On March 1, 2010, BAE Systems plc pleaded guilty to one count of conspiracy. According to documents filed in court, BAE admitted to conspiring to defraud the United States, making false statements about its Foreign Corrupt Practices Act (FCPA) compliance program, and violating the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). BAE must pay $400 million in criminal fines and has agreed to make additional commitments concerning its ongoing compliance.
BAE had previously announced this settlement with the DOJ and the U.K.’s Serious Fraud Office. The U.S. settlement had been subject to the court approval. See our post here for more details on that announcement.
According to court documents, from approximately 2000 to 2002, BAE represented to various U.S. government agencies that it would create and implement policies and procedures to ensure its compliance with the anti-bribery provisions of the FCPA, as well as similar foreign laws implementing the Organization for Economic Cooperation and Development (OECD) Anti-bribery Convention. However, BAE knowingly and willfully failed to create mechanisms to ensure compliance with these legal prohibitions on foreign bribery. The gain to BAE from the various false statements and failures to make required disclosures to the U.S. government was more than $200 million.
Despite representations to the contrary, BAE admitted to making a series of substantial payments to shell companies and third-party intermediaries that were not subjected to the degree of scrutiny and review to which BAE told the U.S. government the payments would be subjected. BAE admitted it regularly retained what it referred to as “marketing advisors” to assist in securing sales of defense items without scrutinizing those relationships. In fact, BAE took steps to conceal from the U.S. government and others its relationships with some of these advisors and its undisclosed payments to them.
Significantly, the guilty plea referred to BAE’s bribery of Saudi Arabian officials. According to the DOJ release, BAE began providing support services to the U.K. government in the mid-1980s, after the U.K. and the Kingdom of Saudi Arabia entered into a formal understanding. According to court documents, the “support services” that BAE provided under the formal understanding resulted, in part, in BAE’s providing substantial benefits to a foreign public official of Saudi Arabia, who was in a position of influence regarding sales of fighter jets, other defense materials and related support services.
BAE admitted it did not undertake an adequate review or verification of benefits provided to the Saudi Arabian official, and did not adequately review or verify more than $5 million in invoices submitted by a BAE employee from May 2001 to early 2002 to determine whether the listed expenses were in compliance with previous statements made by BAE to the U.S. government regarding its anti-corruption compliance procedures. In addition, in connection with these same defense deals, BAE agreed to transfer more than £10 million plus more than $9 million to a bank account in Switzerland controlled by an intermediary, being aware that there was a high probability that the intermediary would transfer part of these payments to the same Saudi Arabian official.
As part of its guilty plea, BAE agreed to maintain a compliance program designed to detect and deter future violations of the law, including the FCPA and other foreign bribery laws. This includes the retention of an independent compliance monitor for three years.
This plea continues the trend of increased cooperation among DOJ and foreign law enforcement authorities, with DOJ expressing “its gratitude to [the SFO] for its ongoing partnership in the fight against overseas corruption.”