BAE accused of '£1bn Saudi payout'

Last Modified: 07 Jun 2007
By: Faisal Islam

There have been calls today for a fresh inquiry into the multi billion pound Al Yamamah arms deal between Britain and Saudi Arabia.

It has been claimed that the UK's largest defence company, BAe Systems, made secret payments of more than £1bn to the Saudi Prince Bandar in connection with the deal.

The contract was being investigated by the Serious Fraud Office up until the end of last year. Today, the prime minister said it was right that the investigation was halted because it could have wrecked Britain's links with Saudi Arabia. Faisal Islam reports.

Prince Bandar bin Sultan

Prince Bandar bin Sultan (credit: Reuters)

He is the cigar-smoking friend of many of the world's leaders: a man with easy access to the corridors of power on both sides of the Atlantic.

Prince Bandar bin Sultan was formerly the Saudi ambassador in Washington but is the alleged recipient of more than a billion pounds in secret payments from Britain's biggest arms company, BAe systems.

The payments related to the biggest arms deal in history the £43bn Al-Yamamah deal - involving Hawk jets, and 120 Tornadoes. It's been running for over 20 years, and is imminently due to be extended with the purchase of 72 of these eurofighter typhoon aircraft.

For 20 years, ministers have consistently clamed no knowledge of secret commissions.

But today's Guardian claims that money was drawn from an account at the Bank of England, set up to facilitate the Al-Yamamah deal.

BAe Systems would withdraw the cash and send it to Prince Bandar's account at Riggs Bank in Washington,

The newspaper alleges that £30m was paid over every quarter for 10 years, making a total payment of more than £1bn.

It says these payments were presented as fees for marketing services provided by the Prince.

Last December the attorney general, Lord Goldsmith announced the scrapping of a Serious Fraud Office bribery investigation into the Saudi deals.

At the time the Saudis had been threatening to pull the order for the 72 eurofighter typhoons, but a Whitehall-wide exercise had earlier concluded that it would not be legal to pull the investigation on that basis.

However the prime minister determined that it was a matter of national security based on unspecified suggestions of a withdrawal of intelligence cooperation from the Saudis, whose national security council is headed by Prince Bandar.

This rationale has not been accepted by the world bribery watchdog, the OECD, but at today's G8 summit, Mr Blair wasn't rowing back.

BAe systems itself says: "The Al Yamamah programme is a government-to-government agreement and all such payments made under those agreements were made with the express approval of both the Saudi and the UK governments.

"We deny all allegations of wrongdoing in relation to this important and strategic programme."

'We deny all allegations of wrongdoing in relation to this important and strategic programme'
BAe

Drastic action

However Channel 4 News understands that the shadow of the SFO investigation has led to some drastic action.

Last month BAe quietly axed hundreds of advisers, consultants, agents and middlemen some of whom earn six figure commissions on its deals abroad. Among more than 300 leading figures let go were former MPs, military chiefs and intelligence officers.

Those moves appear to be an attempt to allay the concerns of US authorities who are keeping a close eye on BAe's expansion there, including the £2bn purchase of a company that manufactures military vehicles.

Senior congressional aides had told Channel 4 News that the clearout had helped.