The following correction was printed in the Guardian's Corrections and clarifications column, Wednesday 17 February 2010
The headline above could have been misinterpreted. What BAE admitted to was false accounting and making misleading statements in relation to allegations of corruption, as we later made clear in other articles. The US deputy attorney general quoted in the article is Gary Grindler, not Larry Grindler.
The arms giant BAE yesterday agreed to pay out almost £300m in penalties, as it finally admitted guilt over its worldwide conduct, in the face of long-running corruption investigations.
For 20 years, the firm refused to accept any wrongdoing, despite mounting evidence of alleged bribes and kickbacks, much of it uncovered by the Guardian.
But BAE yesterday said it would plead guilty to charges of false accounting and making misleading statements, in simultaneous settlement deals with the Serious Fraud Office in the UK and the department of justice in Washington.
The admissions in the US covered BAE's huge £43bn al-Yamamah fighter plane sales to Saudi Arabia and smaller deals in the Czech Republic and elsewhere in central Europe. In the UK, the admissions cover a highly controversial sale of a military radar to poverty-stricken Tanzania, which the development secretary Clare Short said at the time "stank" of corruption, but which the then prime minister, Tony Blair, forced through the cabinet.
The Serious Fraud Office said in its announcement yesterday that some of the £30m penalty BAE was to hand over in the UK would be "an ex gratia payment for the benefit of the people of Tanzania".
Another $400m (£257m) would be paid in penalties to the US authorities. BAE will not face international blacklisting from future contracts, because it has only admitted false accounting, not bribery.
MPs admitted to mixed feelings about BAE's admission and are still furious that the SFO's own extensive inquiry into the al-Yamamah deal was shut down in 2006, following pressure from the firm and from Saudi officials, who reportedly threatened to withdraw co-operation over security matters. The then attorney general, Lord Goldsmith, cited national security when he announced the inquiry was being abandoned. Blair said he took full responsibility for the decision.
The Liberal Democrats' deputy leader, Vince Cable, said last night that BAE Systems had succeeded in ensuring that key details of its arms deals would remain hidden. "The one positive thing is we have now had an acknowledgement from BAE Systems that unacceptable practices were being conducted. But nobody has been brought to account." He added: "The British government was up to its neck in this whole business. Government ministers were almost certainly fully aware of what was happening."
The former Labour minister Peter Kilfoyle said: "I certainly think there is now an argument to be made for an independent judicial inquiry into the whole affair. This raises serious questions on what [Blair's] motivation was in intervening in the [al-Yamamah investigation in the UK] and what influences were brought to bear on him."
Richard Alderman, director of the SFO, called the pioneering deal "pragmatic". It later emerged that the only prosecution of an individual by the SFO – Count Alfons Mensdorff-Pouilly – was being dropped. Alderman added: "This brings to an end the SFO's investigations into BAE's defence contracts."
In Washington, the deputy attorney general, Larry Grindler, was more pointed. "Any company conducting business with the US that profits through false statements will be held accountable," he said. "The alleged illegal conduct undermined US efforts to ensure that corruption has no place in international trade."
Britain had previously been subject to condemnation at the OECD after Blair intervened to halt the British investigation into allegations of Saudi corruption.
Yesterday's announcement in Washington focused on BAE's acceptance of guilt of the Saudi deals, and described secret shell offshore companies for making covert payments, and specific payments into a Saudi intermediary's Swiss account. It also identified £19m secretly paid to lubricate Czech and Hungarian weapons deals. BAE admitted writing an untrue letter to US authorities in 2000, denying it was paying any secret commissions.
Yesterday's statement said BAE was now free of threats of corporate prosecution. BAE said the deal "draws a line under the past", and it regretted what it called "the lack of rigor in the past".
A government spokesman said last night: "It's right that these historical allegations have been addressed."
But two anti-corruption campaigners – Sue Hawley of the Cornerhouse NGO, and the former South African ANC MP Andrew Feinstein – said they reacted to the deal, under which no trials will take place, with "dismay". They said it "betrays the people of Tanzania, South Africa, the Czech Republic and Romania, who have the right to know the truth about corruption in their countries perpetrated by British and other companies. It … sends the message that large enough corporations are able to pay their way out of trouble."
