Mahmoud Fustok named as boss of Lebanese company with 10% cut of Sangcom deal

By David Pallister and Frederika Whitehead | 23 June 2014

“In absolute terms, the sums involved are very large”
– Sir Lester Suffield, writing memo as head of the DSO

One of the king of Saudi Arabia’s relatives ran a company that skimmed 10 per cent from a massive contract with a British contractor.

Mahmoud Fustok, King Abdullah’s brother-in-law, is named in a book to be launched on Wednesday as the manager of a Lebanese company that received millions of pounds in commission from a defence deal that was struck between the UK and Saudi governments.

Nicholas Gilby, a former researcher for Campaign Against Arms Trade, makes the crucial link between Fustok and a contract to overhaul Saudi Arabia’s military communications – the ‘Sangcom project’ – in his new book, ‘Deception in High Places’.

Exaro revealed more than two years ago how a UK company, GPT Special Project Management, transferred more than £14.5 million to two mysterious offshore companies between 2007 and 2010 as part of the deal.

Following a series of disclosures by Exaro, the Serious Fraud Office (SFO) mounted a criminal investigation three months later into the ‘Sangcom project’.

GPT denies wrongdoing.

But the SFO made limited attempts to look into the case, and has been trying to drop the investigation quietly. It has the option of trying to settle the case under a deferred prosecution agreement.

One SFO insider, however, said that the case should not qualify for this because it only came to light thanks to a whistleblower’s disclosures.

Gilby unearthed a Lebanese trade directory from 1977 that lists Fustok as the manager of Engineering and Trading Operations Company Beirut.

It adds a key detail to a 1976 memo – also found by Gilby – from the late Sir Lester Suffield, as head of the UK’s Defence Sales Organisation (DSO), that identifies the same Lebanese company as being in line for “agency fees” of 10 per cent on the initial contract worth £150 million for the Sangcom project.

Two other companies, one named in the same memo as Simec International, shared further agency fees of five per cent between them.

Suffield wrote that “the fees being demanded” are not “exceptionally large in terms of the per-centages commonly charged in Saudi Arabia.”

“In absolute terms, the sums involved are very large,” he said.

The Suffield memo was one of a series, written during negotiations for the deal, that show how the Ministry of Defence accepted such agency fees to clinch a government-to-government contract. At the time, £150 million made it a huge deal. The Saudi national guard agreed the contract in 1978 to overhaul its communications systems with the UK. Abdullah was then its commander and crown prince, before he became king and ruler of Saudi Arabia.

The Sangcom project later expanded hugely, with the latest 10-year phase from 2010 reportedly worth £2 billion, which suggests a bonanza in agency fees.

GPT took over the contract long after it started. It is a subsidiary of the European defence giant, EADS, which was rebranded Airbus Group in January.

Simec International was a key party to another huge contract with the Saudi national guard to “look after its medical requirements”.

Exaro named one of Simec International’s two partners as Peter Austin, but he declined to comment. The same report identified Fustok as handling many of Abdullah’s business dealings.

Fustok died in a road accident in 2006 in America, where he was a celebrated racehorse breeder. His sister, Aida, was one of Abdullah’s many wives. They divorced in 1968, but remained on good terms.

Fustok was known to British officials before the Sangcom deal was agreed, according to correspondence in the National Archives. Earlier that decade, he tried unsuccessfully to broker a deal for the sale of Alvis armoured cars to the Saudi national guard.

And in 1975, British Leyland paid him £700,000 commission for the sale of Land Rovers to the same client.

Gilby found other papers from the Foreign Office that identify Simec International as having a role in British Leyland’s deal.

One memo said that Austin was so well connected that he negotiated personally with Abdullah. 
Austin’s partner at Simec International was Bryan Somerfield, who died in 2004. One official remarked in one of the documents found by Gilby at the National Archives that Somerfield “also had a special pull with the [Saudi] royal family.”

Related Stories : Bribery claims, ‘Sangcom’ and ‘Al Yamamah’: Exaro story thread

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.