BAE agrees to payment of Tanzania fine

Following select committee criticism, arms company pledges to make long-awaited payment of £29.5m for education projects.  BAE systems has agreed to pay immediately the £29.5m fine handed down to it by the Serious Fraud Office (SFO) in February 2010. The move follows strong criticism of the delay in making the payment from the UK government’s international development committee.

BAE unpaid fine earmarked to fund education suppliesBAE unpaid fine earmarked to fund education supplies

In February 2010, BAE was fined for concealing payments of $12.4m to a marketing adviser in Tanzaniain connection with a radar deal in 2002. The company agreed with the SFO to make the ex-gratia payment to the Tanzanian people. The UK’s Department for International Development (DfID) and the Tanzanian government drew up plans on how to spend the money, which was to be invested in education. Under the plans, the money would be spent on 4.4m school textbooks, 192,000 desks, 1,196 teachers’ houses and 2,900 pit latrines. Spending the money on such tangible objects, DfID argued, would make auditing easy and minimise the chance of any corruption allegations.However, no payment was made by BAE. In June, the company announced the formation of an advisory board that, it said, would help it distribute the funds more effectively itself.

This proposal was met with outrage by the members of the international development committee. Anas Sarwar, the Labour MP for Glasgow central, accused BAE of trying to turn a punishment into a PR exercise. At a select committee hearing in July, he told BAE’s head of government relations, Bob Keen, that BAE must “take the hit now”. He said: “You are not setting up a charity trust, or a personal or a private foundation, or some kind of outward branch for great super-duper positive campaigns that BAE will do to win friends in nice places, and gain influence in nice places – you are paying a fine, a punishment.”

The committee urged BAE to honour the original plan and channel the money through DfID to be spent on schools.

In August BAE’s chairman, Dick Olver, wrote to Malcolm Bruce MP, the chairman of the committee, announcing BAE’s about-turn. “I have now written again to the secretary of state, indicating our readiness to remit a Banker’s Draft payable to the Government of Tanzania. We are ready to do that as soon as DFID indicate their agreement,” Olver’s letter says.

“In taking this action we are mindful of the Committee’s unequivocal support for the scheme proposed by the Government of Tanzania and developed by DFID. We have also taken full account of the clear view expressed by the Committee, including your own personal comments, that the company should have no role in the operation of oversight of the scheme proposed by DFID … We are ready to make the payment immediately on receipt of the necessary banking details.”

Bruce said: “We’re pleased that BAE systems has agreed to pay the money it owes to the people of Tanzania straight away. This is the right decision for the reputation of British business, for BAE systems and for the children of Tanzania and their teachers who will benefit from the additional textbooks, desks, teachers’ houses, and other education materials that this payment will go towards.”

Source – – Frederika Whitehead, 9 September, 2011