BAE Systems / Tanzania Radar Case

Case Control Number: 
27
Description : 

According to the Serious Fraud Office press release, in 1999 a contract valued at $39.97 million for the supply of a radar defence system for Dar-es-Salaam International Airport was agreed upon between British Aerospace Defence Systems Ltd and the government of Tanzania. According to the release, BAE often utilized “overt” and “covert” advisors for marketing purposes. To ensure confidentially, Red Diamond Trading Company was set up in the British Virgin Islands to make payments to the latter “covert” advisors.

A Tanzanian local businessman, Shailesh Vithlani, was recruited to advise BAE on its negotiations with the government on the radar contract. Shortly before the contract was signed two new adviser arrangements with Vithlani were concluded- one between Red Diamond and a Vithlani-controlled Panama company, Envers Trading Corporation. This was a 'covert' arrangement where the fee for Vithlani's services was to be not more than 30.025% of the radar contract price. The other arrangement was 'overt' and was for 1% of the radar contract value for services to BAE by a Vithlani-controlled BVI business, Merlin International, not involving Red Diamond. According to the release, between 2000 and 2005 around $12.4 million was paid to Vithlani's two companies. BAE has accepted that there was a high probability that part of this sum would be used to favour it in the contract negotiations. The payments were not subject to proper scrutiny and it was not possible for any person auditing the accounts to investigate and determine whether the payments were properly accounted for or were lawful.

In sentencing BAE, the Judge viewed that BAE were concealing from the auditors and the public that they were making payments to Vithlani; 97% of them via two offshore companies, with the intention that he should have free rein to make such payments to such people as he thought fit in order to secure the radar contract for BAE but that BAE did not want to know the details. The release further stated that the Judge took into account in sentencing BAE that the group had committed itself to a process of change following the Report of Lord Woolf and that BAE would be making a payment for the benefit of the people of Tanzania of £30 million less the fine. The Judge said that the people of Tanzania were the real victims. The Judge decided in these circumstances to impose a fine of £500,000.

Type of Illicit activity involving Public Official : 

Kickbacks, Bribery

Impediments to investigation: 

Fake Consulting Agreement; multiple CV jurisdictions/Multiple bank accounts/Multiple Bank Jurisdictions

Most recent legal action against Public Official?: 
Other legal action/ other prosecutions: 
Region: 
AFR
Country of Public Official: 
Sources: 
UK Serious Fraud Office Press Release. "BAE fined in Tanzania defence contract case." Dec. 21, 2010, accessed at http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2010/bae-fined-in-tanzania-defence-contract-case.aspx UK Serious Fraud Office Press Release. "BAE Systems plc." Feb 5, 2010, accessed at http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2010/bae-systems-plc.aspx "Suspects Finally Arrested." Tanzanian Affairs, Jan. 1, 2009, accessed at http://www.tzaffairs.org/2009/01/suspects-finally-arrested/ Jarrett, Tim and Claire Taylor. "Bribery allegations and BAE Systems." Standard Note: SN/BT/5367. House of Commons Library. Business and Transport Section and International Affairs and Defence Section. Last updated: Mar. 2, 2010, accessed at http://www.google.com/url?url=http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/snbt-05367.pdf&rct=j&sa=U&ei=p2mOTL6HOMn6lwf62MjYDA&ved=0CBEQFjAA&sig2=4nCSoXvbHAEy6hhWqi0qkg&q=SN/BT/5367&usg=AFQjCNG80GlW3UspVLKZJj4S_H0_Qfx-VQ&cad=rja British Virgin Islands Financial Services Commission. Registry of Corporate Affairs. Inquiry of Robert Evans on behalf of The Guardian, inquiring into the standing of Red Diamond Trading Ltd, Nov 10, 2003, accessed at http://image.guardian.co.uk/sys-files/Guardian/documents/2007/05/29/ch08doc05.pdf
Position of Public Official during scheme: 
Unknown
Is there a pending case or appeals?: 
Unk
UNCAC Articles(s) Implicated: 
Money laundering Implicated?: 
Yes
Year scheme began: 
1992