BAE, Blair, Bribery and the Benefits of Breaking the Law
21 Corporate Crime Reporter 4, January 15, 2007

Bribery is a menace that undermines democracy.

Yet, despite laws prohibiting bribery, corporations continue to bribe worldwide.


Because corporations consider a law violation as merely a cost of doing business.

Let us not forget the advice of two of the most revered corporate law professors in the United States – University of Chicago Law Professors Frank Easterbrook and Daniel Fischel – authors of the number one cited work in legal academia over the last 25 years – The Economic Structure of Corporate Law.

They advocate that corporations violate the law if profits from the law-violating activity outweigh the cost of the fine.

Straight cost-benefit.

But that’s not to say that corporations won’t go to the end of the world to try and beat back those who would accuse of them of criminal activity.

Take the case of BAE Systems – one of the world’s largest military contractors.

Last year, the cops in the UK were deep into a bribery investigation of BAE in Saudi Arabia.

In the United States, bribery prosecutions of major corporations are a rare thing – and even if they succeed, they end up with deferred or non prosecution agreements and minimal slap-on-the-wrist fines.

But why risk even the slap when you can get the investigation dismissed as a matter of “public interest”?

In the UK, the Serious Fraud Office took some serious political heat for its investigation.

The heat was generated by BAE and the Saudis.

And they couldn’t stand the heat.

So, they got out of the kitchen.

As in – they closed down the investigation.


Well, according to a press release from the prosecutors in the Serious Fraud Office:

“This decision has been taken following representations that have been made both to the Attorney General and the Director of the SFO concerning the need to safeguard national and international security. It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest.”


BAE and the Saudis have been lobbying to close down this investigation for months now.

And more than $19 billion or so in BAE contracts is on the line.

Of course, no weight was given to these commercial interests.

In December, Prime Minister Tony Blair defended the move to close down the investigation by implying that it would hurt the UK’s relationship with Saudi Arabia.

“Our relationship with Saudi Arabia is vitally important for our country in terms of counter-terrorism, in terms of the broader Middle East, in terms of helping in respect of Israel-Palestine, and that strategic interest comes first,” Blair said.

Wait a second?

Shut down a bribery investigation as a way to enhance the peace process?

A group of more than 40 public interest groups last week wrote to Prime Minister Tony Blair that “the early termination of the investigation for reasons that do not relate to the legal merits of the case sends the message that companies trading with countries that a government claims to be of strategic importance are above the law and can bribe with impunity.”


Good word.

The groups pointed out to Blair that the UK is a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Antibribery Convention).

Article 5 of the OECD Anti-bribery Convention requires that the investigation and prosecution of foreign bribery “shall not be influenced by considerations of national economic interest” or “the potential effect upon relations with another State.”

It’s not as if the BAE case is an isolated case of big corporations getting their way through bribery.

Just today, the Guardian paper in London is reporting on a $12 million BAE bribery scandal brewing in Tanzania.

According to the article, Robin Cook the former foreign secretary under Blair, has written his memoirs in which he notes that "I came to learn that the chairman of BAE appeared to have the key to the garden door to No 10. Certainly I never knew No 10 to come up with any decision that would be incommoding to BAE."

In the United States, despite a law criminalizing foreign bribery, the case load at the Justice Department’s Fraud Section is overwhelming.

The bare bones staff there can barely keep up.

And while no instance of a corporation slamming shut a prosecutor’s case the way BAE apparently has in the UK has surfaced in the United States, federal prosecutors here rarely bring criminal prosecutions against major American corporations.

Clearly the corporations have us where they want us.

You or I commit a crime – we are off to the slammer.

They commit a crime, they call the head guy and the investigation is shut down.

Res ipsa loquitur.

The thing speaks for itself.


Corporate Crime Reporter
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