In the News
Below is a selection of news headlines from around the world from the past month. Please see our disclaimer immediately below the news section.
Feature Survey
Control Risks: International business attitudes to corruption – survey 2006 - Global
This newly released survey of the international business community suggests that corruption continues to be a detriment to business. It shows that of the defence companies surveyed, 31% believed they had failed to win a contract or gain new business in the last 12 months because a competitor had paid a bribe. Further, 28% of defence companies surveyed had been deterred from an otherwise attractive investment because of the host country’s reputation for corruption.
Asia & Pacific
No decision on blacklisting Barak firm
Copyright The Hindu
13 October 2006
Following a large-scale investigation into alleged payment kickbacks in an arms procurement deal involving Israel Aircraft Industries, the Indian government insisted that the case should go to the courts before any decisions about blacklisting are made. India has blacklisted South African defence firm Denel for its part in a corruption scandal. One minister has urged that public debate on such measures is necessary.
Indian weapons imports under the gun
Copyright Asia Times
19 October 2006
In light of India’s deep defence ties with Israel, proof of a corrupt deal becomes much more complex. While those directly involved in the deal will undoubtedly be prosecuted, including former Indian defence minister George Fernandes, the issue of how to punish Israel Aircraft Industries as a company remains problematic.
No middlemen to be allowed in arms deals: Pranab
Copyright Rediff News
24 October 2006
Indian Minister of Defence Pranab Mukherjee has stated that middlemen will continue to be prohibited in arms deals, including the large deals planned for the upcoming months. Government-registered agents, however, will be able to participate in deals.
Europe
SFO raids four offices in BAE contracts probe
20 October 2006
Copyright The Telegraph
Reprinted in full with kind permission
THE Serious Fraud Office has taken a new direction in its investigation into allegations of corruption surrounding defence contracts with BAE Systems.
The SFO confirmed it had on Tuesday raided four addresses in connection with its investigation into situations where BAE has been the prime contractor.
It is understood that the focus of the raids was not connected with Saudia Arabia and Romania. Allegations of corruption involving BAE and those two countries are well known.
It appears the SFO and the Ministry of Defence Police, which was also present at the raids, is also focusing on other contracts, possibly in Africa.
BAE said it was "cooperating fully with the SFO and as this is part of an ongoing investigation we cannot make further comment at this stage''.
It was reported that among the properties searched were the Kensington home of John Bredenkamp and a company he owns.
Mr Bredenkamp, a Zimbabwean, has interests in Southern Africa in a company called ACS - Aviation Consulting Services - which is a representative for aircraft makers including BAE.
The latest raids do not necessarily represent a widening or deepening of the SFO investigation. No arrests were made during the SFO raids.
Various BAE employees have been questioned by the police but no arrests have been made. The company has denied all allegations it has acted in a corrupt way.
Related article:
Probe into BAE arms deals widens Copyright BBC News 19 October 2006
Americas
Many in Government Helped Cunningham or Yielded, Panel Finds
Copyright Washington Post
18 October 2006
A Congressional committee report has indicated that former Congressman Randy “Duke” Cunningham, convicted of accepting large bribes in exchange for steering defence contracts, must have been facilitated by the acquiescence of others in the government, including Department of Defense officials and other members of Congress. The release of the findings by the committee’s ranking Democrat was strongly criticised by the committee’s chairman, a Republican.
American Accused of Taking a Bribe for Work in Iraq
Copyright New York Times
12 October 2006
A released indictment against Bonnie Murphy of Florida shows that the former Pentagon official accepted bribes in exchange for securing contracts to an Iraqi company for work on an American military base outside of Baghdad. The bribes were in the form of jewellery, worth thousands of dollars. The company received millions of dollars in Pentagon contracts.
Lobbyists won't like what Pelosi has in mind
Copyright Washington Post
30 October 2006
Representative Nancy Pelosi, the House Democratic leader, has promised to change House of Representatives’ rules so that among other things, House members will be prohibited from accepting gifts and travel from lobbyists or from organizations that employ lobbyists.
Middle East
Termination set for Iraq monitor
Copyright Washington Times
4 October 2006
The special post of inspector of Iraq reconstruction will finish in October 2007. Stuart W. Bowen Jr., appointed by the Bush administration to monitor the Iraq Relief and Reconstruction Fund, will have his job terminated and transferred to the hands of departmental auditors based in Washington. Bowen is known for criticising the handling of Iraq funds in his reports, making the existence of his post controversial within the US Congress.
CBS: Corrupt Arms Deal Cost Iraq $800 million
Copyright CBS News Interactive
23 October 2006
Former Iraqi finance minister Ali Allawi has stated in a new interview that $800 million of funds meant to procure defence equipment for the Iraqi army were in fact funnelled into the pockets of corrupt officials, while a small portion of the fund was spent on outdated equipment. Allawi’s claims give new details to long-standing allegations of defence procurement-related corruption in the Iraqi Ministry of Defence.
Halliburton Motto – It’s Cost Plus, Baby
Copyright Truthout.org
30 October 2006
Former Halliburton employee Julie McBride describes her experience with the company, including methods used to purposely inflate numbers submitted to the government on which profits were based. Halliburton has been widely accused of abusing its no-bid contracts in Iraq. McBride recounts being harassed by the company after raising the question of fraud.
Africa
The benefits of a call to arms
Copyright Business Report
8 October 2006
Although many South Africans have come to view the arms trade in a negative light because of corruption allegations and uncertain offsets, many European defence firms point to their positive impact on the South African economy. While some economic promises set out in arms contracts have not yet been fulfilled, companies believe that they will be able to complete their obligations over the coming years, benefiting the country as a whole.
Mbeki: No substance to arms deal rumours
Copyright Mail & Guardian
12 October 2006
South African President Thabo Mbeki has once again denied all wrongdoing against allegations of corruption in a 1998 arms deal. In response to questions from South African party leaders, Mbeki suggested that the allegations were “mischief” and “rumours”, and that a potential Parliamentary investigation would find no evidence of the claims.
While the investigation of former defence minister George Fernandes of India has focused largely on the involvement of an Israel company, deals with other companies are also being looked at. South Africa’s Denel is also under suspicion, as are some deals with Russia
Disclaimer
Transparency International UK takes no position on the views presented by reporters, commentators, organisations and companies in the materials listed in this email or linked to in our website. As with any such resource, our purpose is to provide access to a wide selection of materials representing diverse viewpoints on a matter of obvious public interest. We do not exercise any editorial control over the materials and cannot guarantee their accuracy. The Digest is a free publication of Transparency International UK.
Interview
Lord Garden
Lord Garden has been visiting professor at the Centre for Defence Studies, King's College London since 2000 and is the 2004 Wells Professor at Indiana University. Since retiring from the RAF, Lord Garden has been closely involved in developing foreign and security policy for the Liberal Democrats and is the party's Defence spokesman in the Lords. Lord Garden was awarded a CB in 1992, and received his knighthood in 1994.
Lord Garden sits on the strategy group of Transparency International UK’s preventing corruption in the official arms trade project.
Our interview with Lord Garden is split over editions 8 and 9. This second interview, below, is on UK domestic issues. Please see last month’s Digest (Edition 8) for the first instalment on international issues.
On the UK government’s responsibility to do something substantial on the problem of corruption, Lord Garden states “The UK government should use its very considerable powers to combat corruption – to make it as difficult as possible to get away with. It needs to be tackled as a prime element of procurement. Military contracts are done through the government, and so the UK government has enormous power.”
Yet the government has not always lived up to this capacity. One of the more infamous perceived failings of the UK government in the fight against defence corruption is its failure to publish The National Audit Office’s investigation into contracts in the Al Yamamah deal; the only NAO report, in fact to be withheld from the public domain. This is “indicative of the compromises governments have to make, when economic interests sometimes seem to be more important than principle,” says Lord Garden. “There is no doubt that the government wants to promote the economy through the defence industries. This is not a partisan political issue. Any government finds it hard to say, ‘We are prepared to give up jobs at home against this rather abstract concept.’ And once you go down this slippery slope, you get to the practical consideration like an NAO report that looks like it might cause difficulty with future contracts.”
Liberal Democrat MP Nick Harvey has called for assurance of transparency and probity in the new Saudi Arabian deal. Lord Garden fleshes out what his party would like to see: “As the contract is signed, we should get the details, the breakdown of the deal published. Currently the NAO has been refused even the current pricing of the Eurofighter because of the current confidence rationale in relation to the Saudi deal. And so we are not even able to appraise what value for money we are getting in terms of UK procurement on an extended argument of commercial confidence. We are being pushed too far.”
On the most recent allegations of corruption relating to the purchase of two Royal Navy ships by the Romanian Government, Lord Garden says, “Of course I don’t know if the allegations are true or not. But what I would like to see is a government that says, ‘We will investigate fully.’ To not investigate is unacceptable. We must cooperate with the Romanians, who are our allies and will shortly join the EU.”
On the subject of the OECD anti-bribery convention, is the government doing all it can to prosecute bribery? “There isn’t any way I can know,” says Lord Garden. “There is a perfectly reasonable case for confidentiality within business arrangements but I don’t think this stops government-to-government cooperation, which doesn’t have to be across the front of newspapers.”
Ultimately, he thinks “we have not yet had any clear evidence that government sees it as a priority. One gets the sense that within government, between departments, perhaps the MoD needs to be more open to looking into these things.”
Further, there are peculiar situations which could hinder such openness. “One of the problems is the very strange arrangement of having the DESO within the MoD. This leads to a tension between the MoD’s role of providing security for the UK, and DESO’s role of promoting export sales to their full extent. If there is going to be a government organisation to promote UK defence products (which I’m not sure is needed), it seems to me it ought to be in a different department – the DTI (Department for Trade & Industry) seems like the obvious place. Then you could have a normal Whitehall debate, with one department arguing an economic case and one for security concerns… With DESO in the MoD, that debate is much more internalised.”
On the new UK Defence Industrial Strategy Lord Garden cautions against drawing early conclusions, but notes it is “obviously a less competitive approach than that of Lord Levene of Portsoken, who attempted to work primarily through market forces. “The argument made by Lord Drayson is that it may not be most efficient for the long-term defence capability to continue to give small, disparate contracts to UK companies, as this does not encourage long-term investment. Getting the judgement right is difficult; it’s too early to say whether or not the new strategy will be effective. There are dangers if the scrutiny of the procurement decisions is not close enough. The NAO usually does a good job. We have to wait and see with the new approach, as we haven’t seen much of a change yet.”
Finally, Lord Garden comments on John Githongo’s observations of the security sector being the last refuge of grand corruption in Africa. Lord Garden sees the UK as being “quite good” at promoting and supporting defence reform in Africa and further afield through security sector reform, defence diplomacy, and providing courses in governance and defence budgets. But, “most importantly, we must abide by good practice ourselves.”
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