EADS compliance unit faces questions on ‘bribery’ after leak of confidential e-mails
The explosive cache of e-mails details how the contractor’s financial controller blew the whistle internally on a series of suspicious payments – linked to a huge Saudi defence deal – that were transferred to a company registered in the Cayman Islands.
The e-mails raise awkward questions for the British company’s owner, EADS, the European defence giant whose “merger” talks with BAE Systems collapsed two weeks ago.
The financial controller was convinced that the payments, totalling just over £14.5 million, were bribes to help secure a massive military-communications contract with Saudi Arabia’s national guard.
The e-mails have been passed to the Serious Fraud Office (SFO), and form the key evidence in a criminal investigation into the company, GPT Special Project Management, a British subsidiary of EADS.
GPT is the prime contractor on the Sangcom project, a huge UK contract – overseen by the Ministry of Defence (MoD) – to overhaul communications systems for the Saudi national guard, which protects the kingdom’s royal family.
Michael Paterson, as GPT’s financial controller based in the Saudi capital of Riyadh, was frank with his bosses of his concerns about what he called “illegal” payments. He told one EADS executive in an e-mail: “You will understand that, for my own protection, I keep a record of these e-mails and phone calls.”
As the payments continued to the mysterious Cayman company, Simec International, Paterson raised the issue with several EADS compliance officers.
Paterson also repeatedly says in the correspondence that he feared for his life – and for his wife and baby. But the e-mails do not make clear what he felt to be the source of the threat.
Paterson met Pedro Montoya, chief compliance officer at EADS, in Paris to discuss his concerns. He was in contact with at least two other compliance officers working for the EADS group. One was at the Paris meeting, and Paterson met the other in London.
But Paterson was frustrated with what he regarded as a lack of action by the compliance division at EADS. At the same time, he felt hugely reliant on at least one of the compliance officers.
In the e-mails, he also talks about reporting the issue to the SFO before it had even begun its preliminary investigation into the case. According to the e-mails, he lodged copies of key documents with his lawyer in London, and was preparing to take a dossier of material to the SFO and the US Department of Justice (DoJ).
He e-mailed one colleague to say: “The only option remaining to me is to report matters externally.”
He suggested in the e-mail that he should travel to London within the month to “make full disclosure to the SFO.”
In an e-mail just over a week later, he said: “Once I have given this one to the SFO, I am immediately giving it to the US DoJ.”
But Paterson changed his mind about going to the authorities, in either the UK or the US.
Instead, one of his colleagues, the former programme director for the Sangcom project, Ian Foxley, later reported the case to the SFO.
He shared Paterson’s concerns that GPT was paying bribes. He accessed Paterson’s e-mail account looking for evidence.
Foxley then fled Saudi Arabia and provided the SFO with the crucial e-mails that are at the core of its criminal investigation.
At Paterson’s request, Exaro agreed not to name him in a series of earlier reports exposing the case. However, he was later identified by national newspapers following up our revelations.
EADS says that it is co-operating with the SFO investigation. A spokesman told Exaro that it would not comment on the allegations, including Paterson’s claim that the group’s compliance division failed to take proper action.
Nonetheless, EADS is known to regard its award-winning compliance function as effective at enabling employees to report breaches of the group’s code of conduct.
Exaro has obtained a copy of the cache of e-mails, and has drawn on them – as well as interviews with former colleagues of Paterson – to reveal the extraordinary story behind the bribery allegations surrounding the Sangcom project that casts a shadow over EADS.
Additional research by Alex Varley-Winter.