[A-List] UK state: the al-Yamamah deal again

["Michael Keaney" <michael011@xxxxxxxxxxx>]

Attorney-general knew of BAE and the £1bn. Then concealed it

Goldsmith hid secret money transfers from international anti-corruption
organisation 

David Leigh and Rob Evans
Friday June 8, 2007
The Guardian 

British investigators were ordered by the attorney-general Lord
Goldsmith to conceal from international anti-bribery watchdogs the
existence of payments totalling more than £1bn to a Saudi prince, the
Guardian can disclose.

The money was paid into bank accounts controlled by Prince Bandar for
his role in setting up BAE Systems with Britain's biggest ever arms
deal. Details of the transfers to accounts in the US were discovered by
officers from the Serious Fraud Office during its long-running
investigation into BAE. But its inquiry was halted suddenly last
December.

The Guardian has established that the attorney-general warned colleagues
last year that "government complicity" in the payment of the sums was in
danger of being revealed if the SFO probe was allowed to continue.
The abandonment of the inquiry caused an outcry which provoked the
world's anti-corruption watchdog, the OECD, to launch its own
investigation into the circumstances behind the decision.

But when OECD representatives sought to learn more about the background
to the move at private meetings in January and March they were not given
full disclosure by British officials, according to sources.

One insider with knowledge of the discussions said :"When the British
officials gave their briefing they gave some details of the allegations,
but it now transpires, not all of them."

A source close to the OECD added: "We suspected that the British were
holding some secret back."

Sources close to the US justice department, whose members help to police
the international anti-corruption treaty to which Britain is a
signatory, confirmed that UK officials had not disclosed to the group
that huge payments had gone to the prince in connection with the
al-Yamamah arms deal.

In those confidential briefings at the OECD headquarters in Paris
earlier this year, the UK said "national security" reasons were behind
the decision to halt the SFO investigation into the case.

They claimed the SFO probe focused largely on old allegations of a slush
fund operated by the BAE to provide treats for junior Saudi officials.
Last night, a spokesman for Lord Goldsmith said full evidence had not
been given to international panel members of the OECD anti-bribery
working party at their meetings in order to protect "national security".
He said: "The risk of causing such damage to national security had a
bearing on the information voluntarily provided to the OECD".

He added: "We have not revealed information which could itself
jeopardise our national security. For these purposes the OECD was
effectively a public forum, as is illustrated by the fact that you claim
to know what [the government] told them."

The Guardian's disclosure of British government complicity in the
alleged payment of £1bn to Prince Bandar caused international concern
yesterday, with Tony Blair taking a bullish position when questioned at
the G8.

Standing beside George Bush, a close family friend of former US
ambassador Prince Bandar, Mr Blair said it would have "wrecked" the
relationship with Saudi Arabia if he had allowed investigations to go
on. "This investigation, if it had gone ahead, would have involved the
most serious allegations and investigation being made of the Saudi royal
family," he said.

"My job is to give advice as to whether that is a sensible thing in
circumstances where I don't believe the investigation would have led to
anywhere except to the complete wreckage of a vital interest to our
country."

Neither Mr Blair nor the Ministry of Defence made any attempt to deny
the allegations revealed by the Guardian.

Prince Bandar last night issued a statement through his lawyers
categorically denying that payments made to Riggs Bank in Washington
"represented improper secret commissions or 'backhanders'".

He said the payments were made to Saudi ministry of defence and aviation
(MODA) accounts of which he was a signatory. "Any monies paid out of
those accounts were exclusively for purposes approved by MODA."

He said the accounts were regularly audited by the Saudi ministry of
finance and BAE payments were "pursuant to the al-Yamamah contracts". He
added: "At no stage have MODA or the Saudi Arabian ministry of finance
identified any irregularities in the conduct of the accounts."

BAE last night issued a statement claiming there was full government
complicity in any payments it had made with regard to the al-Yamamah
deal, which was signed in 1985. The company said transactions were made
with the "express approval" of the British government.

"All such payments made under those agreements were made with the
express approval of both the Saudi and UK governments".

The fallout from yesterday's allegations may affect BAE's planned
expansion in the US.

According to a source in Washington, BAE's $4.1bn (£2bn) proposed
takeover of a major US defence company could be in jeopardy because of
the disclosures.

The source, assessing the damage yesterday, predicted it will also be
harder for BAE to pursue other plans for moves into the US defence
market.

BAE could come under scrutiny from a number of US investigatory bodies,
including the treasury, the justice department and congressional
committees.


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