MoD must be examined over deal with Saudi national guard, writes defence specialist
By Nicholas Gilby | 15 February 2013
The Serious Fraud Office (SFO) is investigating a British contractor, GPT Special Project Management, over claims that it paid bribes to help secure a deal to overhaul the Saudi national guard’s communications systems under the ‘Sangcom project’.
The SFO’s move follows a series of reports by Exaro, beginning in May last year with the disclosure from whistleblowers that GPT transferred more than £14.5 million as part of the deal to two mysterious offshore companies, Simec International and Duranton International, which did not appear to carry out any sub-contracting work.
Exaro more recently identified key partners behind those offshore companies.
It is reminiscent of the SFO’s investigation into whether bribes were paid in the ‘Al Yamamah’ deal, in which Saudi Arabia bought military jets from BAE Systems, the British defence giant.
Upon his retirement as the SFO’s director, Richard Alderman, said that the decision to terminate that investigation in 2006 caused great and lasting damage to the UK’s reputation abroad.
Both the Sangcom project and Al Yamamah are government-to-government deals supervised by the Ministry of Defence (MoD). As a signatory to the anti-bribery convention of the Organisation for Economic Co-operation and Development (OECD), the UK government is formally committed to combating corruption.
The convention says: “All countries share a responsibility to combat bribery in international business transactions.”
The SFO’s task is to establish whether a crime has been committed. But for the UK to discharge adequately its responsibility to combat bribery overseas, it must establish why questionable payments are being made undetected under the MoD’s watch, and put in place procedures to prevent them.
Therefore, an independent organisation, accountable to Parliament – the National Audit Office (NAO) – should investigate.
Back in 1976, when the Sangcom deal was first negotiated, the MoD’s then permanent secretary, Frank Cooper, approved the inclusion of “agency fees” of three per cent for a company called Simec International. The initial contract was valued then at £150 million, but the latest 10-year phase started in 2010 is reportedly worth £2 billion.
BAE agreed to pay nearly £300 million in 2010 as it admitted false accounting and making misleading statements in simultaneous settlements with the SFO and the US Department of Justice over Al Yamamah and other deals. But BAE, like GPT, denied paying bribes.
An answer to a parliamentary question revealed last year that the MoD’s Saudi Armed Forces Project Office relies on “assurances from the project prime contractor that procedures are in place for the prevention of bribery”.
So, BAE’s conviction for making misleading statements had no impact on the MoD’s procedures. The MoD seems unwilling to use any power of audit.
The scourge of corruption will of course flourish in international trade if those who give and receive bribes believe they can do so with impunity and without scrutiny.
That serious allegations meriting a full SFO investigation can be made about two of UK’s three major military Saudi projects, managed by more than 200 MoD personnel, is clear evidence that something is seriously wrong with this country’s anti-bribery procedures.
The Saudis pay the MoD to supervise their projects, even meeting the salaries of British officials.
In theory, no public money is at risk in the UK. However, 21 years ago, the NAO examined Al Yamamah, including the issue of commissions. It resulted in the only NAO report never to have been published.
Furthermore, Exaro understands that the MoD decided not to put GPT’s latest contract out to tender in 2010. Therefore, the NAO has a legitimate reason to investigate the MoD’s relationship with GPT.
A failure to investigate the MoD’s anti-bribery procedures will undermine the UK’s credibility with its OECD partners, damage the wider fight against corruption, and encourage those involved in Saudi arms deals to offer or demand questionable payments.
Unlike the NAO report on Al Yamamah 21 years ago, an examination of the Sangcom project should not be kept secret. The only exception should be if publication would prejudice the SFO investigation and any criminal proceedings.
Parliament, as well as OECD partners, must be able to hold the UK government to account.
Nicholas Gilby led the Campaign Against Arms Trade’s efforts to reveal documents that shed light on the UK’s defence deals with Saudi Arabia.