MoD papers shed light on bribery claims in huge Saudi defence contract
By Frederika Whitehead | 26 June 2012
Civil servants at the top of Britain’s defence establishment exchanged highly sensitive memos three decade ago that shed light on bribery allegations today.
The exchange was about so-called “agency fees” to help the UK secure defence sales overseas.
It was between two of Whitehall’s most powerful mandarins in their day. The first was the permanent secretary at the Ministry of Defence (MoD), Sir Frank Cooper, a former wartime Spitfire pilot described as a “mixture of industrial tycoon and dance-hall bouncer”, who died in 2002.
The second was the late Sir Lester Suffield, who left school at the age of 15 and worked his way up through the car industry to become sales director of British Leyland. He was Britain’s chief arms salesman as head of the MoD’s Defence Sales Organisation.
“These are serious allegations from a credible source; it is imperative that they be investigated properly” – Mark Pyman, defence director, Transparency International
Their correspondence includes the Suffield memo that leaves the MoD facing questions over its knowledge about irregular payments linked to the Sangcom project, a huge programme to overhaul the Saudi Arabian national guard’s communications systems.
Exaro last month revealed details of transfers totalling just over £14.5 million linked to Sangcom and paid to two mysterious companies in the Cayman Islands between 2007 and 2010. Nearly all of it went to a company called Simec International.
Suffield wrote his memo in June 1976 in response to a confidential directive issued by Cooper a fortnight earlier. The directive gave “special guidance” on the “difficult and sensitive area” of “special commissions and the employment of agents” in overseas defence sales.
He wrote: “What is ‘illegal’ or ‘improper’ will depend, in the last resort, on the law and practice of the country or countries concerned, and it is for the foreign government to determine what are acceptable standards within its jurisdiction.”
The directive, published by Exaro, stated that it had been approved by the defence secretary in Jim Callaghan’s Labour government, Roy Mason.
In Suffield’s reply, also published by Exaro, he sought backing from his boss for “agency fees” in Sangcom and another Saudi defence deal. He said: “We are now in the final stages of negotiating the Sangcom project, and I need an early resolution of these matters.”
He said that the MoD’s then prime contractor for Sangcom, Cable & Wireless, provided for “agency fees” to be shared among three “agencies”, totalling 15 per cent in the contract then said to be worth £150 million. The project later expanded hugely, with the latest 10-year phase from 2010 reportedly worth £2 billion.
Suffield even named Simec International as one of the agencies. It would receive “agency fees” of three per cent, he said.
He also sought approval to allow Cable & Wireless to increase its profit margin to accommodate other charges, to a level that would not be allowed for sales to the UK government.
Cooper replied the same day in a memo, also published by Exaro, accepting Suffield’s recommendations.
On profit margins, Cooper wrote: “I see no difficulty about what you propose, provided that we do not, at any time, get into a situation where we have undertaken to any purchaser to try to place any contract on the kind of terms that would be obtained by HMG.”
A spokesman for Cable & Wireless, which is no longer involved in Sangcom, said: “We are looking into the history of this, but we are not able to provide a comment at the moment.”
The Serious Fraud Office (SFO) started a preliminary investigation into Sangcom last year. It is under pressure to say whether it has launched a full investigation into the case.
Mark Pyman, director of the defence and security programme at Transparency International, a non-governmental anti-corruption organisation, said: “These are serious allegations from a credible source; it is imperative that they be investigated properly.”
Sangcom has echoes of the ‘Al Yamamah’ deal, in which bribes were allegedly paid to Saudi royals to secure sales. Tony Blair’s Labour government forced the SFO to halt an investigation into that case in 2006.
The current prime contractors in Sangcom and ‘Al Yamamah’ deny any wrongdoing.