- By Region
Barely seven months after Ian Foxley arrived in Riyadh to oversee a £2bn communications contract between the UK Ministry of Defence and Saudi Arabia’s National Guard, he found himself fleeing to the city’s airport with a carry-on bag.
The retired British lieutenant-colonel had given his employer – GPT, part of EADS, the pan-European defence contractor – the slip by letting his managers assume he was heading to the UK embassy, where he knew the ambassador from the discreet Catholic mass they attended there in a back room every Sunday.
Instead – he recalled to the Financial Times last month – he boarded a night flight to London, bringing with him evidence of apparently irregular payments to Saudi officials that could harm the reputation of one of Europe’s biggest defence contractors. In doing so, he put further strain on one of the UK’s most important and lucrative diplomatic and commercial relationships.
Mr Foxley had joined GPT in spring 2010 as the project manager of the 10-year programme through which it supplied – via the MoD – the Saudi National Guard with communications tools, such as a military intranet and equipment to monitor and jam systems. The work was part of the Sangcom programme agreed by the UK and Saudi governments more than 30 years ago and which by 2010 was in its third procurement phase.
It did not take long for Mr Foxley to notice red flags, especially when talk of payments for “bought-in services” arose. But the watershed moment came when Mr Foxley realised that he was not alone and that the project’s financial controller had for years tried to raise his concerns about unexplained payments – totalling more than £11m – and lavish gifts, such as cars, for Saudi royals.
Mike Paterson, however, was at the end of his struggle, which had led him to fear for his own safety because of the irregularities he was reporting. He decided to relocate within the company rather than take his concerns to the Serious Fraud Office, the UK regulator.
Mr Foxley was not about to do the same, despite fears that he could be arrested. The morning after he discovered Mr Paterson’s concerns, he accessed the emails Mr Paterson had told him he had written over the previous three years. By doing so, Mr Foxley followed an electronic paper trail that would lead to the SFO launching a criminal investigation.
The allegations of Mr Foxley and Mr Paterson point not only to GPT and EADS, they also involve the MoD. Because the only customer of GPT is the MoD, which then liaises directly with the Saudi National Guard, every riyal the company requests to spend on the project must be approved by the ministry and go through its Sangcom bank account.
In his statement, Mr Foxley raised his concerns about the MoD’s role in approving payments to GPT and handling the money “without sufficient determination of the legality and propriety of such monies”.
The MoD said: “It would not be appropriate to comment on this specific contract at this time as it is subject to an ongoing SFO investigation.”
But EADS confirmed the MoD’s involvement, pointing out that GPT in Saudi Arabia was a local subsidiary “conducting business exclusively for the UK MoD”. EADS confirmed that the relevant executives were aware of the FT’s inquiries but declined to comment.
Mr Foxley worries that the contentious payments may go back further than 2007. Documents filed at the national archives in Kew show that shortly before the project between the UK and Saudi Arabia began in 1978, the MoD condoned payments to consultants.
Sir Frank Cooper, then permanent secretary to the defence minister, the most senior civil servant, advised his procurement officials in a private written directive that some projects could warrant agent fees. Those that commanded fees in excess of 10 per cent or were very large would need to be signed off by him directly. A letter to Sir Frank from Sir Douglas Henley, the UK parliament’s financial watchdog, names Sangcom as one of those projects.
Mindful that the previous UK government had halted the SFO’s 2006 investigation into alleged bribery by BAE Systems, Europe’s biggest defence contractor, which was hoping to clinch a £40bn fighter jet deal in Saudi Arabia, Mr Foxley began to be concerned about the lack of movement in the Sangcom investigation. In January this year he raised his concerns with business secretary Vince Cable, the SFO and the Institute of Chartered Accountants.
Last week, the SFO announced it had launched a formal criminal probe. It wrote to Mr Foxley, warning him not to talk about the case and he has since declined to comment.