Friday, 16 March 2007

Corruption in the Defence Industry

Last night a very interesting couple of talks took place in the Redlands Friends Meeting House, organised by the Bristol Campaign Against the Arms Trade (CAAT).

A history of Corruption and the MOD

Nick Gilby, of the National CAAT group, gave a potted history of the "Ministry of Defence and the Bribe Culture" (his speech constitutes a very abbreviated version of his upcoming book...) Nick has spent many long hours in the national archives reading old memos and other documents of the MOD. He described a culture of massive bribery over very many years.

Up until 1975 the MOD had been an active and enthusiastic participant in the bribes culture. Harold Hubert was the MOD's main seller of weapons. His strategy was to inflate the prices of his weapons to cover the cost of a slush fund used for bribery. He would pay "agents" public money to fix deals with various countries around the world. These agents had access to the highest echelons in the countries in question and they would pass on these funds in order to guarantee that the sale went ahead.

Nick outlined how Saudi Arabia, in particular, had been a main target for this bribery activity with huge amounts of public money used to pay off members of the Saudi royal family. Nick quoted from a number of memos that openly discussed this process (many of which involved the British Aircraft Corporation, a company which has since morped into part of BAe Systems).

In 1975, the Church Commission uncovered massive corruption in the business dealings of the Lockheed corporation. This led to a rethink of the business of arms sales around the world. In the UK this rethink resulted in a deliberate ostrich policy: Public money was not to be used to pay bribes but, equally, if corporations paid bribes in order to gain contracts then the MOD would not investigate such goings on. In other words the MOD preferred to remain in an official state of ignorance, even though they were (and are) acutely aware of the extent to which the arms trade is riddled with bribery and corruption.

A case in point is Al Yamamah. This is the name of a series of massive arms sales by the United Kingdom to Saudi Arabia, which have been paid for by the delivery of up to 600,000 barrels of oil per day to the UK government. The first deal was signed in 1985 and the prime contractor has been BAE Systems and its predecessor British Aerospace.

Nick outlined how the initial deal in 1985 had many very suspicious elements (including a 34% increase in price over a year, which could have been to pay bribes) but which was not investigated by the MOD (in accordance with their ostrich policy). Instead the MOD inquired of British Aerospace whether the deal had been legal and when they received an affirmative response, no further questions were asked!

More on the Al Yamamah deal later...

Corruption in general

The second speaker was Nick Hildyard of The Corner House. His starting point was a desire to incite public outrage at the corrupt practices which go on around the world. Only by ensuring that governments know that the public is watching what they get up to can we give the judiciary the necessary spine to call the government to account over matters of corruption (see the discussion below).

Nick outlined the massive damage done by corruption all around the world. Indeed our own Hilary Benn has admitted that "corruption kills day to day"! The mechanisms by which this happens are numerous. Firstly of course it simply diverts money from worthwhile projects into the bank accounts of unscrupulous individuals.

Secondly, and more subtly, a culture of corruption tends to channel money into developments with the greatest kick-backs. These tend to be macro projects - projects of grand vision and scope which therefore have numerous weak points were funds can "leak away". Thus aid and other money is diverted away from local, community projects (which tend to be more corruption-proof as their small scale enhances accountability) - the very projects which offer the most hope for local people.

Thirdly a culture of corruption results in money being shifted from the legal economy into the black economy. Thus money bypasses legitimate checks and balances as well as bypassing taxation.

There is a popular perception of other countries having an indigenous culture of corruption. Nick pointed out that this is not only inaccurate, it is also racist. Nick outlined the sterling efforts of Lesotho in combatting corrupt corporate practices and noted that Lesotho has received very little help from the West.

In fact in general the West has more often facilitated a culture of corruption in impoverished countries (often in Africa). Through IMF and WTO policies, education and health structures have been stripped back and have left poor people unable to access basic services without resorting to bribery.

Al Yamamah and the Judicial Review

The corrupt practices involved in the Al Yamamah deal have, of late, caught the attention of the Serious Fraud Office. They have been investigating corrupt practices in the period since 2002. However their investigation was discontinued on 14 December 2006 after the Government warned the investiation could "damage national security interests".

In fact the government was more specific: In announcing the decision Attorney General Lord Goldsmith said that both Tony Blair and Defence Secretary Des Browne had argued that carrying on the investigation would harm intelligence and diplomatic co-operation with Saudi Arabia, in turn damaging the UK's national security.

This decision brought a storm of criticism from many different quarters. The criticism was especially strong as the UK is a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Article 5 of the convention states that
"Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”

In lay terms this means that an investigation into bribery can only be dropped as a result of the merits of the case - the likelihood, or not, that a prosecution will succeed.

It would seem clear that the government has explicitly violated this convention in its decision to halt the SFO investigation into Al Yamamah. In order to test this out, CAAT and The Cornerhouse (the organisations which the two Nicks were representing last night) have launched a judicial review into the decision. This review is already well underway and is likely to come to a conclusion some time in the next six months.

Action points

As Nick Hildyard described, it is imperative that there is a sustained and vigorous public response to the dropping of the Serious Fraud Office inquiry. The officials conducting the judicial review into the government's decision will need to feel the eyes of the public upon them if they are to take a stand against their political masters. The awareness of the general public needs to be raised in every way including discussions in the pub, letters to the press, public meetings and other events.

One practical measure is to write to your MP and ask that they sign the Early Day Motion on this matter.

To write to your MP go here.

You can also sign an e-petition on the matter.

There'll be those of you reading this who aint believers in this on-line lobbying malarkey. Well, fair enough too.... So maybe you'd just better give CAAT some money! Or come up with your own way to call the government to account on this matter...

To keep updated on what's going on (and to find out who CAAT and the Cornerhouse are):

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