Tanzania ‘accounting error’ verdict for BAE Systems today

BAE in court

BAE in court

The fate of ‘accounting errors’ in Tanzania made by arms major BAE systems will be decided today in court. The Serious Frauds Office (SFO) was investigating the case.

The defense firm – which builds the ‘Astute’ class submarines for the Ministry of Defence at Barrow-in-Furness in Cumbria, had struck a deal with the SFO to settle the case for £30 million.

However, putting a question mark over the legality of SFO’s US-style plea bargain with BAE, Justice Bean – the Judge presiding over the case, may award higher penalties for the company.

The single criminal offence against BAE Systems was brought by SFO lawyer Louis Mably under section 221 of the Companies Act 1985 for failing to keep accounting records. The SFO investigation found that BAE Systems had bribed to secure an order worth £28 million for the Military Radar System of Tanzania, through its company Red Diamond through Panama-registered trading company Envers. In its report SFO said: “to keep accounting records which were sufficient to show and explain payments made pursuant to (a) a contract between Red Diamond Trading Limited and Envers Trading Corporation, (b) a further contract between British Aerospace (Operations) Limited and Merlin International Limited”.

When asked how BAE is pleading the charges brought by SFO, QC David Perry representing BAE simply said “guilty” without elaborating further.

The SFO found that over £6 million was paid by a BAE subsidiary, Red Diamond to BAE’s agent in Tanzania Sailesh Vithlani, who holds a British passport. In 2007, an international arrest warrant was issued against Vithlani and is wanted by the Interpol. Paying inflated commissions to agents, who in turn bribe officials to clinch deals, is an old practice. Norman Lamb MP, had prepared a report on the deal and concluded a modern system could have been procured for one-tenth of the cost.

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