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LONDON — British anti-fraud prosecutors intend to pursue a case against BAE Systems PLC, the world's No. 2 defense contractor, on charges of corruption in dealings on foreign contracts worth hundreds of millions of pounds.
Prosecutors said Thursday they will seek permission from Attorney General Patricia Scotland to pursue the case against BAE, which is Britain's largest manufacturer.
In a statement, BAE Systems said it "continues to expend considerable effort seeking to resolve, at the earliest opportunity, the historical matters under investigation by the SFO."
Shares in BAE closed down 4.4 percent at 334 pence on the London Stock Exchange.
The cases involve alleged secret payments on sales of a military radar to Tanzania; alleged bribes behind a Czech deal to lease Anglo-Swedish Gripen warplanes; payments allegedly made on a sale of two frigates to Romania; and 100 million pounds ($160 million) in allegedly secret payments in a weapons deal with South Africa.
Christopher Grierson, a partner in the bribery and corruption taskforce at Lovells LLP international law firm, said the SFO's decision would shake British business.
"The sheer scale of the penalties being sought, which are believed to be 1 billion pounds ($1.6 billion), is unprecedented in the U.K. and will send shockwaves across corporate Britain," Grierson said.
"Whilst we have yet to see how this will play out, it is clear that the SFO is flexing its muscles and attempting to emulate the aggressive approach of the U.S. authorities."
A senior politician said the case could have serious implications "not just for BAE but for Britain's defense capacity".
"The company is the principal contractor in the programs for the Eurofighter, the aircraft carriers and Joint Strike Fighter which is to go on them, and many other significant procurement projects," said Menzie Campbell, former leader of the Liberal Democrat party.
Tanzania signed a contract worth up to $41 million with BAE in 2001 for a radar system, a deal in which BAE was accused of paying $12 million to a Tanzanian middleman. Critics, including the World Bank and the International Monetary Fund, said Tanzania could have bought a much cheaper system which would have met its needs.
There were allegations that more than 7 million pounds of secret commissions had been paid via an agent to cement the sale of two second-hand Royal Navy frigates to Romania in 2003 for 116 million pounds.
The South African deal involved the 1.6 billion pounds sale of Hawk aircraft in 2001.
In 2006, Prime Minister Tony Blair called off a separate Serious Fraud Office investigation of BAE's dealings with Saudi Arabia in a multibillion dollar plane and military equipment contract dating back to the 1980s. Blair said the investigation threatened national security and British jobs.
The U.S. Justice Department continues to investigate the allegations that BAE Systems funneled money to Saudi Prince Bandar bin Sultan, a former ambassador to the U.S., to help win a $86 billion weapons deal. Bandar and BAE have denied the allegations.
Last year BAE Systems announced a three-year program to implement recommendations from an internally commissioned report that found it failed to pay sufficient attention to ethical standards.
The committee reported that BAE, which has maintained that it acted lawfully, had left itself open to misconduct accusations that have tarnished its reputation and recommended that the company implement tougher anti-bribery measures.
BAE Systems PLC is Europe's largest defense conglomerate. Its U.S. subsidiary, BAE Systems Inc., is based in Rockville, Maryland.
The company builds combat aircraft such as the Eurofighter Typhoon and the Tornado, as well as armored combat vehicles and nuclear attack submarines.
BAE Systems is the world's No. 2 defense company based on revenue last year of 18.5 billion pounds ($34.4 billion), behind Bethesda, Maryland-based Lockheed Martin. BAE generates more than half its sales in the U.S., and is the Pentagon's fourth-biggest contractor.
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