"The same visit, the first by a Saudi monarch in 20 years, was no exception, with much of the storm centering on controversial financial ties linking the British military contracting giant, BAE Systems, to Downing Street and the desert kingdom. The leader of one major British political party boycotted King Abdullah’s visit while protesters turned out for the ceremonial carriage ride to Buckingham Palace.

"Much of the debate turns on the fact that BAE made billions of dollars in clandestine and questionable payments to Saudi royals over the last 20 years as part of an $80 billion contract to supply the kingdom with advanced fighter jets and other military hardware. While the investigation of BAE’s business practices has followed a circuitous path in Britain, it has recently gained independent momentum in the US, where the Justice Department is now investigating the company.

"Much of the debate turns on the fact that BAE made billions of dollars in clandestine and questionable payments to Saudi royals over the last 20 years as part of an $80 billion contract to supply the kingdom with advanced fighter jets and other military hardware. While the investigation of BAE’s business practices has followed a circuitous path in Britain, it has recently gained independent momentum in the US, where the Justice Department is now investigating the company."

Bribery and Money Laundering?

"BAE generates nearly half its revenue in the US, and it recently acquired a major supplier of armored Humvees used by American forces in Iraq. American officials, who were granted anonymity because they were not authorized to speak publicly about the matter, said the Justice Department is examining whether BAE violated domestic laws banning international bribery and money laundering. Accounts in Switzerland, the Caribbean and elsewhere are involved and, like Britain, the US has a strategic relationship with the Saudis that the investigation threatens.

"Although the cast of players in the BAE story is unusually broad – it includes Saudi royals like Prince Bundar bin Sultan, the kingdom’s former ambassador to the US. as well as Tony Blair, the former British prime minister – the investigation is but one of a bounty of cases that the Justice Department recently started under a once-obscure law called the Foreign Corrupt Practices Act or FCPA.

BAE and the Saudis have openly acknowledged the payment at the center of the investigation, deny any wrongdoing and say that the payments were known to the British and Saudi governments. ‘We are aware of the US DOJ investigation and we are fully cooperating,’ a BAE spokeswoman said. ‘As it is an ongoing investigation, we cannot comment any further.’ While the BAE investigation apparently ran aground in Britain, it has gained enough interest in the US to cause some of those in the middle of it to secure high-profile legal advisers. Prince Bandar, a confidant of the Bush family, recently retained the former Federal Bureau of Investigation director, Louis J. Freeh, as well as one of the fathers of the FCPA, the retired federal judge, Stanley Sporkin, to represent him.

"‘There have been no charges laid,’ Mr. Freeh said in an interview. ‘The prince denies any impropriety and violating any statutes in the US or the UK.’"

Crumbling Institutions Impossible to Replace with Private Virtues

"The revelation that British investigators had discovered that BAE had deposited $2 billion in payments into Prince Bandar’s Washington bank account led the Justice Department to enter what analysts describe as the highest-profile FCPA case to date. Passed by Congress three decades ago in the wake of Watergate, it is only in the last five years that the FCPA has become a powerful tool for prosecuting domestic and overseas companies suspected of bribing foreign officials to secure business.’

Then comes a most revealing couple of paragraphs: "Justice Department officials estimate that there are about 60 such cases under investigation or prosecution in the US, with a new 5-member FBI team dedicated to examining violations of the Act. According to the Organization for Economic Cooperation and Development, a group based in Paris that represents 30 industrialized countries, there are now more than 150 prosecutions or investigations worldwide involving possible bribery of government officials for commercial gain.

"While law enforcement officials and governments in disparate jurisdictions once hesitated to work together to combat corporate fraud, graft has come to be seen as such a severe impediment to global economic growth, that cooperation is becoming more frequent."

When institutions become increasingly curtailed and unstable, with a smaller minority grossly overreaching a deeply underprivileged majority of a given society, the net outcome of such a process is that institutions become increasingly challenged by individuals’ corruption and crime. The built-in stability of the institutions accordingly counts for less in maintaining law and a relic of justice. And for the purpose a greater responsibility falls on the citizens’ individual virtues, to the extent that they may exist. The initiatives to contain corruption in government contracts is an instance of this.

And closely related to this, there is also a growing readiness to reach for military options. The readiness of governments to seek military solutions for problems that they were unable to handle in a peaceful way can be seen contributing to a more corrupt and law-breaking society, less able to depend on individuals’ virtues that are hard put to replace its crumbling institutions.

W.K.

– from Economic Reform, December 2007