BAE Chief's Texas Detention Could Scupper US Defence Bid




 
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BAE Chief's Texas Detention Could Scupper US Defence Bid
 
May 18th, 2008  
Team Infidel
 
 

Topic: BAE Chief's Texas Detention Could Scupper US Defence Bid


BAE Chief's Texas Detention Could Scupper US Defence Bid
London Sunday Telegraph
May 18, 2008 By Richard Tyler
BAE Systems' hopes of making further inroads into the lucrative US defence market through a potential counterbid for DRS Systems may have been derailed by the shock detention of BAE's chief executive Mike Turner and a senior colleague in Texas last week.
It is understood that the British defence giant has been examining a counter-offer for DRS, which makes flight recorders, sensors and thermal-imaging devices used on US military helicopters and ships, following its decision last week to accept a $4bn (2bn) takeover bid by Italian aerospace company Finmeccanica.
BAE is the Pentagon's biggest foreign supplier after snapping up Bradley tank maker United Defence Industries in 2005 and last year's acquisition of Armor Holdings. Mr Turner had indicated more US acquisitions would follow. Asked earlier this year whether he has anything in his sights, he said: "There's a few at the moment."
But with Turner's detention in Houston and the expectation that he will return to the US shortly in connection with the investigation, such deals would appear on hold. It leaves the door open for European rival EADS, which makes the Eurocopter and parts of the Eurofighter combat-jet and the Ariane space rocket.
Its chief executive officer Louis Gallois confirmed last week he had DRS in his sights. "DRS is on our target list, but we have not taken any decision about it," he said, after the news of the Finmeccanica bid broke.
BAE is being investigated by the US Department of Justice over allegations that it illegally paid 1bn in kickbacks to senior Saudis during the 1980s and 1990s as part of the 43bn Al-Yamamah jet fighter deal. BAE has always denied any illegal wrongdoing.
A Serious Fraud Office (SFO) inquiry in Britain was halted by the Government in December 2006 over concerns that it was damaging Britain's relations with the Saudis. The decision was successfully challenged in the High Court and the Government is now appealing against the ruling on grounds of "national security".
BAE is still being investigated by the SFO over claims it paid bribes to secure contracts in a number of other countries, including Romania, Tanzania and the Czech Republic. The defence group had sought to draw a line under the allegations last summer by hiring Lord Woolf of Barnes, the former Lord Chief Justice, to review its operations.
His report, released this month and which did not touch on the Al-Yamamah deal, concluded BAE was "overly secretive, defensive, unwilling to explain its actions and, at best, lukewarm to the challenge of dealing with the major reputational issues affecting the company and industry". Lord Woolf said Mr Turner, and Dick Olver, the company's chairman, had conceded BAE "did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage".
The company is now acting on all 23 of Lord Woolf's recommendations, including closer monitoring of middle-men used to broker arms deals around the world.
The news of Turner's detention may also hurt BAE's chances of landing its first choice to succeed him when he steps down in August. Candidates had included Paul Lester, the boss of VT Group; Chris Kubasik, finance director at Lockheed Martin, Sir Kevin Smith, chief of the engineering group GKN, and Colin Matthews, head of BAA airports group. Two internal BAE candidates are understood to be Ian King, chief operating officer, and Walt Havenstein, the head of BAE's American arm.
The US authorities' willingness to act swiftly highlights the risks that British executives face when visiting the US. In 2006 there was an overnight clampdown on the internet gambling industry when David Carruthers, the chief executive of BetOnSports, and former Sportingbet chairman Peter Dicks were arrested.
Lawyers have speculated that BAE executives could face extradition requests in the wake of Lord Woolf's report. Adam Vause, senior associate with Norton Rose, warned British companies to expect increasing co-operation between the DoJ and the Securities and Exchange Commission (SEC) in the US and the SFO and the Serious Organised Crime Agency in the UK.
 


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