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The investigation by the BBC and The Guardian makes a much bigger and more substantial allegation, and it reaches to the heart of government: it is not simply a matter of a relationship between a company
and a named individual. The allegation is that £1 billion was paid over a 10-year period at three-monthly intervals into one of two accounts in Riggs bank in the United States under the name of Prince Bandar. He is a very important figure in the Saudi regime. He was named first not in that investigation: I mentioned his name in an Adjournment debate a few weeks before, because it was clear that, where he was concerned, some extraordinary developments had occurred. It had been pointed out to me that, for example, in the period since July 2006, he visited this country 14 times in a private jet that landed at an RAF air base, and that he had six meetings with Foreign and Commonwealth Office officials and undisclosed meetings with others.
That is clearly somebody who was at the heart of our official relationship with the Saudi Government. There exists a very close relationship between an individual and the British Government, and the same individual is named in the context of the very large payments in this case. I stand to be corrected, but I understand that Prince Bandar is currently the head of intelligence in Saudi Arabia, and that he has held major roles in that Government, including that of ambassador to the United States.
If the accusations cited are in any way correct, they raise major issues about the role of our Government and their conduct and accountability. We are all operating in the dark, and I have no other evidence, so let me describe what it is argued took place in the context of Prince Bandar and the payments. The House will forgive me if I read for a few moments, because the process is complex and we all need to understand it:
“According to legal sources familiar with the records, BAE Systems made cash transfers to Prince Bandar every three months for 10 years or more. BAE drew the money from a confidential account held at the Bank of England that had been set up to facilitate the Al-Yamamah deal...Both BAE and the government’s arms sales department, the Defence Export Services Organisation (Deso),”
“allegedly had drawing rights on the funds, which were held in a special Ministry of Defence account run by the government banker, the paymaster general. Those close to Deso say regular payments were drawn down by BAE and despatched to Prince Bandar’s account at Riggs...Under the terms of a previously unknown MoD instruction from the department’s permanent secretary, Sir Frank Cooper, the payment deal would have required Deso authorisation.”
It is just conceivable that that is all fantasy, dreamed up by somebody in the bath trying to sell a few more newspapers, but that is improbable. It is a well sourced story that appears entirely consistent with what many independent sources have argued in the past. If the story is true, or even approximately true, it raises issues about two major arms of government. First, there is the financial arm, which is the Treasury and the Bank of England. In the past, I asked the then Chancellor of the Exchequer whether he would explain his role in the matter, but of course, he transferred the questions to the Ministry of Defence, arguing that it was nothing to do with him. He has also said publicly that he knew nothing about it. I am sure that he did not, because the arrangement would not have operated at that level. As has been acknowledged in parliamentary answers, an
account was run through the Bank of England. That raises important questions of public accountability about who monitored that account, who was responsible for it and what their level of seniority was, and we deserve answers.
Mr. Jonathan Djanogly (Huntingdon) (Con): Will the hon. Gentleman identify what crime he is saying has been committed?
Dr. Cable: No crime has been committed that I am aware of. If enormous sums of money are swilling through Government Departments, surely it is an elementary requirement of our system of government that somebody is accountable to Parliament to explain that and to answer parliamentary questions. The Opposition parties should ask those questions, rather than trying to suppress them.
The heart of the matter does not lie in the Bank of England or the Treasury; it lies in DESO. The account that I have quoted went on to say:
“Before the investigation was abandoned, the SFO interviewed Alan Garwood, head of DESO. Sources close to the arms sales unit say that he and...the commercial director of the Saudi project were questioned about the reasons for authorising the payments.”
In order to make sense of what happened on the al-Yamamah project, we need to know much more about DESO. As far as I understand it, DESO operates in an extraordinary way. It is paid a fee of 2 per cent. of the value of transactions by the Saudi authorities in order to conduct business on behalf of a British company. It is a Government Department that is headed up by somebody who is on secondment from a company linked to BAE Systems earning a fee from a foreign Government for commercial work. It may be that that is entrepreneurial activity in government that we should applaud, but surely somebody should explain the mechanisms and be accountable for them. Is 2 per cent. too much or too little? Where are the accounts relating to that extraordinary business?
What is at issue here is a question of parliamentary accountability that we have a duty to pursue. In my view, nobody has more of a duty to pursue it than the Public Accounts Committee. I am sorry that he is not here, but the hon. Member for Gainsborough (Mr. Leigh) intervened very early in my speech on the last occasion we considered the matter to explain why the Public Accounts Committee did not wish to publish the original report into the al-Yamamah project, which he admitted that he had never read. None the less, he felt very strongly that the PAC should not publish that report. He said that
“the National Audit Office is concerned with the Government and not private companies”.—[ Official Report, 7 February 2007; Vol. 456, c. 863.]
However, we now know that the Government are critically involved in all aspects of the operation, so, of course, the PAC must reopen the issue and investigate it as well as referring to its inquiry.
As a result of the exchanges involving the hon. Member for South Ribble (Mr. Borrow), we have already touched on the third new issue that has arisen, which relates to the US Department of Justice. The United States is a close ally, but it also has strict laws governing overseas corruption—they were introduced rather sooner than ours in the Foreign Corrupt
Practices Act 1977. Inquiries have been initiated, and perhaps they were prompted by competitor companies of BAE Systems—it is possible that there is a commercial motivation.
As far as the journalists who are looking at the matter can establish, the motivation is concern not with the big al-Yamamah architecture, which I have just described, but with a narrow set of transactions—the so-called red diamond payments—under which BAE Systems paid money for services, such as hospitality, for its friends and which flowed through US jurisdiction on this occasion. We do not know whether there is any basis to those inquiries, but it is surely necessary that the British Government give an absolute commitment to maximum co-operation, which means the sharing of files and the evidence that they acquired, because how else is our reciprocal set of obligations with the Americans to be honoured?
The fourth new issue that has arisen relates to our relationship with the OECD. At its March meeting, two months after our original debate, the OECD working group on bribery reached the following conclusions:
“the OECD Working Group on Bribery reaffirmed its serious concerns about the United Kingdom’s discontinuation of the BAE Al Yamamah investigation and outlined the continued shortcomings in UK Anti-Bribery legislation. It urged the UK to remedy these shortcomings as quickly as possible and decided to conduct a further examination of the UK’s efforts to fight bribery.”
The OECD, in a peer group assessment of our progress, is highly critical of what the Government have done in this department, and will no doubt report in due course.
The aspect of the OECD investigation that leaves a particularly nasty taste is the allegations that have been made within the OECD itself that the Government did not pursue this in a completely detached manner. When I raised this in the Adjournment debate, the Foreign Office Minister who responded gave a very robust reply in which he categorically denied all the dirty tricks allegations that have been made, and did so with such conviction that I completely accepted what he said. None the less, a month later, officials from the OECD told the press—this is from a different newspaper; not the wicked Guardian again but The Independent—
“‘The dirty tricks boys were all at work’, said a senior OECD official who asked not to be named. ‘There was a lot of pressure on a lot of people.’”
I completely accepted the Government’s assurances on this. However, will they explain what they are doing to assure the OECD, whose officials continue to argue that their reputations are being traduced by British officials, that they are pursuing their relations with it in a proper way?
Finally, let me look forward. Much of this is history. Things have happened in the past that are perhaps regrettable and do not comply with the standards that we currently expect in terms of anti-corruption behaviour. Nevertheless, it is possible for the Government to turn a corner on all this and to pursue their future investigations in a way that reflects the spirit, as well as the letter, of the original OECD provisions. Part of the proof of how the Government are approaching this will be how they deal with their
future investigations; I think that six are lined up. I shall briefly enumerate them so that Ministers can indicate whether they are still live and whether they will be pursued by the head of the Serious Fraud Office.
The first case relates to Chile and the accusation of the £1 million payment to General Pinochet that was unearthed by a Chilean judge pursuing tax evasion. General Pinochet is of course dead, and was presumably the principal witness in that inquiry, so is the case still being pursued? The allegations in relation to Romania relate to the £7 million commission on a £116 million naval contract. The case in South Africa concerns a much bigger contract, where the difficulty is that a very senior figure in the South African Government is involved.
The case in Tanzania is particularly important because it relates to the full thrust of Government policy in Africa, which is to encourage good governance. The original corruption allegations related to a large payment by BAE Systems on an air traffic control arrangement that was opposed at the time by the current Prime Minister and the then overseas development Secretary. What has made it topical is that the alleged middleman, a Mr. Vithlani, has subsequently been named in Tanzania in accord with two other major corruption inquiries relating to a presidential jet and a military truck. Those who are concerned with honesty and probity in Tanzania are looking anxiously at whether the British Government will pursue their own inquiries.
In Jersey, an investigation was proceeding for several years into large payments made by Sheikh Hamad bin Jasim bin Jaber ath-Thani, who is Qatar’s Foreign Minister. I understand that those investigations have now been discontinued. It was alleged in the Jersey press that that happened because of pressure from Britain, but that is entirely hearsay. However, it is important to appreciate whether the Qatar inquiry is proceeding.
Those are past inquiries, and as several hon. Members with constituency interests have intervened to say, there are potentially big contracts on the way. It seems to me that there is one simple way in which BAE Systems, with Government support, may ensure that the taint hitherto associated with many arms contracts is removed from any contract achieved or jobs secured. The mechanism to do that, which has been suggested by Transparency International, means that we should put the past on one side, and have an arrangement whereby an independent organisation, such as Transparency International or someone nominated by it, can vet contracts in order to certify that they have been achieved without bribery, and to establish that new contracts, whatever may have happened in the past, are entirely above suspicion. That seems to me a perfectly plausible and praiseworthy initiative, and I shall be interested to hear the Government’s reaction to it.
Looking forward, if the Government pursue their investigations into those other allegations, which I think are still live, and if a mechanism can be found to ensure that any accusation of bribery is removed from future contracts, it is possible to move on from the episode in question. I hope that the Government will take into account the fact that we are in new territory—
Mr. Evans: Will the hon. Gentleman give way?
Dr. Cable: I am just coming to a conclusion, so let me finish.
What is required is a major step forward in terms of parliamentary accountability, in which the Select Committee on Public Accounts and other Select Committees of the House are able to investigate, in a more transparent way than in the past, many of the accusations that have been made and which appear to have substance.
5.2 pm
The Solicitor-General (Vera Baird): I beg to move, To leave out from “House” to the end of the Question, and to add instead thereof:
“supports the Government’s stance against international corruption; welcomes the action it is taking to tackle it; and recognises that the decision to discontinue the Serious Fraud Office (SFO) investigation into BAE Systems plc and Saudi Arabia was taken by the Director of the SFO alone for reasons of national and international security.”.
When the Liberal Democrats speak, money swills through Departments. The word “implausible” can be used liberally about the Prime Minister, the director of the Serious Fraud Office, the Attorney-General, senior civil servants and—very nearly—the Select Committee on Public Accounts. Prosecutions are stopped on a whim, and unsourced allegations from nameless people in newspapers are enough to rebut what Ministers of State have said in this House. An evidence-free zone surrounds the Liberal Democrat Front Benchers on this issue, and today we have heard a barrel-load of conspiracy theories that would disgrace a juvenile anorak.
I welcome the opportunity to respond to this debate. On the fundamental question of the Serious Fraud Office investigation nothing has changed, although we have had a number of debates on the matter in this House. I am going to take the opportunity to deal in some detail with the basis of SFO director’s decision to stop the investigation in question, since clearly—let me put it as politely as I can—somebody still has questions about it.
The decision was taken precisely according to the requirements of our current, unwritten constitution. No Government have, to date, changed these requirements, which have existed for a very long time—probably as long ago as when the Liberal Democrats were last in office, a period which is into three figures and growing. A question may emerge whether it will subsist for 100 years to come, which is at least the length of time it would take for the Liberals to get back into power on today’s showing—if anyone ever trusts such a totally disreputable set of peddlers of appalling scandal. The decision was taken by Robert Wardle, the director of the SFO. The SFO had been investigating for two and a half years whether officials were bribed to win the al-Yamamah contract for BAE Systems. Its view was that approximately another 18 months of investigation were necessary to decide whether there would be a prosecution. Unlike the other prosecuting authorities, the SFO is an investigatory body too.
The then Attorney-General, Lord Goldsmith, agreed with Mr. Wardle’s decision to halt the investigation. Lord Goldsmith had undertaken a Shawcross exercise before the decision. That exercise is undertaken when
the Attorney-General consults ministerial colleagues on the public interest implications of proceeding with a prosecution—or, in the case that we are considering, an investigation. It is a well established and wholly legitimate procedure, which Sir Hartley Shawcross articulated in 1951, when he was Attorney-General.
David Howarth (Cambridge) (LD): Will the hon. and learned Lady give way?
The Solicitor-General: I shall not give way during my account of the facts. After that, I shall do so.
The Solicitor-General: As I said, I shall give the hon. Gentleman ample opportunity to intervene later, but I shall go through the facts first because so many attempts have been made to obfuscate what truly happened that it is vital that the public understand who is firing with ridiculously bent bullets from the Opposition Benches.
Mr. Wardle explained to the Constitutional Affairs Committee the nature of the Attorney-General’s superintendence role over the SFO. He said that he would brief the Attorney-General and the Solicitor-General on specific cases as a matter of routine— perhaps complex ones or those in which the public interest was likely to be important. He said that he did so in the al-Yamamah case and that the Attorney-General first initiated a Shawcross exercise in December 2005, consulting various Ministers. The hon. Member for Twickenham (Dr. Cable) tried to make something sinister of that, so let me make clear what happened. At that stage, views were expressed about the commercial implications that might flow from the investigation, but the Attorney-General concluded that it should proceed.
Let me mention the Organisation for Economic Co-operation and Development convention on combating bribery of foreign public officials in international business transactions, which we signed in 1997. Article 5 provides that investigating and prosecuting the bribery of foreign public officials shall
“not be influenced by considerations of national economic interest”
“the potential effect upon relations with another State”,
hence the decision in December 2005 that commercial interests should not be relied on as a reason for stopping the SFO investigation.
In 2006, Mr. Wardle said that evidential issues and the public interest re-emerged as questions. He ultimately decided that, although he would like to continue the investigation to ascertain whether charges could have been brought, he came to know of issues that made him reach the following decision:
“To continue the investigation was in my view likely to cause grave damage to the public interest, to national security, and I fully accept that the result of the investigation would be uncertain.”
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