[A-List] UK arms industry: slush fund scandal

["Michael Keaney" <michael.keaney@xxxxxx>]

MoD official took BAE gifts

David Leigh and Rob Evans
Tuesday April 6, 2004
The Guardian

A slush fund run by Britain's biggest arms firm, BAE Systems, has been
providing free holidays to a low-paid civil servant at the Ministry of
Defence, according to allegations made to the Guardian.

The information has been passed to the Serious Fraud Office, which is
planning to interview a key witness today. The gifts BAE is alleged to have
arranged for John Porter between 2000 and 2002 include:

· An all-expenses-paid holiday in Paris at the luxury Hotel Le Bristol for
Mr Porter and his wife Sue;
· A weekend for the couple at a £600 a night country house hotel, Chewton
Glen, in the New Forest;
· A London night out for two at My Fair Lady, followed by champagne and a
suite at the Carlton Tower hotel;
· Grandstand tickets plus free hospitality for the England v Australia Test
match at Lords;
· Tickets costing £240 for a Neil Diamond concert;
· A camera; and
· Use of a car.

Such payments are forbidden by the MoD, and if made in return for favours,
may be a serious criminal offence.

Mr Porter, who was at the time a higher executive officer earning up to
£28,000 at the MoD's arms sales unit, refused to comment when the Guardian
put the allegations to him. He said: "No comment. No comment at all."

After the Guardian notified Mr Porter of the allegations last Sunday, BAE
held private discussions with him and Tony Winship, the former BAE executive
accused of arranging the payments. BAE made no comment other than to say:
"We never break the law."

Asked whether the company had provided free holidays for the MoD official, a
BAE spokesman declined to answer. Mr Winship did not respond to invitations
to comment.

In one document passed to the SFO, Mr Porter is described as being "very
important to Tony Winship [of BAE]". A source close to the transactions says
that BAE often sought to obtain special privileges for their rich Saudi
customers, such as landing rights at Heathrow. The Saudis' ostentatious
private jets are normally banned from London's most congested airport.

Until he took early retirement last May, Mr Porter worked at the Saudi
project office at Castlewood House, New Oxford Street, London, a department
of the Defence Exports Services Organisation, the MoD's arms sales unit. Its
job was to supervise the billion-pound bills BAE was charging Saudi
customers for selling and servicing warplanes. Mr Porter was in charge of
liaison with visiting Saudis.

The Guardian asked Mr Porter if he was in a position to provide special
privileges for BAE customers such as landing rights. He did not respond.

The MoD said last night that it did not authorise BAE to provide benefits to
Mr Porter.

The firm, which uses a battery of methods to persuade Britain and regimes
all over the world to buy its weapons, has frequently been at the centre of
corruption allegations abroad. The Guardian disclosed this year that since
Labour legislated against bribery of foreign public officials, BAE has
secretly shifted its files of payments to agents and foreign politicians
into a vault in Geneva. BAE is also alleged to be using Swiss banks and
offshore companies in the British Virgin Islands to conceal its
transactions.

The Guardian also disclosed allegations that BAE has been operating a £20m
slush fund to provide prostitutes, yachts and free trips for Saudis. This
fund, according to the documents, also appears to have been used to finance
the free holidays for Mr Porter. BAE has refused to respond to all these
allegations, other than to make a generalised denial of wrongdoing.