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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

The Briefing Book

The President Elect and his transition team aren’t spending hours each day pondering the Foreign Corrupt Practices Act. But there is one FCPA matter that should be on their radar — the investigation of BAE Systems. Why? Because that case — whatever the outcome — is a chance for the United States to demonstrate its commitment to the rule of law and the fight against global public corruption. The new administration can also show its in situ allies in the war on terror that, unlike the British, the U.S. won’t give in to political blackmail.

Some allegations in the case are these: U.K. military-equipment-maker BAE secretly paid $2 billion to Saudi Prince Bandar bin Sultan bin Abdul Aziz Al Saud in return for inside help selling Typhoon jet fighters to the Saudi government; the money moved irregularly from American banks to accounts in Switzerland; and the prince, who was Saudi Arabia’s ambassador to Washington from 1983 to 2005, shared the largess he received during those years with other Saudi officials.

According to reports, Prince Bandar has never denied what happened, only that neither he nor BAE broke any laws — notwithstanding British prohibitions on international public bribery, Swiss money laundering concerns, and the application of the Foreign Corrupt Practices Act. BAE denies all allegations of corruption.

The U.K.’s Serious Fraud Office launched an investigation. But in December 2006 — just as the SFO was getting close to evidence it needed about the money transfers through Switzerland — the Blair government told it to stand down. In High Court hearings in London this year to determine if the SFO broke any laws by dropping the investigation, witnesses said Saudi Arabia had threatened to end all anti-terrorism cooperation with the U.K. unless the Blair government pulled the plug. According to one report on the hearings,

Investigators said they were given to understand there would be another 7/7 and the loss of British lives on British streets if they carried on delving into the payments. The government argued . . . that these threats were so grave and put Britain’s security in such imminent threat that the head of the Serious Fraud Office had no option but to shut down his investigation immediately.

On April 10, 2008, the High Court’s Lord Justice Moses and Mr. Justice Sullivan tried to reclaim for Britain the simple idea that no man or woman is above the law, an idea that shapes and preserves every great and not-so-great democracy on the planet. “No one,” their scathing 46-page ruling against the government said, “within this country or outside, is entitled to interfere with the course of our justice.”

The victory for the rule of law was short lived. In July, the House of Lords (to which the government had appealed) ruled that the Serious Fraud Office didn’t do anything illegal. All five law lords hearing the case agreed that although the SFO “was confronted by an ugly and obviously unwelcome threat,” its decision to stop investigating BAE was justified because it reasonably believed the Saudi threats were putting British lives at risk.

In Washington, meanwhile, the Justice Department had started its own investigation. It wanted to know whether BAE and Prince Bandar had violated the Foreign Corrupt Practices Act and anti-money laundering laws. In November 2007, the DOJ reportedly obtained Swiss banking records and evidence from a U.K. businessman who was part of the deal. The U.K. press said Peter Gardiner had boxes of invoices allegedly detailing payments from BAE to members of the Saudi royal family. Gardiner, the reports said, was flown by FBI agents to Washington in August 2007 to give testimony there, traveling via Paris to avoid British attention. And in May this year, U.S. authorities detained BAE’s chief executive Mike Turner and director Nigel Rudd at U.S. airports. Before letting them leave, investigators copied information from their laptops, PDAs, cell phones and papers.

BAE’s reaction? “A severe lack of cooperation,” according Joshua Hochberg, the former head of the DOJ’s group responsible for Foreign Corrupt Practices Act prosecutions. As we said some months ago, instead of making peace with the DOJ, BAE is flipping the feds an awfully rude gesture. (A report out today in says BAE is now trying to repair the damage with the DOJ and the two parties are talking.)

And the reaction from the rest of the world? Last month the OECD said it is “disappointed and seriously concerned with the unsatisfactory implementation of the [OECD Anti-bribery] Convention by the UK. . . . The Working Group also strongly regrets the uncertainty about the UK’s commitment to establish an effective corporate liability regime in accordance with the Convention . . . .”

On the U.K. government’s decision to stop the investigation of BAE, the editors of the Wall Street Journal said this: “[Former Prime Minister] Blair has eloquently argued on other occasions that bringing democratic institutions to the Middle East is a vital part of fighting Islamic terrorism. In stopping the BAE case, his administration missed a perfect opportunity to show the Saudis that one of the foremost of these institutions is the rule of law — and that neither justice nor human lives should be toyed with for expediency’s sake.”

The lawyers who have retaken the White House have another “perfect opportunity” to show the majesty and importance of the rule of law. We can’t think of a better reason for the FCPA to be in the President Elect’s Briefing Book than that.

View our prior posts about BAE here.


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