Last October we wrote how the United States Justice Department was looking into the British government's investigation of BAE Systems (BAE:L) for possibly bribing Suadi Arabian Government officials in order to win billions of dollars in contracts for military equipment and services. The key contract was an order for seventy-two of the advanced Eurofighter Typhoon aircraft. BAE Systems is one of the companies that make up Eurofighter and would stand to gain a great deal of work for its British plants with this contract.
The British Government had started one investigation in the early part of the decade only to end it prematurely. Reportedly the Saudi government had placed pressure on the U.K. to do this with threats to stop sharing intelligence. Another investigation in the U.S. continued and eventually the British re-opened theirs as well.
It is now being reported that BAE Systems will pay a $450 million fine to the U.S. and Great Britain to settle the investigations. The company because it did business in the U.S. as well as having U.S. subsidiaries is liable under the Foreign Corrupt Practices Act (FCPA) and this is what Justice charged them under and what will guide the settlement.
The FCPA was recently highlighted by a sting run by the Federal Bureau of Investigation (FBI) with smaller, security companies that led to the arrest of twenty-two individuals. In many previous cases like the BAE Systems situation the government settles with the company receiving a payment of some sort. The $450 million involved here is quite high and lets companies know again how serious the U.S. is about enforcing the law.
Bribery and payola have been so common in international arms sales for the last few hundred years that they have become a cliche. The fact that U.S. and European companies were paying off government representatives led to the FCPA and its enforcement. The use of bribes skews the market meaning that nations are not getting the best value for their money as well as preventing deserving companies from winning contracts. This means that money will be wasted by the buying government as well as companies bidding on the contracts with no chance of winning.
Laws like the FCPA even the playing field for all those involved in this business. The buyers are assured that they will get a good product for a good price and the sellers of a competitive market. The use of bribes makes the market uneven and shortchanges everyone.