JUSTICE DEPT. INVESTIGATING SAUDI ROYAL FAMILY BRIBE CASE

by Emad Mekay

(IPS) WASHINGTON -- The Justice Department is investigating allegations of bribery by the British defense contractor BAE Systems to Prince Bandar Bin Sultan, a high-ranking member of the Saudi royal family with wide contacts and relations here.

The news brings a high-profile investigation initially launched in Britain to the United States, where the political influence of the Saudi royal family is well-known.

Although the British government dropped its own probe last December, citing national security considerations, U.S. prosecutors determined that BAE could be investigated under the Foreign Corrupt Practices Act because it used U.S. banks to allegedly transfer payments to accounts controlled by Prince Bandar.

The Justice Department involvement has had immediate ramifications, with the company's shares losing eight percent of their value Tuesday.

"BAE Systems has been notified by the U.S. Department of Justice that it has commenced a formal investigation relating to the company's compliance with anti-corruption laws, including the company's business concerning the Kingdom of Saudi Arabia," BAE Systems said in a statement sent to IPS.

It is not clear yet what prompted Washington to get involved the case, given its close relationship with both Britain and the Saudis, but the decision comes after weeks of lobbying by some European officials, and development and anti-corruption groups around the world who denounced the decision by the Tony Blair government to close its own investigation.

In a letter campaign, they urged Blair to reopen the Serious Fraud Office (SFO) inquiry into allegations of slush funds surrounding the 80-billion-dollar Al Yamamah arms deal between BAE Systems and Saudi Arabia, a transaction that dates back to 1985.

They argued that future efforts by Britain to prescribe governance and transparency standards for developing countries receiving aid and debt relief are likely to be viewed with skepticism.

The anti-bribery committee of the Organization for Economic Cooperation and Development had also demanded an explanation from the British government and decided to conduct a further examination of Britain's efforts to combat bribery.

The SFO is still examining corruption charges involving BAE contracts in Romania, the Czech Republic, Tanzania and South Africa.

Meanwhile, an investigation by the British BBC earlier this month found that BAE paid nearly two billion dollars in bribes to the Saudi prince, a charge that both Prince Bandar and BAE vehemently deny.

Many activists say that the British government succumbed to political pressure both from BAE, Europe's' leading defense company, and from Saudi officials who threatened to cancel future lucrative arms deals.

Last year, Saudi Arabia signed an expanded military agreement with Britain, including a commitment to acquire at least 24 Eurofighter Typhoons to replace its air force fleet of Panavia Tornado Air Defense Variant (ADV) fighters.

They were part of the multi-billion-dollar Typhoon order that would provide the cornerstone of a third phase to the bilateral Al Yamamah arms agreement.

This agreement has already covered the delivery and support of 120 Tornado ADV and Interdictor Strike (IDS) aircraft, BAE Systems Hawk and Pilatus PC-9 trainers and other equipment.

The 2006 agreement also seeks to further develop Saudi Arabia's national aerospace industry through the transfer of technology from BAE, the main contractor, and the establishment of additional in-country support facilities.

BAE says it is in the process of promoting an extensive upgrade of Saudi Arabia's Tornado IDS aircraft in an effort to further boost the value of its Al Yamamah business activities.

But the expanded deals are just one factor in the investigation. Prince Bandar wields enormous political clout -- even more so in the United States, where he spent much of his career and developed close relations with many U.S. politicians, including the Bush family.

He also recently endeared himself to U.S. foreign policy circles, including the powerful pro-Israel hawks in the U.S. Congress, with a rapprochement between his conservative kingdom and Israel, a key U.S. ally in the Middle East.

After he came to serve as Saudi Arabian King Abdullah's national security advisor, he made unprecedented advances towards Israel.

In the past, U.S. citizens have reported they were refused a Saudi visa because their passports reflected travel to Israel or indicated they were born in Israel. This has not happened recently.

Bandar bin Sultan is also widely credited for forging an unprecedented front made up of his country, Jordan and Egypt, which rallied against Hezbollah in Lebanon during its war with Israel last summer.

The position won him praise in Washington and was heralded as a new era in Arab-Israeli relations.

Saudi Arabia is also likely to be a major player if the U.S. decides to take military action against Iran over Tehran's nuclear program.

U.S. lawmakers have yet to make a statement on the case.