A subsidiary of EADS, the pan-European defence contractor, was still approving contracts including questionable “bought-in services” payments in late 2010, despite the warnings of a financial controller and a looming UK crackdown on bribery, the Financial Times has learnt.
One project contract, a copy of which has been seen by the FT, was signed in December 2010 by five senior executives of GPT Special Project Management Services, an EADS subsidiary that supplies communications equipment to Saudi Arabia’s National Guard via the UK’s Ministry of Defence.
The contract was for a total of SR77.7m, of which SR9.6m, or about 12 per cent, was for “bought-in services”. Evidence from three former and current GPT executives suggests that it was not the only such contract signed and that there was at least £11.5m in unexplained payments between 2007 and 2009.
The contract itemises the list of costs but does not explain what goods or services were to be rendered for the specific payment entitled “bought-in services”. It is this omission that led Mike Paterson, then a financial controller at GPT, repeatedly to alert his superiors to questionable payments, which he also refused to sign off. His first emails and meetings on the matter occurred in 2007 and the last in 2010.
By the time the December 2010 contract was signed, Mr Paterson had already taken his concerns all the way to Pedro Montoya, EADS’s chief compliance officer who reported directly to the chief executive.
He had also warned that such “bought-in services” were unlikely to be approved by the UK Ministry of Defence, which oversees the programme and liaises with Saudi Arabia’s National Guard.
By late 2010, the UK was months away from enacting a tough new anti-bribery law, whose origins lay in another bribery scandal centred around UK defence sales to Saudi Arabia.
In the early 2000s, allegations that BAE Systems, the UK’s largest defence contractor, had bribed a Saudi prince in the hopes of winning a £40bn fighter jet contract – called Al-Yamamah – had begun to emerge. But in 2006, citing national security concerns, the then Prime Minister Tony Blair quashed the Serious Fraud Office’s investigation into the matter.
In the spring of 2010, just months before GPT executives signed the contract, the US Department of Justice fined BAE $400m for covering up potentially illegal payments made to procure work, including for the Al-Yamamah project.
Despite the hardening attitudes in London and Washington towards bribery, Mr Paterson continued to feel ignored, rebuffed, sidelined and under physical threat, emails seen by the show. He never signed the 2010 contract and subsequently transferred to a different role within GPT.
However, a second GPT executive had separately become concerned about “bought-in services” payments: Ian Foxley, GPT’s programme director at the time. He collected Mr Paterson’s and his own evidence on the matter, fled Saudi Arabia and passed the documents to the SFO in January 2011. Last week the SFO launched a criminal probe into GPT and those payments.
EADS and its executives have declined to comment on the matter but the company said it was co-operating with the SFO.