Like many people, we’re tempted to bash the Serious Fraud Office. Its reluctance to pursue BAE — despite the company’s outrageous selling practices and offensive attitude — generated strong emotions over the years. Andrew Feinstein, a former African National Congress MP who helped South Africa’s parliament investigate BAE, told the Financial Times the SFO’s settlement was a “travesty of justice.”
The end wasn’t pretty. The SFO — which should have taken the lead — barely laid a glove on BAE. It let the company plead guilty to an accounting lapse for payments to a former agent in small-market Tanzania. No other countries were mentioned. And it fined BAE £30 million (with some portion going to charity) — a mere gesture considering the company’s £18.5 billion in revenue last year.
Let’s ask then: Why the tiny slap from the SFO? Why not something a lot more . . . proportionate? The Justice Department, for example, followed a familiar script. In settling allegations that BAE paid and concealed bribes to government officials from Saudi Arabia, the Czech Republic, and Hungary, the DOJ hit the company with a small criminal charge — one count of conspiracy to make false statements — and a huge financial penalty of $400 million. That’s similar to the Siemens settlement in December 2008.
The SFO’s main goal, it appeared, was to put the case behind it. On Friday it said “no further prosecutions will be brought against BAE Systems in relation to the matters that have been under investigation by the SFO.” To prove the point, it dropped the prosecution of BAE’s agent, Alfons Mensdorff-Pouilly. Just days earlier, he’d been charged with bribing government officials in the Czech Republic, Hungary, and Austria to sell jets for BAE. The end of his case probably sealed his lips — and any evidence he might have offered — forever.
We’re not apologizing for the SFO. But could the BAE case have been too much enforcement too soon? The American Justice Department, after all, had 30 years to cut its teeth on FCPA prosecutions. When the big cases came along — Siemens, KBR, then BAE — the feds knew the drill. They had created politician-friendly templates that look like real punishment but let the corporate body survive unharmed and maybe even a lot wiser.
When the SFO launched its investigation into BAE six years ago, no British agency had prosecuted a case of overseas bribery. There wasn’t any U.K. precedent to ensure punishment that wouldn’t kill the company, à la Arthur Andersen. Beyond the mechanics, there was a cultural barrier. The British idea that laws broken overseas are no concern back home was around for a long time (see our post here). That idea didn’t disappear on the day ten years ago when the U.K. signed the OECD’s anti-corruption convention. Attitudes can change, as they did in the U.S., but that takes time.
Politics, too, may have helped overwhelm the case. The hawks who wanted BAE prosecuted were mainly from the press, NGOs, the judicial system, and the public. But the doves — Britain’s elected officials — held the real power and they opposed putting BAE on trial. That’s probably why the company’s top brass never acted as though the SFO posed a serious threat.
There were also hints of something more cynical at work. As the Financial Times reported: “Norman Lamb, MP of the Liberal Democrats — the only one of the three main parties not implicated in BAE’s Saudi dealings of more than £40 billion over two decades — said he was ‘deeply concerned’ that the settlement failed to deal with the company’s suspected conduct in full.” (Our italics.)
Going forward, the optimistic version is that the BAE case will help change British attitudes. And that the SFO, soon to be armed with a tough new antibribery law, will use the lessons learned to become a global leader in the fight against international public corruption.