Bandar-Gate Comes To The US

By Cernig

Josh Marshall writes of the ongoing BAe bribery scandal :" I haven't had time to dial in on this story, but I think it's big." He's right, it is, and he really should take the time to get up to speed.

I've been reading and following this story for months but haven't posted on it because it seemed to be a purely internal UK/Saudi matter - even now, the tale only rates page A15 in the Washington Post - but I've a strong feeling that's about to change. This may well be the next big "culture of corruption" scandal here in the U.S.

The story, at heart, is a simple one. In 1985, the Saudis did an arms deal worth billions with the BAe and the Thatcher UK government acted as facillitator and middleman for the deal. As a sweetener to make sure the deal went ahead, BAe bribed various Saudi bigwigs - and the UK government looked the other way in full knowledge of what happened. The arrangement continued for decades and extended to other deals including one under the Blair government for even more billions worth of fighter aircraft. Then, when the Serious Fraud Squad began an investigation of the bribes, Blair's government squashed that investigation.

Laura Rozen tries to explain what's been getting the Brits worked up about this:

no one - not Tony Blair, who shut down the UK Serious Fraud Office investigation, not Bandar, not BAE -- is really denying it. Such is the cost of doing business with Saudi Arabia...Blair just openly said, we're shutting this investigation down because official exposure of the truth will hurt British national security interests.

Not quite - because we Brits are pissed that Blair first denied it, then shut the investigation down while admitting it. But she has the gist. No-one is denying the payments, they just say that they were all legal commissions paid to consultants. This despite the evidence that money was laundered and redirected through cut-outs who were supposedly other "consultants" so that it ended up in the pockets of prominent and powerful Mid-East figures.

But the new -and relevant to US politics - can of worms is the revelation by the Guardian's investigative reporting team, who have been working this story for four years, that the Bush administration's best friend in Saudi, Prince Bandar Abbas, was deeply involved in the bribery - to the tune of $2 billion dollars. Much of the money was channelled from a UK government account at the Bank of England to the now-failed Riggs Bank in Washington (remember? allegations of channeling funds to Al Qaeda and a federal investigation?) and thus to "Bandar Bush", as Dubya calls him.

For the moment, the US connection is limited to growing concern about BAe's purchase of Armor Holdings, the company that makes Hummers for US troops in Iraq as well as the current US-issue personal body armor. The London Times explains where that is going:

BAE Systems’ proposed $4.5 billion (£2.26 billion) acquisition of Armor Holdings in the United States has been thrown into doubt by the latest allegations of corruption against the defence giant.

Diplomatic sources in the US have revealed that the deal could be in danger as officials threaten a closer examination. “There are protectionist elements on Capitol Hill and elsewhere who are looking for an excuse to block BAE,” the source said. “This may have just provided them with one.”

...The furore...may give BAE’s rivals a chance to block the company’s ambitions in the US. BAE has done 15 deals in the US since 1999 and the country now accounts for 42 per cent of its sales.

Both Congress and the US Department of Justice (DoJ) are now expected to take a fresh interest in the corruption allegations. The DoJ has not launched its own investigation into whether BAE breached the US’s Foreign Corrupt Practice Act but British officials in Washington fear “that may change” after these latest allegations.

Staff members from the Senate Foreign Relations Committee and the House of Representatives’ Foreign Relations Committee have been briefed about the Armor acquisition by BAE and the US State Department. Congressional aides are questioning whether BAE has operated within corruption laws and whether the Armor deal should go ahead.

Until yesterday, there was a general expectation that the Committee on Foreign Investment in the United States (CFIUS), an interagency panel based in the US Treasury that examines such takeovers, would not raise any significant national security objections to the acquisition of Armor. But CFIUS could now decide to order a formal 45-day investigation, delaying or even scuppering the takeover plan. A spokeswoman for the panel refused to comment.

And that is where the can will be opened - with congressional investigations.

Such investigations are absolutely certain to spill over into questions about consecutive US administrations' knowledge of the British deals, into Riggs bank's involvement and the Bush administration's complicity in that scandal and finally into examinations of whether US deals with the Saudis - e.g. by Halliburton and Exxon and involving the same cast of Saudi characters - have also involved bribes in violation of the law and with full knowledge of the US government. My guess is that there's a lot of worms in that particular can.