ARMS DEALING, CASE STUDY BAE, PART IV

A June update --

and one comment: as we ALL know, denial is the great part of valour (???!!!)

Czech Republic

David Leigh and Rob Evans
Thursday June 7, 2007
Guardian Unlimited

This central European state emerged from the break-up of the old Soviet empire. Slovakia seceded from Czechoslovakia in 1993. The latter was renamed the Czech Republic, with its capital remaining in Prague. The Czechs were desperate to be adopted by the west, gaining entry to Nato in 1999 and to the EU in 2004. This opened up lucrative opportunities for western arms companies, as the Czechs were forced to re-equip to Nato standards.

The arms deal

The Czechs agreed to lease Gripen fighter planes for £400m in 2004. This followed failed attempts during a hectic lobbying campaign to persuade them to spend £1bn on buying outright a much larger fleet of Gripens. Tony Blair flew to Prague to lobby on behalf of BAE, which was selling the planes in a joint venture with Swedish manufacturer Saab.

The commissions

Secret payments from BAE of more than £4m were identified according to documents obtained by Swedish TV. A Swedish source alleged the money was to be used to pay bribes. Three agents were promised payments and in some cases received them. These three had links to the Czech political establishment. All three denied any money was for bribes. The agents were:

· Otto Jelinek, a former state finance minister in Canada who had returned home to Prague as a businessman;

· Richard Hava, head of the state arms firm Omnipol;

· Count Alfons Mensdorff-Pouilly, who was the husband of an Austrian politician and had a chequered past.

A series of offshore companies were named. Hava was allegedly promised 2% commission through an entity called Gabstar. Jelinek used a Bahamian entity called Fidra Holdings. The controversial Alfons received £4m through the most multi-layered arrangements: BAE paid intermediary arms dealer Brigadier Tim Landon through his Swiss-based, Panama-registered entity Valurex. Landon in turn employed Alfons to lobby in Prague. BAE's sales campaign was masterminded by ex-MOD official Julian Scopes and country director Steve Mead.

The investigations

· The US authorities were the first to allege corruption. [document] They pulled out of the aircraft contest in 2002 and the US authorities protested in vain to the British MoD permanent secretary Sir Kevin Tebbit. · The SFO in London began to investgiate in 2004, when Red Diamond records led them to the identities of Czech agents. · The Swedish authorities were then alerted to documents allegedly implicating Saab executives in the commission arrangements. · Austria became concerned when documents suggested Hans Malzacher, former head of the Steyr arms firm, had been promised commission if further Gripen sales were made to Austria.

Despite what was alleged to be foot-dragging by the infant Czech anti-corruption unit, the probes moved to a new level in 2007. All four European prosecutors met at the Hague under the auspices of the new EU anti-organised crime body Eurojust, to try and thrash out a strategy. BAE continued to deny it had ever authorised any bribes.