A transcript of what happened.in the BAE V/S Tanzania radar sale case

House of COMMONS

Oral EVIDENCE TAKEN BEFORE the International Development Committee 

Financial Crime and DevelopmentTuesday 19 July 2011 Bob Keen, Philip Bramwell and Lord Cairns Richard Alderman Rt Hon MR Alan Duncan MP, Rt hon Lord McNally, Joy Hutcheon, Phil Mason and ROSEMARY DAVIES Evidence heard in Public Questions 1 - 140

Oral Evidence: Taken before the International Development Committee

on Tuesday 19 July 2011

Members present:

Malcolm Bruce (Chair)

Hugh Bayley

Richard Burden

Pauline Latham

Jeremy Lefroy

Chris White

Mr Michael McCann

Anas Sarwar

________________

Examination of Witnesses

Witnesses: Bob Keen, Head of Government Relations, BAE Systems, Philip Bramwell, Group General Counsel, BAE Systems, and Lord Cairns, Chair, Advisory Board on Tanzania.

Q1 Chair : Can I bid you good morning and thank you for coming to give evidence before the Committee? As you know, we are looking into the wider context of financial crimes and the implications of the Bribery Act, but specifically the issue of the Tanzanian contract for air traffic control systems. First of all, could you introduce yourselves for the record?

Bob Keen: Thank you Chairman. My name is Bob Keen, and I am the head of Government Relations for BAE Systems.

Philip Bramwell: My name is Philip Bramwell, and I am the Group General Counsel of BAE Systems.

Lord Cairns: I am Simon Cairns, Lord Cairns. I have taken on the role as the Chairman of the Independent Committee to advise on the distribution of the funds in question.

Q2 Chair : I will start by saying that BAE is a British company that pleaded guilty to an offence in the UK relating to improper record-keeping or improper accounting. Can you explain why this should result in what appear to be reparations of £29.5 million being paid "for the benefit of the people of Tanzania", and indeed what calculation was made to establish the loss the people of Tanzania suffered as a result of what appears to be just a book-keeping offence?

Bob Keen: On the basis of the settlement that we reached with the Serious Fraud Office, the company, in discussion with the SFO, considered it appropriate to make a payment for the benefit of the people of Tanzania, based on the fact that the settlement referred to an offence that related to a contract in Tanzania. The quantum was discussed in negotiations with the Serious Fraud Office; I will ask Mr Bramwell to say a word about the quantum.

Philip Bramwell: The quantum from the company’s perspective bore no relation to the value of the contract in Tanzania, which at the economics of the time was around £24.5 million. Instead it was in relation to: the investigation that had been going on for some time by the SFO; the quantum of the US settlement; and the differential factor of circumstances underpinning the US settlement on the one hand, and the UK settlement on the other. The amount of £30 million was arrived at as a component part of the global settlement of investigations on both sides of the Atlantic.

The second issue, of how that money should be applied, was a separate issue. There was no consideration given to reparation to any one group of people, and particularly not in relation to this contract.

Q3 Chair : Mr Justice Bean said he was "astonished" at the claim made by BAE that they were not corrupt. He said it was "naïve in the extreme" to believe that.

Philip Bramwell: Mr Justice Bean chose to draw an inference from the evidence put before him, which was not invited by the Serious Fraud Office, and certainly with which the company does not agree.

Q4 Chair : That basically is because it was a plea bargain, was it not? You pleaded guilty to a lesser charge because you had an agreement with the SFO.

Philip Bramwell: No, I do not think it was a plea bargain in that sense. It was a settlement that reflected the facts and the evidence available to the Serious Fraud Office and the company.

Q5 Chair : So in response to a simple book-keeping error, British Aerospace, in its magnanimity, decided to give £29.5 million to the people of Tanzania?

Philip Bramwell: No, I do not think I would characterise it that way. I should say that it is not British Aerospace-that company ceased to exist in 2000. I would instead say that BAE Systems, as part of a global settlement with both the SFO and the DOJ, paid an amount of £30 million to the Serious Fraud Office, or was willing to do so. The issue then arose as to whether or not the best use of those funds was to go to the UK Treasury or to be applied elsewhere.

Chair : We will come back to that.

Q6 Hugh Bayley: Was the decision to vire part of the penalty from the form of a fine to a payment to benefit the people of Tanzania first proposed by the Serious Fraud Office or by your company?

Philip Bramwell: We tried hard to recollect in a long and complex negotiation who first suggested that. I think on balance we cannot be certain whether it was proposed by the SFO or initially by the company in the middle of that negotiation. All I can say usefully is that we agreed that that seemed like a good thing to do.

Q7 Hugh Bayley: It is nevertheless clear that the company made the offer as a mitigating factor in order to reduce the size of the fine that was going to be imposed on it.

Philip Bramwell: No, actually that was not the intent.

Q8 Hugh Bayley: With great respect, it is what the Director of the SFO and your company jointly said in the joint sentencing submissions. Perhaps you should remind yourself of what you said at that time.

Philip Bramwell: My recollection, and I was present at the negotiations, was that it was a settlement that we were paying to the SFO. What we could not do was prejudge or in any way fetter the sentencing discretion of the court. We were aware of other settlement discussions that had gone on and we were anxious to make sure that we had an amount of money, which was paid by way of settlement, from which a fine would be assessed. Until such time as the court was able to assess that fine-

Q9 Hugh Bayley: If I may interrupt you, in this document, which your company has put its name to as it is a joint sentencing submission, under the heading "Mitigating Features" it says that the company has agreed to make a voluntary payment "for the benefit of the people of Tanzania". At the time you were in front of a judge in the court you accepted that the payment was intended to be a mitigating factor.

Philip Bramwell: Are you referring to the transcript of the hearing or the joint sentencing submission to the Crown Court?

Hugh Bayley: No, I am talking about the sentencing submission itself.

Philip Bramwell: If that is what was actually said in court, and that is what it says there, plainly, I do not dissociate myself from that. What was said in court subsequently by legal counsel on behalf of the company in mitigation was that the company sought, through making this payment, an opportunity to restore its reputation.

Q10 Hugh Bayley: Could I ask why your company paid Mr Vithlani 31% of the contract price?

Philip Bramwell: That was our contractual obligation having acquired Siemens Plessey radar company in 1998. The overall level of commission was actually reduced.

Q11 Hugh Bayley: But it was reduced to 31%, was it not?

Philip Bramwell: Yes.

Q12 Hugh Bayley: So the 31% figure is accurate is it not? It was reduced from 40% to 31%. What were you buying with the sum of £12 million-can you remind the Committee what the sum was?

Philip Bramwell: Ultimately it was £12 million, yes.

Hugh Bayley: What were you buying with that money?

Philip Bramwell: Complete in-country marketing representation.

Q13 Hugh Bayley: It says in the submission the Director of the SFO made to the court that the contract was for the provision of various services as required by your company, with regard to activities in Tanzania, including, if required, advice for financial and commercial aspects of doing such business. Is it normal to pay a £12 million commission for representation in a foreign country?

Philip Bramwell: I think that would depend on the length of programme and whether or not a company would at that time have a representation. It is certainly not something the company would do today.

Q14 Hugh Bayley: It says here that British Aerospace accepted, as part of their plea, that "there was a high probability that part of the $12.4 million would be used in the negotiation process to favour British Aerospace Defence Systems Limited". What does that phrase mean, "to favour"?

Philip Bramwell: To promote, to lobby and to do all that could be done in the competitive process to secure the contract for British Aerospace as it then was.

Q15 Hugh Bayley: Did the lobbying include payments being made to third parties?

Philip Bramwell: It did not.

Q16 Hugh Bayley: So what did Mr Vithlani use the $12.4 million for?

Philip Bramwell: As we have said in the company’s most recent submission of evidence, Mr Vithlani received no retainer of any description. He alone assumed the risk of representing the company for a long period of time; there were seven years where he was without payment of any commission at all. I do not think the company today would invest that much risk in any one individual.

To  be  continued  tommorrow 

(Reported  By Ayoub  mzee   newdeal  africa -London)