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Exaro News Archive UK defence company faces trouble over Saudi deal

UK defence company faces trouble over Saudi deal

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UK defence company faces trouble over Saudi deal

By Mark Watts and Frederika Whitehead | 15 May 2012

Saudi Arabia’s order to upgrade the communications systems of its national guard has proved to be lucrative for a British company. But accounts filed at Companies House make clear that allegations surrounding the contract are threatening to land the company in big trouble.

Exaro today exposed details of a series of 28 secret payments linked to the deal that went to two offshore accounts. The Serious Fraud Office (SFO) has been carrying out a preliminary investigation into the allegations of corruption over 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.

“Certain allegations have been made in connection with the company’s contracts with a sub-contractor group” – Directors’ report, annual accounts, GPT Special Project Management

The company is registered and based in Britain. But, its latest accounts, for the year to December 2010, say that it “operates exclusively in the Kingdom of Saudi Arabia.”

The directors’ report in the accounts says: “The company’s principal activity continues to be the prime contractor offering design and build capital-replacement projects of communications systems plus associated managed services – operations maintenance and customer training.”

The company “has served a single customer since its formation due to its status as prime contractor to its single customer. Therefore, the company has no intention to seek new contracts with other customers.”

Under the heading, “Principal risks and uncertainties”, it continues: “The company retains its exclusive arrangement with its customer by providing efficient and cost-effective services in addition to maintaining a strong relationship with its customer both in the Kingdom of Saudi Arabia and the UK.”

“The principal activity of the company continues to be the operation and maintenance of communications systems and associated company training in the Kingdom of Saudi Arabia.”

The accounts show that the company had 347 employees at the end of 2010, but only five of them worked in the UK.

The directors’ report adds: “During the year, and since year end, certain allegations have been made regarding a group of sub-contractors.”

A note to the accounts under the heading, “Contingent liabilities”, explains: “Certain allegations have been made in connection with the company’s contracts with a sub-contractor group. These allegations have been notified to the UK authorities with whom EADS is maintaining a dialogue. It is not yet clear what the outcome of the notification will be.

“The relevant sub-contracts were terminated. This termination has led recently to an unquantified claim from the sub-contractor group for monetary damages. The directors consider that the sub-contracts terminated lawfully, but are not in a position to assess the financial implications, if any, of the claim brought by the sub-contractor group, nor are they in a position to assess any other financial implications that may arise as a result of the termination and any investigation by the authorities.”

The company’s auditors, KPMG, gave a qualified audit opinion, saying that it had been “unable to obtain sufficient appropriate audit evidence in relation to the potential consequences of the allegations.”

The audit report expressed further anxiety under a section headed, “Emphasis of matter – uncertain outcome of sub-contract allegations”.

The UK Ministry of Defence (MoD) helps to co-ordinate the contract. An MoD spokeswoman said: “This matter has been referred to the Serious Fraud Office. It would be inappropriate to comment further at this time.”

An SFO spokeswoman said: “The SFO can confirm that a number of allegations have been made against GPT Special Project Management Limited, and that these allegations are being considered by the SFO. The SFO has engaged with EADS, the parent company, on how these issues are to be addressed.”

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.

HSBC declined to comment. Its spokesman said that the bank was unable to make any comment relating to client accounts.

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Sarah Davies
Sarah Davieshttps://www.exaronews.com/
Exaro News investigates matters of public interest and seeks to uncover the truth.

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