Department, has been trying to enforce this law.

Last year it wrote new rules saying that to get taxpayer guarantees,
companies had to reveal the identity of their secret commission agents.
These are often the people who would end up being arrested under new
legislation.

In the past it has been discovered, for example, that the arms firm Alvis
paid £16.5m to offshore companies belonging to the daughter of Indonesia's
President Suharto. The arms firm BAE Systems paid £7m into a Jersey account
of a relative of the ruler of Qatar.

The Serious Fraud Office is investigating a string of secret agency payments
made by BAE, who keep the contracts locked in a safe in Geneva. They are
alleged to have provided more than £17m of benefits to a Saudi prince.

So disclosure of the true identity of agents and "consultants" will, as
often as not, have a practical value in deterring corruption.

But when the big corporations discovered what the ECGD had done, they went
ballistic. The Whitehall papers revealing their behaviour were slipped out
at 8pm last Friday in the traditional damage-limiting way, but the story
they tell is a particularly naked one.

Three huge companies, Rolls-Royce, BAE and Airbus, used the CBI to mount a
behind-the-scenes lobbying campaign aimed at Hewitt. Rolls exports its
aircraft engines around the world. BAE sells warplanes, particularly its
Hawk light-attack aircraft. Airbus, the Euro-venture in which BAE has a 20%
share and which the UK government has supported heavily with launch aid, is
seeking to sell its new civil airliners on a global scale in rivalry to
Boeing in the US.

Last June the CBI claimed to Hewitt that the new rules had to be suspended
as a matter of urgency. They were "endangering a number of valuable
contracts due to close this week ... In the light of the scale of the
contracts currently at risk, it would be prudent temporarily to revert to
the status quo ante".

Minutes of a meeting on August 9 last year show that the three companies
then told the ECGD that information about middlemen was "very commercially
sensitive. The network of agents/intermediaries was a valuable asset built
up over a number of years and offered important commercial advantages such
as being able to open doors."

"The intermediaries themselves may have valid and justifiable reasons for
wanting to remain anonymous."

The companies claimed that the ECGD could not be trusted to prevent the
names of these middlemen leaking to their competitors, who would try to
poach them.

It is unlikely that the secretary of state believed this questionable
explanation. Another reason, of course, why an agent would want their
identity and the location of their offshore bank account kept secret is
because it would reveal that a criminal offence under British law was being
committed.

But none the less, she rolled over. Hewitt agreed that the companies did not
have to name these middlemen, provided the firms gave a satisfactory
explanation. On October 7 the companies demanded "confirmation that
commercial confidentiality would be accepted as a valid reason for not
identifying its agents". This was accepted.

It was some anti-corruption campaigners, the Corner House group, who forced
the release of these files. They are the kind of small, idealistic body to
which Hewitt once belonged. It is a shame that they should end up on
opposite sides nowadays.