Murphy's Law: Save Me Lord, But Not Just Yet

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September 16, 2009: In Britain, the Serious Fraud Office (SFO) has now been investigating defense manufacturer BAE for six years, seeking to prosecute cases where the company used bribes to obtain contracts from foreign nations. The SFO has already been overruled, in some cases,  by its own government, even though it had evidence of crimes committed. The government tried to keep all this secret. But last year, Britain's external intelligence agency, MI6, was forced to admit that they told British prosecutors that Saudi Arabia threatened to stop sharing information in Islamic terrorists, if an investigation of Saudi corruption went forward. This investigation involved over $100 million in bribes paid to Saudi officials to ensure that British firms got weapons contracts. The Saudis consider the bribes a part of their culture, and immune from British prosecution.

After the investigation was halted (at the end of 2006), Saudi Arabia proceeded to buy $8.7 billion worth of jet fighters from the British firm (BAE) that was under investigation. Many people familiar with how arms purchases were carried out in the Middle East, had already concluded that the corruption investigation was quashed because of threats from the Saudis.

At the same time, the British government was quite frank about not wanting to lose the sale. Until the last decade or so, most European governments did not investigate or prosecute use of such bribes. American companies had long complained about this European situation, which often meant lost sales for U.S. firms. American pressure has caused the Europeans to pass anti-bribery laws. Enforcement is another matter, as it often is.

The British government defends quashing many of these investigations because British firms cannot compete in many foreign markets unless bribes are offered to procurement officials. Fining companies like BAE for the bribes would simply be regarded as a cost of doing business, and raise the price of British goods sold to foreign customers. Threatening prosecution of British manufacturers, like BAE, for the bribery would discourage these firms from seeking foreign business, and cause unemployment in Britain.

The corruption overseas is a big problem, both locally and internationally. The corruption leads to inefficient government and stunts economic growth. It's one of the reasons for the rise of Islamic terrorism (which, for centuries, sprang up to battle oppressive local governments). But Western nations are unwilling to give up a competitive edge when selling both military and non-military goods to corruption-prone nations.

 

 


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