EADS executive and Michael Paterson clash over payments to Cayman company
Part 2 of the inside story of ‘bribes’, Saudi Arabia and the Sangcom project…
December 5, 2007: In a conference-telephone call, Paterson and the EADS executive have a heated clash over the Cayman payments. Paterson even records the conversation.
That month, in the face of Paterson’s concerns, his boss and a second EADS executive approve two payments to Simec for invoices totalling £2.25 million, according to the accountant’s schedule. The money is routed through the same HSBC branch in New York.
The pair approve a further payment of £566,667 the following April, and two more transfers totalling £1 million in August 2008. The cash is again routed through HSBC, New York.
“The local MoD team in Saudi advised that payments to the Cayman Islands company were unlikely to be approved”
– Michael Paterson, former financial controller, GPT Special Project Management
The fevered atmosphere in Riyadh is heightened by the executives’ living conditions in Saudi Arabia, where Paterson and his colleagues live in guarded compounds.
Beyond the gates and heavy security presence, the compounds look like up-market housing estates, with identical, immaculately-clipped gardens – and eerily empty roads.
Many expatriate executives feel trapped and bored. Alcoholism is rife. Despite strict Islamic anti-drinking rules, many brew their own alcohol to add routinely to orange juice.
They share deep anxiety about security.
Terrorists had targeted Westerners in a protracted car-bombing campaign in Riyadh and other Saudi cities. Five years earlier, attacks on three compounds in Riyadh killed 35 people, including two Britons, and wounded another 160. There were more attacks on Western compounds. Once, shooting raged outside the home of an MoD liaison officer on the Sangcom project, while his family cowered inside. And, during a series of kidnappings and killings in Riyadh, a member of GPT’s training staff was slain in a car park.
As pressure piles up on Paterson over payments to Simec, he receives a belligerent e-mail one night in early December 2008. “I am disappointed to learn… this evening that you have, still, yet to provide the detail that will support the next round of payments.
“These payments will be approved by myself [and two other executives].”
Please do not fail, says the e-mail, to pass the information by noon next day.
The following morning, Paterson replies: “I am disappointed that you have not replied to several of my e-mails from last week.”
“You will not be surprised that I am offended by [a] recent e-mail stating that I have no interest in the long-term business. As someone who has stuck with this business for five-and-a-half years, during which time there have been three company owners, four heads of the business, the compound bombings and the murder of a colleague, I do not think that it is surprising that I am offended by [the] remarks.”
“As you know, I believe payments to the Cayman Islands company may be illegal.”
He even sends a government guide to the Anti-Terrorism, Crime and Security Act 2001, which extended bribery laws in the UK to make it illegal to do anything overseas that would count as corruption at home.
Paterson suggests contacting Anne Longchampt, group international compliance officer at EADS, saying: “I have asked you whether we should refer the matter to Anne Longchampt. You have not replied to my e-mail.”
By now, Paterson says that he was routinely recording telephone calls and backing up his e-mails about the mysterious payments. He writes: “You will understand that, for my own protection, I keep a record of these e-mails and phone calls such as the one on December 5, 2007.
“I have been flagging up to you [and two other executives] my concerns since before our call on December 5, 2007.”
He continues: “My concerns have increased since the local MoD team in Saudi advised that payments to the Cayman Islands company were unlikely to be approved when next reviewed by the MoD in the UK.” He had already pointed out the MoD’s concern a fortnight earlier, he adds.
Despite the MoD’s warning, the Cayman payments continue.
In December 2008, Paterson’s schedule shows, two further payments to Simec are approved for invoices totalling £1.75 million. The money is again routed through HSBC, New York.
And in April 2009, another payment to Simec is authorised, for an invoice for £750,000.
Paterson complains of being sidelined and left with no work to do. He feels increasingly frustrated – and extremely bored.
He decides to raise the alarm with a compliance officer…
Additional research by Alex Varley-Winter.