It sounds like the stuff of pulp fiction: The UK's largest armaments producer running a £20 million ($33.4 million) slush fund to finance prostitutes, gambling trips, yachts, sports cars, and more for its most important clients the Saudi royal family and their intermediaries, greasing the wheels of the largest business deal in UK history. These are the accusations made last month by a former employee of weapons giant BAE Systems. And evidence has surfaced that members of the British government were aware of the bribe arrangement, but looked the other way.
BAE Systems, formerly known as British Aerospace or BAe, is one of the world's top arms producers. It manufactures warplanes, avionics, submarines, surface ships, radar, electronics, and guided weapons systems, generating annual sales of £12 billion ($20 billion) in 130 countries. The arms giant was formed as a nationalized British defense corporation in 1977, which was subsequently privatized in the early 1980s, and changed its name to BAE when British Aerospace merged with Marconi Electronic Systems in 1999.
BAE Systems' North American branch has an unusual special relationship with the Pentagon where it is treated as a domestic arms company. According to Ian Prichard of the British Campaign Against Arms Trade (CAAT), "BAES North America appears to be virtually a separate company - even top UK executives are not privy to the more sensitive work carried out by 'their' company in the US."
For years the company has been accused of selling arms to impoverished and dictatorial regimes, polluting the environment, and has been dogged for years by allegations of corrupt dealings.
Now those allegations have exploded into the open. Revelations point to BAE's provision of enticements to the Saudis over a fifteen year period, starting in the late 1980s, using a front company Robert Lee International (RLI), to divert funds to the arms clients and their middlemen. Among other allegations, RLI procured prostitutes for visiting Saudi officials and bought houses for mistresses, while an internal BAE statement reportedly refers to "sex and bondage with Saudi princes". According to documents published by The Guardian, the British government's Serious Fraud Office (SFO) alerted the Ministry of Defense of the possible involvement of BAE's chairman Sir Richard Evans in the bribe scheme, but the Ministry of Defense did nothing.
BAE Systems' chief executive Mike Turner didn't deny the slush fund charges. At a press conference following the revelations, he stated, "They are old allegations and they are old hat. They are history." Turner added, "Everything we do is legal and that is all I am prepared to say. Whatever the law is, we are legal."