LISA BUCKINGHAM: SFO finally lands a punch

By LISA BUCKINGHAM, MAIL ON SUNDAY FINANCIAL EDITOR
Updated: 17:00 EST, 6 February 2010

A score draw is probably the fairest way to view Friday’s settlement of hostilities between the Serious Fraud Office and BAE Systems, which it has accused of bribery.

The defence giant, which has spent years in costly battle claiming its innocence of all allegations ranging from the giant Al Yamama deal in Saudi Arabia to contracts for radar in Tanzania, finally ‘fessed up’.

Not to bribery, you understand, but to accounting errors and other minor indiscretions.

Clipped wings: BAE is finally pinned down by the SFO although the victory was not unqualified and leaves questions about the organisation's might

These peccadillos warranted a thumping £300 million fine (£270 million of which is for the US authorities), the overhaul of BAE’s governance systems and the extraordinary acceptance that a Washington-approved ethics policeman will now sit in its Westminster HQ.

Shares ticked up in relief that the whole unseemly episode is now in the past and that unlike some others, who have fallen foul of the US Department of Justice, the fine was on the right side of $1 billion.

The SFO failed to land the eye-watering fine for which it had hoped.

Indeed, £30 million looks piffling against the string of noughts suggested at one stage.

But securing a relatively quick out-of-court settlement was what director Richard Alderman had wanted.

If nothing else, it helped meet the tough financial targets applied to all its investigations. 

And he will have been encouraged that the close relationship he initiated with the tough-nosed investigators in the DoJ yielded fruit – even though Britain has come off looking rather second-best.

To secure BAE’s co-operation in a plea bargain, Alderman had to be able to deliver global finality. The defence giant would never have copped a guilty plea in one jurisdiction only to have to suffer further years of mauling in another. The humiliation of the ethics monitor is quite enough.

Despite last-minute worries that the SFO case was less than steady and that the Attorney General might be getting cold feet, the organisation has finally landed a punch after too often being batted away.

It is certainly not the unqualified victory that SFO would have liked and it will still leave questions about the organisation’s credentials for taking on the investigatory apparatus of the Financial Services Authority should there be a future Conservative government, but it will have stoked confidence within the troops.

The ‘household-name manufacturer’ now in the SFO’s sights will feel distinctly less comfortable this weekend.

Supermarket suppliers unlikely to benefit from tough new codes of practice

Listen to the supermarket bosses and they would have you believe that fear about securing the future supply of their produce means they are behaving like pussy cats with their suppliers.

So frightened are they that growth-hungry China will suck the global food chain dry that they are busy cementing long-term supply deals, which no self-respecting farmer would sign if they were anything other than scrupulously fair.

Down on the farm, it would seem, all is happiness in the haystacks. This and last week’s introduction of a new, strengthened code of practice governing dealings between the retailers and their suppliers should, the supermarkets say, ensure harmonious relationships.

The code, to be governed by the Office of Fair Trading, is designed to protect small suppliers from suddenly being asked to help fund discounts, pay for shoplifting or getting slapped with a retrospective demand or dramatically longer payment periods.

Both the Government and the Opposition want an ombudsman to police the code.

Needless to say, the supermarkets are vehemently against. The problem with past attempts at a code to control supermarkets’ behaviour is that suppliers have been too frightened to complain in case their main source of income turns nasty.

The supplier behind even an anonymous complaint is pretty easily identified.

Without an ombudsman, a similar fate looks likely for the current code. And only if the Ombudsman pro-actively searches out unfairness will there be a shift in the balance of power.

Rare is the supplier who, like Tyrrells crisps of Herefordshire, can prosper after refusing to meet the demands of a Tesco.