BAE says UK should hear corruption case

WASHINGTON (Reuters) - Officials of BAE Systems Plc have told a U.S. court that a shareholder lawsuit charging illegal bribes were paid to win a Saudi arms deal worth up to $80 billion should be heard by a British court, not the U.S. court.

In court papers filed late on Friday, the BAE defendants urged a U.S. federal judge to quash a suit by a U.S. pension fund with shares in BAE, Britain’s top arms company. The suit charged they breached their fiduciary duties by allowing more than $2 billion in illegal bribes to Saudi Prince Bandar bin Sultan and others in the 1980s.

A lawyer for Bandar, a former Saudi ambassador to the United States who now heads Saudi Arabia’s national security council, could not be reached for comment.

BAE and Bandar have strongly denied that wrongful payments were made to help secure the arms deal known as al-Yamamah, or “the Dove,” in which Tornado fighter jets and other military hardware were sold to Saudi Arabia in the 1980s.

Britain’s Serious Fraud Office dropped an investigation into the matter in December 2006. Then-Prime Minister Tony Blair said the investigation would damage national security.

In April, a British court ruled in favor of anti-arms trade campaigners that the investigation into allegations of bribery in arms deals with Saudi Arabia was ended unlawfully. The issue is on appeal to the House of Lords, Britain’s highest court.

Lawyers for the defendants, including BAE’s chief executive Mike Turner and board chairman Richard Olver, argued in the U.S. District Court that the British court’s ruling showed there “are live issues in England ... properly addressed under English law.”

The shareholder suit was brought in September 2007 by a pension fund for employees of Harper Woods, Michigan. Defendants include all BAE board members plus several of the company’s current and former top executives.

The action seeks recovery, to be paid to BAE itself, for the defendants’ “intentional, reckless and/or negligent” acts including the alleged kickbacks to Bandar and others.

Lawyers for the pension fund have argued the United States should have jurisdiction because, among other things, more than $2 billion in alleged bribes went through defunct accounts at a former Washington D.C. bank, Riggs Bank.

BAE defendants countered that nearly all of them reside outside the United States, and none in Washington D.C.

“England has a far larger stake in this case than does Washington, D.C., and for reasons of national interest as well as convenience to the court and the parties, this case should proceed in England, if it proceeds at all,” wrote Lawrence Byrne, of the New York firm Linklaters LLP, for the BAE defendants.

The Justice Department is investigating BAE’s compliance with anti-bribery laws, including dealings with Saudi Arabia, and last week served subpoenas on Turner and Sir Nigel Rudd, a non-executive director.

Reporting by Jim Wolf, editing by Jackie Frank