SFO prosecution of BAE

22 December 2010

A judgment at Southwark Crown Court on 21 December 2010 brought to a close the long running saga of the SFO's investigation and prosecution of BAE. Following BAE's guilty plea to one count of failing to keep adequate accounting records under S221 Companies Act 1985, the court essentially upheld the SFO's plea agreement with BAE and fined BAE £500,000 plus costs of £225,000, to be deducted from the £30 million compensation payment which BAE had agreed to pay to the people of Tanzania.

In his sentencing remarks, Mr Justice Bean drew attention to the loose and "hastily drafted" agreement between BAE and the SFO (which also precludes any further prosecution of BAE for any matters prior to February 2010 and of any BAE individuals except in relation to conduct in the Czech Republic and Hungary) as well as to the absence of any charges relating to conspiracy to defraud and false accounting under S17 Theft Act 1968.

Mr Justice Bean expressed astonishment at the SFO's acceptance that payments made to BAE's agent, a Mr Vithlani, were merely for the purposes of lobbying when this appeared inconsistent with BAE's view of the purpose of the payments. He also highlighted an inconsistency in the nature of the alleged inadequate description of the payments to Mr Vithlani and questioned whether merely misdescribing the payments as “provision of technical services” as opposed to something along the lines of “public relations and marketing services” would have been appropriate grounds for a prosecution at all.

However, Mr Justice Bean concluded and sentenced on the basis that "by describing the payments in their accounting records as being for the provision of “technical services” the Defendants were concealing from the auditors and ultimately the public the fact that they were making payments to Mr Vithlani, 97% of them via two offshore companies, with the intention that he should have free rein to make such payments to such people as he thought fit in order to secure the Radar Contract for the defendants, but that the defendants did not want to know the details".

The full sentencing remarks can be found here.