Saudi Prince Could Be Target of Probe

Saudi Arabia's Prince Bandar is accused of taking bribes from BAE Systems, Europe's largest defense contractor. David Leigh of The Guardian says the U.S. Justice Department may investigate BAE Systems under the Foreign Corrupt Practices Act.

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MADELEINE BRAND, host:

This is DAY TO DAY. I'm Madeleine Brand.

ALEX COHEN, host:

I'm Alex Cohen.

In a few minutes, you think the price of a gallon of gas is high? Get ready for $4-a-gallon milk.

BRAND: But first, the Department of Justice is expected to open an investigation into Europe's largest defense contractor, BAE Systems. That's according to a report in Britain's Guardian newspaper. The British company allegedly bribed Saudi Prince Bandar with $2 billion to broker an arms deal.

Prince Bandar used to be the Saudi ambassador to Washington. He's a close ally of both President Bush, his father and also Vice President Dick Cheney. The reason for the U.S. involvement, according to the Guardian, is that BAE may have deposited the bribes into U.S. banks.

Here with us now from The Guardian is investigative reporter David Leigh. Welcome to the program.

Mr. DAVID LEIGH (Investigative Reporter, The Guardian): Hello.

BRAND: Well, this story just keeps growing and growing. It sure has legs. Start from the beginning if you would and explain the essence of the deal that was made between BAE and Saudi Prince Bandar.

Mr. LEIGH: This deal has been running for 20 years and at the time it was Britain's biggest ever arms deal. Basically, Britain sold a fleet of warplanes to Saudi Arabia, along with airbases, maintenance, all the rest of it. They've been running a chunk of the Saudi air force. It's been worth 43 billion pounds, which is nearly a $100 billion over two decades.

It now transpires that among the payments made to win that deal were payments of $2 billion from BAE with the active collusion of the British Ministry of Defense and their officials here. And the money was wired into Prince Bandar's accounts at Riggs Bank in Washington.

BRAND: Now, under British law, this wasn't illegal until a few years ago, correct?

Mr. LEIGH: It wasn't definitely illegal until 2001, when Britain passed a law to come into line with the United States, where payments to foreign officials under the Foreign Corrupt Practices Act have been illegal since 1977. And payments to officials in Saudi Arabia for arms deal have been illegal under Saudi law as well for a long time.

BRAND: Well, what do the Saudis say about this? What does Prince Bandar say?

Mr. LEIGH: Prince Bandar says these were official government funds. He denies he's done anything wrong. He says the money was paid into official accounts of the embassy and he used it for purposes which were approved of by the Saudi Ministry of Defense. We don't know exactly what those purposes are. What we do know is that the Saudi Ministry of Defense is controlled by his own father, Prince Sultan.

BRAND: And what does BAE say?

Mr. LEIGH: They say they haven't done anything wrong.

BRAND: That's it?

Mr. LEIGH: That's it. Oh, they also say that any payments they made were made with the expressed approval of the British government. And there is a big controversy going on in Britain at the moment over the exact extent of the British government's involvement of these payments.

BRAND: Because you say the Defense Ministry may have colluded with this deal.

Mr. LEIGH: Yes. The evidence is that Prince Bandar and his people would send invoices every quarter to the British Ministry of Defense in Whitehall in London. And they would then sign them off and pass them on to BAE - the arms company - who would then make the wire transfers of the money.

So at every stage there were officials in the British Ministry of Defense that were kind of processing these payments and knew all about them.

BRAND: And Prime Minister Tony Blair, has he spoken out on this? Has there been an official investigation?

Mr. LEIGH: An official investigation started by the British Serious Fraud Office and earlier this year Prime Minister Tony Blair ordered a halt to the investigation saying it was threatening national security. What he says is the most extraordinary thing, that the Saudi royal family were threatening to cut off intelligence, particularly about al-Qaida, unless the British police dropped this investigation.

BRAND: And if the Americans get involved, could they cut off intelligence for the Americans and the British?

Mr. LEIGH: Well, do you think the Saudis are going to cut off intelligence to the Americans? Very unlikely. The Saudis depend on the United States for the continued survival of their regime.

BRAND: Well, what could this mean for BAE if the Department of Justice gets involved and this becomes more of an international scandal?

Mr. LEIGH: It could be a serious problem for BAE because they are bidding to become a big United States defense contractor. Forty percent of their turnover is now in the United States. The Pentagon - they want to become their biggest customer. At present they're bidding to take over Armor Holdings, which is a big American defense contractor. They make armor for Humvees and things like that.

They need regulatory approval from the United States for the Armor Holdings takeover. If the Department of Justice opens an investigation, they're going to have regulatory problems, I would guess.

BRAND: Thank you, David. That's David Leigh, an investigative reporter with The Guardian newspaper reporting on an alleged bribery scheme involving Europe's largest defense contractor, BAE, and Prince Bandar of Saudi Arabia.

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