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PRESS RELEASE


Brits May Have Reason To Worry
About U.S. Investigation of BAE

June 29, 2007 (EIRNS)—Since BAE's official acknowledgement that it is under investigation by the U.S. Department of Justice, the British press has been full of warnings that the Blair government would have been better off if it had not shut down the British BAE investigation. They may be right.

For example, today's Daily Telegraph contains a piece called "BAE's poisonous legacy," which says that the U.S. Justice Department investigation is likely to pose even more of a dilemna for the UK government than for BAE, because the British government has to decide whether to allow U.S. investigators to see confidential documents held by the Ministry of Defense. The problem, says the Telegraph, flows from Blair's decision to make Britain a party to the OECD anti-bribery convention; Blair had hoped that calling off the Serious Fraud Office (SFO) would end the matter, but a formal U.S. diplomatic protest suggested otherwise.

Yesterday's London Independent, in a Jeremy Warner column, also says that the British government and BAE would have been better off keeping the investigation in London rather than "being immersed in the icy waters of the Justice Department;" now there's no telling what will happen, and the penalties are likely to be harsher than those meted out in Britain. "BAE Systems hoped to bury the past," Warner writes. "Instead, there now appears to be no stopping it being exhumed. With so much to lose in the U.S., BAE has no option but to co-operate fully." He says the Saudis were able to blackmail the UK into backing off, but it's doubtful the DOJ will be similarly persuaded.

And today's London Independent says the US DOJ investigation "could, in a worst-case scenario, lead to the extradition and prosecution of BAE's senior executives." It notes that the U.S. Foreign Corrupt Practices Act (FCPA) is far more stringent that Britain's anti-corruption laws, and that enforcing the FCPA is a top priority of the DOJ Criminal Division head Alice Fisher.

EIR's investigation shows that it's true that Fisher, a political appointee, has promoted the FCPA, but the Brits' biggest worry should be the actual top prosecutor on FCPA cases, Mark Mandelsohn, a career prosecutor who is now the deputy chief of the DOJ's Fraud Section. Mandelsohn is also the DOJ's representative on the OECD Bribery Working Group — which has been up in arms over the British suppression of the BAE case — and he has principal policy responsibilities relating to the OECD Convention on Combatting Bribery.

In 2006, Mendelsohn won FCPA cases against two foreign companies, one of which was the British oilfield services company Vetco. In that case, three British executives were charged with bribing Nigerian officials; U.S. jurisdiction was obtained because of hotel stays and gifts made in the U.S. In the second case, Norway's Statoil was charged with bribing an Iranian oil official; $5 million of bribe payments had been routed through U.S. banks.

In the BAE case, at least two billion dollars were reportedly routed through Riggs Bank in Washington, D.C. to Dick Cheney's friend Prince Bandar of Saudi Arabia, giving the Justice Department indisputable jurisdiction over the case under U.S. law.