Revealed: ‘irregular’ transfers worth £14.5m were sent via HSBC to Cayman Islands

By Frederika WhiteheadMark WattsGuy Eaton and Andrew Bousfield | 15 May 2012

Offshore payments linked to Saudi defence dealDetails of secret payments linked to a £2 billion defence deal with Saudi Arabia and made to two offshore accounts are exposed by Exaro.

A financial officer working at a European defence giant’s British subsidiary that has been running the huge project drew up a schedule of the mysterious payments.

The document – compiled from invoices and bank records held by the British subsidiary – shows that the company made a series of 28 payments totalling just over £14.5 million to two secretive companies in the Cayman Islands between 2007 and 2010.

Our investigation sensationally revives allegations of massive bribes to secure defence sales to the desert kingdom. And it raises awkward questions about whether the UK government is ready to keep its international pledges to help root out corruption of overseas officials.

Exaro has agreed not to name the financial officer because he fears for his life. But he says that the payments are “irregular” because the offshore companies are not suppliers in the contract.

GPT Special Project Management, a British subsidiary of EADS, Europe’s biggest defence company, is the prime contractor to supply high-tech communications equipment to the Saudi Arabian national guard in a 10-year programme reportedly worth £2 billion. The UK Ministry of Defence (MoD) helps to co-ordinate the contract.

While the deal is lucrative, allegations surrounding it threaten to land GPT and EADS in big trouble.

An EADS spokesman told Exaro: “Certain allegations have been made, and these are being properly addressed with our full and constructive engagement.”

Exaro today publishes the schedule of Cayman Islands payments. It shows that the money was routed through HSBC – mostly via the bank in New York, but sometimes London.

But mystery surrounds the identities of the final beneficiaries of the payments. The Cayman Islands, which is ultimately under UK jurisdiction as one of its ‘overseas territories’, has a reputation as being one of the world’s most secretive offshore havens.

Exaro can reveal that a second GPT executive, Ian Foxley, the programme director and a former lieutenant-colonel in the British army, has passed a copy of the financial officer’s schedule to the Serious Fraud Office (SFO).

Foxley fled Saudi Arabia in 2010 after reporting his concerns to MoD officials working in the country.

He also supplied to the SFO details of four luxury cars – worth more than £200,000 in total – that the company allegedly gave to four leading Saudi defence officials or advisors.

The SFO is already reported to have been carrying out a preliminary investigation into the allegations of corruption over the contract.

It leaves the UK prime minister, David Cameron, and his Conservative-led coalition government with a dilemma over whether to block the SFO case. The cabinet has already been briefed on it.

It has echoes of a previous SFO investigation into alleged payments of huge bribes to members of the Saudi royal family to secure sales, in that case, under the ‘Al Yamamah’ deal. BAE Systems, the lead supplier for that deal, denied the claims.

Pressure from Tony Blair’s Labour government, which insisted that national security was at stake, forced the SFO’s then director, Robert Wardle, to close the investigation in 2006.

Richard Alderman, Wardle’s successor, told Exaro in a pointed interview before leaving the SFO last month that the UK’s reputation around the world suffered great and lasting damage from that “very regrettable and very unfortunate” decision.

His remarks are being seen as a coded message to ministers to hold firm on the new Saudi case.

Alderman warned in the Exaro interview that the UK’s reputation was also threatened by the amount of money laundered through UK banks and property market.

As SFO director, he oversaw the GPT case personally. He briefed Dominic Grieve, the attorney general, on it.

Grieve’s role is to advise the SFO  formally on whether continuing with the case is in the public interest.

Meanwhile, Cameron’s dilemma is sharpened by his efforts to secure further lucrative Saudi defence contracts. In February last year, he led a business delegation on a tour of Middle East countries in a drive to sell weapons and defence equipment.

Exaro also today reveals a letter that Alderman wrote to Foxley in January, which underlines the then SFO director’s commitment to the case.

In the letter, Alderman thanked Foxley for his help as a “whistleblower”, and assured him that the SFO was continuing to look into the allegations.

Responsibility for the case has passed to Alderman’s successor, David Green.

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