BAE deal saw count’s bribes case dropped

UK taxpayers liable for legal costs

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A Viennese count accused of paying bribes on behalf of BAE Systems had to be freed and taxpayers made liable for his legal costs because of a concession to the arms dealer by prosecutors, court papers show.

Alfons Mensdorff-Pouilly was released after the Serious Fraud Office spent one week striking a landmark deal to end its five-year corruption probe into BAE, the documents suggest, causing critics to question whether investigators acted hastily.

The papers, which describe how the SFO brought its case to a whirlwind conclusion after it became clear BAE had reached a settlement in a parallel probe in the US, are likely to add to debate on whether the UK is tackling financial crime independently and effectively.

In the documents, filed by the SFO in response to a legal challenge to the BAE settlement, the prosecutor describes for the first time why it decided in February to drop charges against the count just a week after accusing him over an alleged conspiracy to pay bribes to win the company fighter jet deals in central and eastern Europe. The papers say the SFO had to scrap its action because it had accepted a BAE demand that it should not accuse the company of corruption in any future prosecutions, such as those against individuals allegedly involved in the case.

“The [SFO] received advice from counsel to the effect that in a prosecution of Count Mensdorff . . . it would not be possible to proceed without making an allegation of corruption against BAE,” the documents say. The count has always denied wrongdoing.

Lawyers familiar with the case questioned the concession, with one describing it as “startling”. Another lawyer said: “I don’t think they needed to give it. I think it’s silly.”

The decision allowed the count, whose assets include Dalnaglar Castle, a Scottish stately home commissioned by Queen Victoria’s banker, to claim for his legal costs from taxpayer funds. People close to the count said he had done so, although the SFO declined to confirm this was the case.

The SFO’s defence document, which succeeded this month in defeating the court challenge brought by two non-governmental groups, shows how the prosecutor rushed to do a deal with BAE that it was then able to announce on February 5 alongside the company’s US settlement. In the US, BAE agreed to pay a $400m (£260m, €298m) fine after admitting making false statements to the government, while in Britain it said it would pay £30m and plead guilty to a minor accounting offence relating to the sale of a radar system to Tanzania.

According to the court documents, the SFO began settlement talks with BAE only on January 29, when it received a call from the US Department of Justice to say the deal in Washington was imminent. The SFO and the company had held negotiations on an agreement last year but the prosecutor lost patience in October and announced that it would seek permission from the attorney-general to prosecute.

The SFO said: “We do not accept that we acted hastily. These were considered negotiations and were not rushed decisions.”

Richard Alderman, its director, has previously defended the settlement, describing it in February as a “total vindication of the SFO over the years”.

BAE, which has always denied bribery, declined to comment.

Additional reporting by Sylvia Pfeifer

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