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U.S. v. BAE Systems PLC

 
:
BAE Systems
:
DOJ Criminal
:
February 4, 2010
:
U.S. v. BAE Systems PLC
:
U.S. v. BAE Systems, No. 1:10-cr-00035 (D.D.C. 2010)
:
BAE was not charged with FCPA liability. However, according to the statement of offense, BAE made payments to advisors through offshore shell companies even though "there was a high probability that part of the payments would be used in order to ensure that [BAE] was favored in the foreign government decisions regarding the sales of defense articles." It is likely that debarment consequences were considered; the sentencing memorandum notes "mandatory exclusion under EU debarment regulations is unlikely in light of the nature of the charge" to which BAE pled.
:
Aerospace/Defense
:
Czech Republik, Hungary, Saudi Arabia
:
2000; 2001; 2002
:
Saudi public official; Czech public officials; Hungarian public officials
:
BAE Systems PLC ("BAE"), formerly known as British Aerospace, is a multi-national defense contractor. In 2000, BAE made commitments to the U.S. government that it would create and implement policies and procedures to ensure compliance with provisions of the FCPA and relevant provisions of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. According to the DOJ, in May and June 2002 BAE falsely stated to the Department of Defense that it had implemented sufficient mechanisms to ensure compliance with the anti-bribery provisions of the FCPA.

Before and after its commitments to the U.S. government, BAE regularly retained "marketing advisors" to assist in securing sales of defense articles. Substantial payments were made to these advisors without the type of scrutiny and review required by the FCPA or represented by BAE to the U.S. government. BAE used offshore shell companies to conceal its relationships and payments to these advisors.

Specifically, BAE made undisclosed and unscrutinized payments of more than $19,000,000 to entities associated with an unnamed individual, and at least some of these payments were to secure leases of fighter aircraft to the Czech Republic and Hungary. Additionally, BAE provided substantial benefits, including the purchase of travel and accommodations, security services, real estate, automobiles, and personal items, to a Saudi public official, who was in a position of influence regarding the fighter aircraft BAE sold to the U.K. government, which then sold the aircraft to the Kingdom of Saudi Arabia. BAE also agreed to transfer sums totaling more than $10,000,000 and more than $9,000,000 to a bank account in Switzerland controlled by an intermediary while aware there was a high probability that the intermediary would transfer part of these payments to the Saudi public official.

The DOJ filed a criminal information on February 4, 2010 charging BAE with conspiring to defraud the U.S. and to make false statements to the U.S. government, and with violating the Arms Export Control Act and International Traffic in Arms Regulations by failing to disclose commission payments. On March 1, 2010, BAE pleaded guilty to these charges and agreed to pay a penalty of $400,000,000, implement an effective compliance system, and retain a compliance monitor for a three-year term.

On February 5, 2010, BAE announced that it had reached settlements with the DOJ and the U.K.'s Serious Fraud Office ("SFO"). To resolve the SFO's investigation, BAE agreed to plead guilty to breach of duty to keep accounting records for payments made to a marketing advisor in Tanzania and pay a penalty of $30 million. Though BAE appealed the District Court's extension of the term of the independent monitor, the D.C. Circuit affirmed the lower court on October 22, 2010.
:
Arms Export Control
:
Fine, Plea
:
BAE pleaded guilty and agreed to pay a penalty of $400,000,000, implement an effective compliance system, and retain a compliance monitor for a three-year term.
:
400,000,000
:
0
:
Issuer
:
Foreign
:
Contract Procurement/Retention
:
200,000,000
:
Gifts, Travel, Wire/check
:
Sales Agent/Consultant
:
200,000,000
:
Switzerland
:
No
:
No
:
United Kingdom