SFO may make £500m example of BAE

By KARL WEST
Updated:

 

The Serious Fraud Office is believed to think BAE Systems will need to accept a large fine of close to £500m if it is to put issues of alleged illegal payments in Tanzania and Romania behind it, legal sources say.

Eurofighter Typhoon

Paying its dues: BAE may have to pay £500m.

The figure is likely to come as a shock to investors as it is much higher than the previous suggestion that BAE rejected a deal to settle with the SFO for £300m.

Only last week analysts said any financial penalty was likely to be minimal.

BAE wants to settle but not at any cost and the defence giant is yet to be convinced the authorities have enough evidence of wrongdoing.

Sources believe BAE has a better chance of persuading the US Department of Justice - which is looking into claims it bribed Saudi officials for arms deals - to drop its pursuit of the company if it takes the higher financial penalty.

It is thought anything less than £500m would be seen by the DoJ as being totally out of proportion with some of the penalties it has levied for similar corruption cases.

Technology and engineering giant Siemens was hit with record fines in the US and Germany totalling £817m last December as it settled bribery allegations, with £488m of that sum levied by the DoJ.

If BAE accepts a big fine, the SFO is ready to do a deal whereby the defence group would face lesser charges of false accounting or charges under the Theft Act.

Unlike corruption charges these lesser offences would not impair BAE's future ability to win new contracts in Europe and around the world.

The SFO expects the attorney general, Baroness Scotland to decide whether there is enough evidence to proceed with a criminal prosecution by the end of October. And the SFO, which has hired criminal lawyer Timothy Langdale QC, is thought to be confident the attorney general will have little choice but to sanction a prosecution when she sees the evidence it has compiled on the Tanzania, Romania and perhaps the Czech Republic case.

Another case involving a weapons deal with South Africa is considered to be more difficult to prove.

BAE (up 3p at 325.1p) has always denied any wrongdoing, and said it continues to co-operate with the authorities in their investigations.

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