* Critics accuse SFO of sabre-rattling
* Lawyers, analysts say such cases difficult to prosecute
* Big fines seen likely in the event of any conviction
* Shares in BAE down 4 percent
(Adds analyst comments)
By John Bowker and Paul Hoskins
LONDON, Oct 1 Britain's Serious Fraud Office
(SFO) said on Thursday it was prepared to prosecute BAE Systems
(BAES.L) for bribery but stopped short of formally requesting a
criminal trial of Europe's biggest defence contractor.
Legal experts said BAE could face penalties of hundreds of
millions of pounds if found guilty but said that securing a
conviction would be very difficult, and that both sides would
probably still seek to reach an out of court settlement.
BAE is facing allegations it used bribery and corruption in
arms deals in South Africa, Tanzania, Romania and the Czech
Republic dating back to the 1990s.
The SFO said it intended to ask the Attorney General for
permission to prosecute BAE but did not give a timeframe,
saying only that it would file the necessary paperwork "when
the SFO considers it is ready to proceed."
Reuters last week quoted sources close to the case as
saying that the Serious Fraud Office wanted BAE to plead guilty
and agree to a substantial fine by Sept. 30 or face possible
criminal prosecution. [ID:nN24478509] [ID:nLU332518]
TRACE International, a not-for-profit body that helps
companies combat bribery, criticised the SFO for setting a
deadline and then undermining its credibility by not moving
quickly to indict BAE when the deadline was missed.
"The SFO's strategy on the BAE matter is not at all clear,"
said Alexandra Wrage, TRACE president and author of "Bribery
and Extortion: Undermining Business, Governments and
"It's difficult to see what incentive BAE has to do
anything but proceed on the course it was on before the SFO
started sabre-rattling," she added.
Christopher Grierson, bribery and corruption task force
partner at law firm Lovells, also described the SFO's words as
"a little bit like sabre-rattling" but said the watchdog was
sharpening its act to show it can be as tough on corruption as
other jurisdictions such as the United States. [ID:nL1601628]
For its part BAE said it would only go to court "if
necessary" and that it continued "to expend considerable effort
seeking to resolve (the issues), at the earliest opportunity."
BAE and Britain could well resolve the issue through an
out-of-court settlement; but for now, an ongoing investigation
has cast a shadow over BAE's U.S. subsidiary just as defense
contractors are fighting harder than ever for a shrinking
number of Pentagon dollars.
"The corruption charges will be a drag on BAE's business at
a time when it is facing a downturn in its considerable North
American revenues," said Loren Thompson, defense analyst with
the Virginia-based Lexington Institute.
U.S. officials remain tight-lipped about any progress in
the case, saying only that it is still under way.
Shares in BAE, the Pentagon's No. 5 supplier by sales,
closed down 4.4 percent at 334 pence.
"HUNDREDS OF MILLIONS"
A spokesman for the Attorney General said that, as in all
cases, she would only assess whether there was sufficient
evidence for a prosecution and whether one was in the public
interest once any file had been received from the SFO.
In December 2006, the SFO dropped an investigation of
allegations of bribery of Saudi Arabian officials in an arms
deal involving BAE after then-Prime Minister Tony Blair said
the probe threatened national security.
The anti-corruption unit of the Czech police, which is
probing a fighter aircraft deal awarded to BAE and Swedish
group Saab (SAABb.ST), said it hoped to present the results of
its own investigation to prosecutors by the end of this month.
"There have been some partial consultations with the
British side," said spokesman Roman Skrepek.
Lawyers said there was plenty of incentive for both sides
to avoid a trial given the enormous cost and time involved.
"The figures could well be up in the hundreds of millions,"
Gavin Cunningham, Head of Corruption Investigations at
accountancy firm BDO Stoy Hayward, said of the possible
penalties and costs facing BAE if convicted.
Lawyers said the SFO would want to show it had teeth by
following the lines of Germany and the U.S in dealing with
international corruption. [ID:L1601628]
Late last year German industrial conglomerate Siemens
(SIEGn.DE) agreed to pay just over $1.3 billion to settle
corruption probes. [ID:nN15508680]
For the SFO a successful outcome to any trial would be far
from certain given that securing convictions for individuals is
much easier than for companies.
(Additional Reporting by Matt Scuffham, Rhys Jones, Kirstin
Ridley and Robert Mueller; Editing by Will Waterman and Hans
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