* 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 (Reuters) - 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 Security.”
“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 Peters)
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