Revealed: bank records gathered in SFO’s BAE investigation detail offshore payments

By Frederika WhiteheadMark Watts and David Pallister | 4 October 2013

“The documents were sent to a place that appears to have been used as a cannabis farm, and now seem to be in the hands of journalists” – Emily Thornberry, shadow attorney general

Details of two offshore companies drawn into an investigation into bribery in Saudi Arabia have leaked after the Serious Fraud Office lost the case files.

Records gathered by the SFO during its sensitive investigation into BAE Systems show that two Panamanian-registered entities and one other company received a series of mysterious payments that totalled $21.4 million.

The SFO forced BAE’s bankers, Lloyds TSB, to disclose the documents that set out the transactions.

The material was among 32,000 pages, 81 audio tapes plus electronic media that was lost by the SFO after gathering them during its six-year investigation into bribery allegations surrounding BAE’s sale of military jets for billions of pounds to Saudi Arabia under ‘Al Yamamah’.

Exaro tracked down the BAE cache to a warehouse in London’s Docklands after a trail that started with a tip-off last year. The files were heaped in hundreds of brown boxes, stored alongside a cannabis farm.

The owners of the warehouse – which has no SFO connection – were unaware of the secret material stashed in their storage site – or of the cannabis farm.

Dominic Grieve, attorney general and the minister with responsibility for the SFO, issued an admission that the agency had lost the huge collection of confidential material.

The solicitor general, Oliver Heald, admitted to Parliament that prosecution witnesses were, he understood, identified in the lost cache.

Emily Thornberry, shadow attorney general, thanked Exaro for helping to expose the SFO’s blunder.

One source who had access to the lost material offered to allow Exaro to comb through the entire cache for a fee, but we declined to make any payment.

However, Exaro has obtained a sample copy of some documents, which shows just how sensitive the lost material was.

The documents detail $21.4 million of payments to Swiss bank accounts of three companies – Liriope Anstalt Inc, Hinglok Corporation and Mayne Limited – between May and October 1999.

Exaro has established that Liriope, which received most of the money, and Hinglok are registered in Panama. They were set up in 1994 and 1989 respectively, and dissolved in 2011 and 2001.

Panamanian companies do not have to declare their beneficial owners, enabling Liriope and Hinglok to keep secret where the money ultimately went. Mayne is not registered in Panama, but no trace of this company can be found anywhere. There is an unrelated Mayne Limited in Ireland.

Lloyds TSB authorised the payments. Some of them were routed through the Republic National Bank of New York as it was subject to a takeover by HSBC.

The SFO was forced to drop the BAE investigation in 2006 under pressure from Tony Blair’s Labour government. The decision came as the SFO was trying to force Swiss banks to identify beneficiaries of accounts that received mysterious payments under Al Yamamah.

BAE denied paying bribes. It pleaded guilty in 2010 in America to failing to guard against bribe payments, and was fined $400 million.

Offshore companies were at the centre of a later SFO investigation into bribery allegations – against a British subsidiary of EADS, the European defence giant – following a series of Exaro reports about a contract to overhaul Saudi Arabia’s military communications.

The Cayman Islands featured in that case, but the SFO is also poised to drop this investigation.

Other documents from the BAE cache that was lost by the SFO and seen by Exaro shed light on lavish gifts for Saudi princes and princesses allegedly paid out of a slush fund that kept Al Yamamah rolling.

The explosive documents detailed startling evidence of how the UK lavished expenditure on Saudi royals to help facilitate the government-to-government deal.

Thornberry said: “The documents were sent to a place that appears to have been used as a cannabis farm, and now seem to be in the hands of journalists.”

She added: “Where is this going to end?”

The SFO investigation was highly sensitive – both politically and in business terms. So the SFO was deeply embarrassed after it was found to have lost the case files while trying to return them to various sources following the close of the investigation.

According to the SFO, it has recovered 98 per cent of the material.

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