'David vs. Goliath': City Takes On BAE Systems A small suburb of Detroit takes on BAE Systems, alleging the giant British defense contractor funneled payments to a member of the Saudi royal family. The case, involving the city's pension fund, has players ranging from Tony Blair to a substitute teacher.


'David vs. Goliath': City Takes On BAE Systems

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It's got the elements of a great thriller. At the center is an arms deal, British fighter jets for sale, a Saudi prince, payments in the billions to a long-time ambassador to the United States, and a small leafy suburb of Detroit. NPR's JJ Sutherland explains how they all come together.

JJ SUTHERLAND: Kim Silarski has lived here since 1996. She's considered a newcomer.

KIM SILARSKI: One of the funny things about Harbor Woods is that it really - there's nothing really terribly special about it. And so in its normalness, in its normality I think that is its beauty and its charm.


SUTHERLAND: It's only 2.6 square miles and only has about 14,000 residents and they're intimately involved in a $100 billion international arms deal. How? Well, that revolves around a company called BAE Systems. If you need to fight a war, they're one-stop shopping - aircraft carriers, armored vehicles, super advanced cannon. Anything you need, they make it. Oh, and fighter jets - it's the fighter jets which have gotten the British defense contractor into trouble.

PATRICK COUGHLIN: In the mid-'80s the Brits were negotiating a large defense contract with Saudi Arabia. Nearly $100 billion, obviously a huge, huge contract.

SUTHERLAND: That's Patrick Coughlin. He's a lawyer who represents the Harper Woods Public Employees Retirement Fund.

COUGHLIN: As part of the contract there was a side agreement, side letters, that basically allowed for payments to be funneled to Prince Bandar. Bank examiners and people looking at this have estimated it was nearly $100 million a year or a total of $2 billion that was funneled through various U.S. banks.

SUTHERLAND: The Prince Bandar he's talking about is more formally known as Prince Bandar bin Sultan bin Abdul Aziz al-Saud. He was Saudi Arabia's ambassador to the United States for decades. Coughlin is alleging that in order to get that defense contract for a bunch of fighter planes, known as the Dove Deal, they paid Bandar $2 billion over 20-some years. Yes, that's billion with a B.

CHERYL CONSTANTINO: The Saudi princes sometimes feel like the rules don't apply to them.


CONSTANTINO: This is like David versus Goliath. Only instead of using a rock, we're using attorneys.

SUTHERLAND: Now the Harper Woods Fund has taken BAE and Prince Bandar to court.

CONSTANTINO: We don't look at this as sort of an international incident. We just look at it as, hey, here's our retirees pension money and we just want to make sure that everything is right with it. And then the next thing we know is that, you know, this whole Prince Bandar thing comes up and we're like whoa.

SUTHERLAND: Patrick Coughlin - he's the fund's lawyer - he says they want BAE to recover as much money as they can and put it back into the company. They also want to reform the governance of the company so that this kind of thing doesn't happen again.

COUGHLIN: Corruption just inflates contract, destroys competition and is not good for anybody. And corruption with a defense contractor, of course, is the most dangerous because, you know, where are the arms going, where do they ultimately go? You have to have real accountability in this area because of the world that we live in today.

SUTHERLAND: A spokesman for BAE says that FBI agents took his Blackberry away for a short while before returning it to him and served him with a subpoena before letting him go. The feds also served subpoenas on several other BAE executives who live in the United States.

B: according to British court documents, Saudi Arabia threatened not only to kill another fighter plane deal with BAE that was being negotiated at the time, but - and this is key - to end their close intelligence and diplomatic relationship with the British government.

MONTAGNE: "British lives on British streets were at risk." End quote. But a British court recently ruled that bowing to those threats was unacceptable.

ROB WATSON: What the ruling said that when the Serious Fraud Office under pressure from the government, in particular Tony Blair, decided to drop the investigation into allegations of bribes, it was wrong.

SUTHERLAND: Rob Watson is the BBC's defense and security correspondent.

WATSON: They said it was wrong because British justice should not give in to threats from wherever they might come.

SUTHERLAND: Harper Woods mayor pro tem - and teacher and mom - Cheryl Constantino says it's very simple. She wants to get to the bottom of the allegations, and if there is a problem it needs to be fixed, and the shareholders, no matter how small, they have the right to do it.

CONSTANTINO: Even though we've got, you know, Britain and the United States investigating it - and we're little teeny-tiny Harper Woods - and even smaller than little teeny-tiny Harper Woods is the little teeny-tiny Harper Woods pension board, and here we are, you know, with the nerve to investigate this and the nerve to do something about it, the nerve to stand up to it.

SUTHERLAND: JJ Sutherland, NPR News.

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