BAE Systems fined for accounting failings

23 December 2010
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23 December 2010 | Lindsay Clark

BAE Systems has been fined £500,000 after admitting it failed to keep adequate accounting records in relation to a defence contract.

Earlier this week at Southwark Crown Court in London, the military supplier admitted the offence in relation to a defence contract for the supply of an air traffic control system to the government of Tanzania between 1999 and 2005.

The Serious Fraud Office (SFO) said BAE had paid money to a “covert” agent, and that the company “has accepted that there was a high probability that part of this sum would be used to favour it in the contract negotiations”. The judge said BAE had concealed the payments to the agent from auditors and, ultimately, the public. It was then not possible for auditors to establish if the payments were accounted for or lawful.

The judgment follows a settlement agreed with the SFO in March this year, as reported in SM, to pay £30 million to settle allegations over its conduct. At the same time, the company agreed to pay the US Department of Justice a settlement of £257 million. The new fine will be deducted from the £30 million settlement.

BAE said that in the decade since, it had enhanced its compliance policies and processes.

Lobby group Transparency International UK said the case highlighted the shortcomings of current UK anti-bribery laws and the need to bring the new UK Bribery Act, passed last spring, into force as soon as possible. Its introduction had already been delayed for a year until April 2011.

Transparency International UK executive director Chandrashekhar Krishnan said there were still many unanswered questions in the case.

“We are particularly disappointed that the settlement appears to prevent the future re-opening of this and other cases involving BAE Systems, should new evidence come to light. Perhaps most seriously, the individuals who allegedly broke the law and enabled large sums of money to be misappropriated in an extremely poor country have gone unpunished.

“It is clear that BAE Systems has got off lightly,” Krishnan added.

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