Memorandum from Nicholas Gilby
I am writing to you with evidence that the MoD
has been misleading you over the question of corruption in arms
sales to Saudi Arabia.
You may remember that Campaign Against Arms
Trade (CAAT) wrote to you in February 2006[92]
arguing that "your Committee was seriously misled by the
MoD in its memorandum to you of July 2003 (Strategic Export
Controls: Annual Report for 2002, Licensing Policy and Parliamentary
Scrutiny, 18 May 2004, HC390, Ev34)". In the letter CAAT
stated that the MoD memorandum "was designed to leave the
reader with the impression that DESO had never condoned bribery
in arms sales, and in fact had procedures in place designed to
`ensure legality and propriety in the handling of Government-to-Government
contracts'".
Your recent report states in paragraph 341 that
the Committee "attached weight" to the MoD's responses.
In particular, you rely on the MoD statement of July 2003. The
Defence Secretary has subsequently told you that, in response
to allegations made since then, he has nothing further to add
to his previous statement.
Evidence (which I enclose) placed in the National
Archives by the MoD on 25 July this year directly contradicts
the statement made by Geoff Hoon in July 2003. In that statement
Mr Hoon quoted 1976 guidelines issued by Sir Frank Cooper, then
Permanent Secretary at the MoD, which stated that "public
money should not be used for illegal or improper purposes"
and "officials should not engage in, or encourage, illegal
or improper actions whether in their relations with UK or overseas
firms". These guidelines were used by the MoD to claim the
Guardian's allegations that "the government's own arms sales
department [DESO] is directly implicated in bribery abroad",
substantiated by documents detailing that "special commissions
... are even written by civil servants into the secret contracts
on government-to-government arms deals" were "irresponsible"
and "totally without foundation".
The Cooper guidelines (see appendix A) [not
published] were issued to Lester Suffield, the Head of Defence
Sales, on 9 June 1976. Two weeks later Sir Frank Cooper approved
(appendix B) [not published] the "agency fees" Lester
Suffield had requested (appendix C) [not published] on two Government-to-Government
contracts with Saudi Arabia, one (SADAP) for the Royal Saudi Air
Force and one (SANGLOG) for the Saudi Arabian National Guard.
A draft of the note Suffield wrote to Cooper
(appendix D), [not published] placed in the National Archives
only a few weeks ago,[93]
shows that the guidelines, contrary to what the MoD have been
telling you, were not "to ensure legality and propriety in
the handling of Government-to-Government contracts".
Paragraph 8 of the draft says that the "agency
fees", "although described as `technical consultancy',
amounts in practice to the exertion of influence to sway decisions
in favour of the client". In paragraph 10 it explains that
senior Saudis "would certainly not officially approve the
payment of fees, although they undoubtedly expect appropriately
discreet arrangements to be made. Statements to this effect are
made by senior Saudis to visiting major businessmen in somewhat
elliptical language whenever a suitable opportunity occurs, for
example by HRH Crown Prince Fahd ibn Abdul Aziz during a recent
audience granted to Mr. Greenwood, Chairman of BAC, in the presence
of D.Sales 1 [a DESO official] and our Defence Attache".
Paragraph 4 refers to contractors needing to "conceal agency
fees" in the overall price quoted.
At the very least, these payments, made via
the MoD accounts under a Government-to-Government deal, were improper.
They were in direct breach of the guidelines laid down, with which
the MoD relies on to defend itself against the Guardian's allegations
against it.
Of course there is insufficient evidence here
to say whether or not under the corruption laws prevailing at
the time, the payments were illegal. But they do appear to fit
the UK Government's own definition of bribery: "the receiving
or offering/giving of any benefit (in cash or in kind) by or to
any public servant or office holder or to a director or employee
of a private company in order to induce that person to give improper
assistance in breach of their duty to the government".[94]
The discovery of this document raises grave
concerns. It appears, that on the most charitable explanation,
the MoD has been using bland, unsubstantiated assertion to refute
allegations made against it by a national newspaper. Regardless
of the unwarranted slur on the reputation of the journalists concerned
by the use of words such as "irresponsible", this is
a shameful way to treat a Parliamentary Committee.
As you may know, there is a mounting body of
evidence of official condoning of bribes made to attain arms sales
to Saudi Arabia, not least in the comments of Lord Gilmour on
BBC Newsnight in June 2006, and in the reporting in June this
year of alleged "commissions" paid to Prince Bandar
bin Sultan as part of the Al Yamamh arms contract. In the light
of these sustained allegations it is imperative that there is
proper Parliamentary scrutiny of the UK's arms deals with Saudi
Arabia in addition to just the licensing part of the process your
Committee carries out. It does not appear to me to be good enough
for Des Browne merely to assert he has "nothing further to
add".
In particular you will be aware that no current
member of the House of Commons has read the 1992 National Audit
Office report into the Al Yamamah arms contract. It is the only
NAO report commissioned by Parliament never to have been published.
We would suggest that your Committee formally ask the Public Accounts
Committee to commission the NAO to take a fresh look at the Saudi
Armed Forces Project, in particular beginning a formal investigation
into the extremely disturbing allegations around Prince Bandar
made this June, and how the issue of "consultancy" payments
is currently dealt with in the context of Government-to-Government
arms contracts. Any inquiry ought to take evidence from serving
DESO officials. We would also urge that the report of any investigation
carried out be made public.
September 2007
92 Strategic Export Controls: Annual Report for 2004,
Quarterly Reports for 2005, Licensing Policy and Parliamentary
Scrutiny, 19 July 2006, HC873, Ev 158. Back
93
In file DEFE 68/319. Back
94
See the joint leaflet "UK Bribery and Corruption Law"
produced by the FCO, DTI and UKTI, available at http://www.fco.gov.uk/Files/kfile/briberyleaflet.pdf Back
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