BAE Systems to compensate Tanzania over radar sale

ROBERT BARR - Associated Press

LONDON (AP) — British defense company BAE Systems PLC said Friday it is ready to pay 29.5 million pounds ($47 million) to the government of Tanzania to close a long-running case over the sale of a radar and traffic control system.

A parliamentary committee released a letter from BAE chairman Dick Oliver saying the company was ready to compensate Tanzania as soon as the payment is cleared by Britain's Department for International Development.

"We look forward to bringing the matter to a conclusion," BAE said in a statement.

Last year, BAE pleaded guilty to failing to keep proper records of payments to a former adviser in Tanzania.

The Tanzania radar contract negotiations were started by Siemens Plessey Electronic Group, which was acquired by BAE Systems in 1998. Siemens Plessey had retained Shailesh Vithlani, a Tanzanian marketing adviser, to assist in negotiations.

BAE subsequently entered into agreements which guaranteed $12.4 million, or 31 percent of the $40 million contract proceeds, to two companies — Envers Trading Corp. and Merlin International Ltd. — controlled by Vithlani.

Critics including the World Bank and the International Monetary Fund said a much cheaper system would have met Tanzania's needs.

BAE was not accused of being party to an agreement to corrupt. However, Justice David Bean, who confirmed the settlement of the case in December, said there was "a high probability" that Vithlani used the money to secure a contract for BAE.

"The payments were not subjected to proper or adequate scrutiny or review. Further, British Aerospace Defense Systems Ltd. maintained inadequate information to determine the value for money offered by Vithlani and entities controlled by (Vailesh)," the judge said.

The company had proposed paying compensation to the Department for International Development, which would then use it for projects in Tanzania, but the department said the money should go directly to the Tanzanian government.

"We're pleased that BAE Systems has agreed to pay the money it owes to the people of Tanzania straight away," said Malcolm Bruce, chairman of the House of Commons International Development Committee.

"This is the right decision for the reputation of British business, for BAE Systems and for the children of Tanzania and their teachers who will benefit from the additional textbooks, desks, teachers' houses, and other education materials that this payment will go towards."

At the same time BAE settled the British case, it pleaded guilty to a U.S. charge of conspiracy and was fined $400 million in a case involving arms sales to Saudi Arabia. U.S. officials said BAE knowingly failed to ensure compliance with legal prohibitions on foreign bribery.