BAE has its wrists slapped again

The defence firm has been fined £50m by the US government, this time for flouting export rules. Although its antics don't seem to have stopped it picking up work.

by Emma Haslett
Last Updated: 03 Oct 2011
Defence company BAE Systems has been hit with yet another fine by the US government – the third time it’s had to cough up for sharp practices. The Department of Justice brought forward a case accusing it of ‘conspiring to make false statements’ over secret payments it made to foreign buyers and, this time, flouting military export rules. BAE will have to shell out $79m (£49m), on top of the £30m it paid to the UK Government over similar allegations. Although that’s relatively small change given the £250m it was forced to fork out last time – and at least the US authorities seem willing to give BAE a second chance…

The allegations followed an investigation into deals made in (inter alia) Saudi Arabia, Sweden, and Tanzania; BAe made a donation of £29.5m (by way of compensation) to the latter at the behest of the DoJ and the UK Serious Fraud Office earlier this year. It’s worth mentioning the SFO’s case, too, which centred around the actions of one individual, the brilliantly-named Count Alfons Mensdorff-Pouilly, who apparently helped to engineer deals in Austria, Hungary and the Czech Republic (and whose name does, rather unfortunately, conjure up an image of the moustache-twiddling cads you see in movies).

But the State Department has given the BAE an opportunity to rehabilitate its image: while that $79m must be paid over three years, it will be reduced by $10m if the firm spends that amount on coming up with new ways to comply with export controls. BAE chairman Dick Olver’s response to that was suitably opaque: apparently, the company ‘looks forward to working with the State Department to ensure that it continues to make progress towards achieving its goal as being as widely recognised for responsible conduct as it is for high quality products,’ he near-incomprehensibly trilled. Which we think means it’s going to try harder. Again.

But while that fine will undoubtedly have a painful impact on BAE’s finances (its underlying profits grew by a mere 0.8% last year after cuts in defence spending on both sides of the Atlantic), chances are the pressure will be eased a little by, well, the US government, which last weekend announced it was giving almost $1.3bn worth of contracts to the firm. A committee in the US House of Representatives earmarked $425m, partly to guarantee the production of M2 Bradley fighting vehicles (which BAE manufactures), plus another $850m for a 10-year contract to run and maintain the US Army’s Radford ammunition plant.

So to paraphrase Job, when it comes to BAe, the US government giveth, and the US government taketh away. Although if it wants to avoid shelling out more of these fines, it really needs to get serious about cleaning up its act.

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