30m BAE Systems bribery settlement may be routed to Tanzania

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British prosecutors plan to send as much as £30 million from a BAE Systems bribery probe settlement to Tanzania, the country where officials took the payoffs, in an approach their US counterparts reject.

Europe’s biggest defence contractor reached a deal this year with the UK Serious Fraud Office (SFO) to end a five-year probe into whether it enticed Tanzanian officials to buy a radar system with payments, Bloomberg reports. Under the proposed settlement, which needs a court’s approval, the SFO will ask that most of the £30m BAE Systems is paying go to Tanzania as the agency’s director, Richard Alderman, pushes to return money to corruption victims, Bloomberg reports.

The Tanzanian payouts would be the highest reparations sought by the SFO in three corporate bribery cases it has pursued. The payments have been met with scepticism from lawyers and bribery watchdogs, who say there is no way to ensure how the money will be used, or determine who the victims were. “There is a grave danger that you’re returning money to the very people that took bribes in the first place,” said Mark Mendelsohn, the former chief of the fraud division at the US Department of Justice. “The last thing one wants to do is fuel corruption in the name of fighting it.”

Identifying victims in corruption cases could be challenging, he added. “Is it the people of the country whose government took payments? Often it is,” said Mendelsohn, now a partner at Paul Weiss Rifkind Wharton & Garrison. “Are the victims the shareholders of the bribe-paying company? Maybe, maybe not.” The SFO, which prosecutes complex fraud and corruption, will become part of the UK coalition government’s planned economic crime agency in two years. Alderman, who may retire after the transfer is complete, has said compensating victims was a priority for the agency.
“Some of our cases involve British companies and artificially overpriced contracts for business overseas,” Alderman said. Such contracts “in a developing country could have a negative impact on infrastructure development, education or humanitarian projects”, hurting “ordinary people”. Since he joined the SFO as director in April 2008, Alderman has encouraged companies to self-report bribery in exchange for reduced penalties, which is how similar cases under the US Foreign Corrupt Practices Act (FCPA) are handled. In FCPA cases, the criminal penalties assessed are returned to the US Treasury by law.
“Under the agreement with the Serious Fraud Office, the company will plead guilty to one charge of breach of duty to keep accounting records in relation to payments made to a former marketing adviser in Tanzania,” BAE Systems spokeswoman Lindsay Walls said. BAE Systems chairman Dick Olver has said the final fine assessed by a UK court was likely to be lower than the £30m agreed on, and the company would make up the difference in the form of a charitable donation to Tanzania. The investigation surrounding the Tanzania case dates back to a contract originally won in 1997.

Salva Rweyemamu, the spokesman for Tanzanian President Jakaya Kikwete, declined to comment.



The agreement reached in February will be presented to a London court later this year. Returning the money has proven difficult for the SFO as two countries have refused to accept it in another case. In the first overseas corruption case the SFO prosecuted, closely held UK bridge builder Mabey & Johnson agreed last year to offer reparations of £658 000 to Ghana and £139 000 to Jamaica. Neither country has taken the funds.