Why was BAE Systems investigated by the UK Serious Fraud Office and US Department of Justice, and what was the outcome of these investigations?
Under the settlement agreement with the Department of Justice, the Company pleaded guilty to one charge of conspiring to make false statements to the US Government in connection with certain regulatory filings and undertakings. BAE Systems paid a fine of US$400 million in respect of the settlement with the Department of Justice and made additional commitments concerning its ongoing compliance which included the appointment of an independent monitor for a period of up to three years.
Following the settlement with the Serious Fraud Office, the Company pleaded guilty to one charge of breach of duty to keep accounting records in relation to payments made to a former marketing adviser in Tanzania. BAE Systems made an agreed payment of £30 million comprising a penalty to be determined by the Court with the balance paid as a charitable payment for the benefit of Tanzania in accordance with Company policies including those relating to business conduct and charitable contributions.
In May 2011, BAE Systems reached a civil settlement with the US Department of State in connection with violations of the US defense export control regulations. This relates to the same legacy issues that were the subject of the settlement with the US Department of Justice which we announced in February 2010.
Under the agreement with the Department of State, BAE Systems will pay a fine of up to US$79 million in respect of alleged civil violations. The fine will be payable over a period of three years, subject to a reduction of up to $10 million in respect of the cost of enhanced export control compliance measures already implemented by BAE Systems and planned for implementation during the four-year period from the settlement date.
In addition, a limited number of the Company’s UK-originated export programmes will be subjected to enhanced administrative review. This will be determined on a case by case basis and is not expected to adversely impact our current or future export programmes.
The Company also agreed to make additional commitments concerning its on-going compliance and, pursuant to those commitments, appointed a Special Compliance Official for a period of up to three years to monitor its compliance to such commitments (see separate question below).
In recent years, BAE Systems has systematically enhanced its compliance policies and processes. In particular, BAE Systems undertook to act on all 23 recommendations of the Woolf Committee within 3 years. On 30 September 2011, BAE Systems published a report entitled “Our Response to the Woolf Committee Recommendations” that included a description of the steps BAE Systems has taken since 2008 to implement all 23 recommendations of the Woolf Committee. Such statements were independently assured by Deloitte LLP to be, in its opinion, fairly stated in all material respects as of 30 September 2011.
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