BAE Systems To Pay Fine Of $79M To Settle Case

LONDON (AP) -- Defense contractor BAE Systems PLC said Tuesday it has agreed to pay a fine of up to $79 million to settle an arms export controls case with the U.S. Department of State, the largest civil fine ever levied by the department.

The State Department settlement of the civil case includes a possible $10 million reduction in the fine depending on the company's implementation of compliance measures.

Last year, the BAE agreed to pay a fine of $400 million to settle a U.S. Justice Department investigation and another of 30 million pounds ($49 million) to settle a parallel investigation in the United Kingdom after the company was accused of using shell companies to disguise payments made to a Saudi official and others to win sales, and then failing to disclose the payments as required by U.S. law.

Separately, BAE pleaded guilty in Britain to a charge relating to payments to a former adviser in Tanzania, and agreed to pay a fine of 30 million pounds ($49 million).

The State Department said more than 2,500 alleged violations including unauthorized brokering of U.S. defense articles and services, failure to file annual broker reports, and failure to report the payment of fees or commissions.

The settlement did not involve the company's U.S. subsidiary, BAE Systems Inc. or any of its subsidiaries because there was no indication they had failed to properly disclose payments, the State Department said.

As part of the deal, BAE agreed to oversight and auditing of its export compliance program for the four-year duration of the consent agreement, the State Department said.

BAE Systems shares were down 0.2 percent at 338 pence in midday trading on the London Stock Exchange.

"The company is grateful to the State Department for the time and effort its staff have invested over the last year in reviewing the company's present compliance systems and processes, which enabled them to conclude that the company has initiated appropriate steps to address the cause of the past civil violations and to mitigate any law enforcement concerns," said Dick Oliver, chairman of BAE Systems.

The State Department said three BAE subsidiaries would face restrictions because of their substantial involvement in activities related to the criminal conviction.

All applications for export licenses by BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd. will face a presumption of denial, subject to a case by case review to determine whether an application is in the interest of the United States, the State Department said.

A former BAE agent, Count Alfons Mensdorff-Pouilly, was charged in the United Kingdom last year with conspiracy to corrupt in his efforts to win contracts in Europe, but the Serious Fraud Office dropped the charge a week later following the announcement of the company's settlement with U.S. and U.K. authorities. BAE said Tuesday that the allegations against Mensdorff-Pouilly were not related to the U.S. case or the Tanzania case in Britain.