- The Washington Times - Tuesday, March 16, 2010

The U.S. arm of Europe’s largest defense contractor, BAE Systems, is unlikely to be significantly hurt by its guilty plea in a bribery-related probe this month, said officials involved in issuing licenses to the British company.

Although the Justice Department fined BAE $400 million, the officials said three other factors will be taken into account when reviewing license applications: the firm’s high importance to the Pentagon, its cooperation with the U.S. government and the fact that, unlike the parent company, its U.S. subsidiary was not found guilty of criminal wrongdoing.

Based on the charges related to questionable payments to win hundreds of millions of dollars in contracts in Saudi Arabia and other countries, the State Department has to set a “policy of denial,” which will then be used to grant or reject specific license applications.

“We are required to write a policy that presumes denial of their licenses, with exceptions to be defined by the policy,” said a senior State Department official, who asked not to be named because he was not authorized to speak publicly about the process.

The last time a “company of comparable importance” was in a similar situation, “it took months to write a policy,” the official said. He referred to ITT Corp., a maker of military-grade goggles, monoculars and gun sights that was caught selling sensitive defense articles to China and other countries without a license.

“BAE is a bigger company and very important to the Pentagon, so in order to minimize any negative impact, we expect to take only weeks” to complete a policy this time, he said. The State Department currently has nearly 200 pending license applications from BAE, he added.

The “primary criterion in exceptions” from the “presumptive denials” will be national security, the official said. He noted that many of the projects BAE is involved in, such as the F-35, also known as the joint strike fighter, would suffer significantly without the company’s participation.

“We’d be shooting ourselves in the foot if we prevented them from participating in the joint strike fighter,” he said.

The F-35 is being developed for the Air Force, Navy and Marine Corps, as well as Britain’s Royal Air Force and Royal Navy. BAE’s main contribution is to the plane’s ” airframe and systems,” the company says on its Web site.

“F-35 Lightning II will be the world’s most advanced combat aircraft and the first and only stealthy, supersonic, multi-role fighter,” it says.

Immediately after the $400 million fine was imposed, following BAE’s guilty plea to conspiring to make false statements about having an internal program to comply with anti-bribery laws, the State Department said it was temporarily suspending license issuance.

However, the announcement was taken off its Web site the next day, because it was “confusing” for many people, who wrongly thought it was signaling the outcome of the policy review, the senior official said.

In the meantime, the department is working on applications that are not directly affected by the March 1 plea agreement, and will approve or deny them on a case-by-case basis, he added.

John Suttle, senior vice president for corporate communications at BAE Systems Inc., the company’s U.S. subsidiary, said there is “no impact on our existing export licenses and agreements, and we continue to export under them.”

“It is our understanding that the Department of State is continuing to staff and process our pending and new applications, and may grant certain new licenses, while they continue to review the BAE Systems PLC settlement with the Department of Justice,” he said.

The Justice Department’s investigation took years and continued even after then-British Prime Minister Tony Blair ordered a similar probe in his country closed in 2006.

While there were some contracts in the Czech Republic and Hungary, the main focus in both cases was Saudi Arabia, where BAE had an $80 billion contract to supply fighter jets and other military hardware since the 1980s.

According to press accounts in both Britain and the United States, the authorities were examining payments that the company made to Saudi officials, including $2 billion that was deposited into bank accounts of Prince Bandar bin Sultan, a former Saudi ambassador to Washington.

Prince Bandar has repeatedly denied any wrongdoing, and the Justice Department’s criminal information released last month did not specifically name him. Still, the department said that BAE had paid a large amount to a Saudi official through accounts in the United States and elsewhere.

Mr. Blair ended the British investigation out of fear that the Saudis would suspend intelligence cooperation, which would hurt Britain’s anti-terrorism efforts. At the time, Prince Bandar headed King Abdullah’s National Security Council.

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