BAE still needs to come out clean about its past

Magdalena Reinberg works with Transparency Austria in Vienna, Tiffany Clarke with Transparency’s International Defence & Security Programme in London and Christian Humborg with Transparency Germany in Berlin. They write about recent corruption allegations against British weapons manufacturer BAE Systems.

As mentioned in TI-UK’s blog from 5 February 2013, the revelations in the Sunday Times show that it is very difficult for BAE Systems to escape from the long-standing allegations of corruption, despite the court settlement of $450 million (£30 million in the UK, the rest in the US) two years ago for books and records offences.

This comes at a time when in mid-January the Austrian court found a BAE agent Alfons Mensdorff-Pouilly not guilty of money laundering. Mr Mensdorff-Pouilly was accused of paying €12.6m in bribes on behalf of BAE across Central and Eastern Europe to win arms contracts. The Austrian judge Stefan Apostal declared there was too little evidence to convict him – “the situation stinks but does not stink enough” – as key witnesses did not appear in court. Apparently, Austrian authorities tried to obtain relevant files from the UK for two years, but claim they met with significant resistance after the BAE settlement. One witness that did appear (a former employee of Mr Mensdorff-Pouilly) mentioned that money certainly was handed out, but insisted he did not know whether this was done to pay bribes or for other reasons.

In 2010, the UK’s Serious Fraud Office (SFO) agreed to drop all charges against BAE, including those of Mr Mensdorff-Pouilly, as part of a negotiated settlement where BAE admitted errors in bookkeeping and paid $450m in fines in return for no further prosecution.

The Austrian judge was very clear in his acquittal that the situation could have looked completely different for Mr Mensdorff Pouilly, and that he had been “lucky” that the British did not come after him, and that the proceedings had been halted and that evidence was unable to be stood up.

This is not the first time that Mr Mensdorff-Pouilly’s name has been attached to allegations of corruption. He was investigated in relation to the sale of Gripen jets to Hungary and the Czech Republic (both now under investigation in the respective countries); the acquisition of face masks by the Austrian Ministry of Health during the avian flu scare; various Austrian politicians and businesspeople have been criticised for accepting expensive hunting invitations by him to his hunting grounds in Burgenland (Austria) and Scotland; and his name came up repeatedly during the (currently preparing for court) corruption charges surrounding Telekom Austria.

In a recent Index published by TI UK’s Defence and Security Programme, the evidence suggested BAE now has a good level of basic anti-corruption systems in place. BAE states in its public Code of Conduct that they aim to communicate openly and transparently with stakeholders on its business activities. But BAE has been far from transparent in the trial of one of its agents.

The company should live up to its public commitments of transparency and come out clean about its past dealings. These new allegations are a reminder that not a single individual has apparently been held accountable. BAE should commit to assisting authorities in revealing the truth about any crime that may have been committed by an individual on the company’s behalf. This includes sending witnesses to trials in foreign courts, and not hiding behind their deal with the UK authorities. By being seen to cooperate on matters such as this, BAE will take a step forward in demonstrating to the global public that they have indeed progressed and take ethical matters seriously.

Additionally, regarding the UK government’s commitment to helping reduce corruption globally, the UK authorities should clarify whether they refused to cooperate with the Austrian authorities, and if so, why. This would be in line with the commitment they made with the passage of the Bribery Act in 2010. Above all, the Austrian citizens deserve to know.

Carousel image: Flickr/Creative Commons: Daves Portfolio

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Christian Humborg

About Christian Humborg

Christian Humborg is Managing Director of Transparency International Germany.

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