Some, but not all, of the top figures arrested were singled out for the most brutal treatment, suffering wounds to the body sustained by classic torture methods. There are no wounds to their faces, so they will show no physical signs of their ordeal when they next appear in public.
One of the most famous is Prince Bandar bin Sultan, a former Saudi ambassador to Washington and confidant of former US President George W Bush. There is no word on his fate, but Saudi authorities said that one of the corruption cases they are looking at is the al-Yamamah arms deal, in which Bandar was involved.
Bandar bought an entire village in the Cotswolds, a picturesque area of central England, and a 2,000-acre sporting estate with part of the proceeds from kickbacks he received in the al-Yamamah arms deal, which netted British manufacturer BAE £43bn ($56.5bn) in contracts for fighter aircraft. As much as $30m (£15m) is alleged to have been paid into Bandar’s dollar account at Riggs Bank in Washington and the affair led to corruption probes in the US and UK, although the case was dropped in the UK in 2006 after an intervention by then-prime minister Tony Blair.–MEE
The Al Yamamah series of arms deals with Saudi Arabia was, and remains, Britain’s biggest arms deal ever concluded, earning the prime contractor, BAE Systems , at least GBP 43 billion in revenue between 1985 and 2007, with further deals still ongoing. In 1985, the UK and Saudi governments signed an initial Memorandum of Understanding, that led to a series of contracts for combat aircraft and a variety of other military equipment and support services over the period 1985-93. A major follow-up deal, Al Salam, was concluded in 2003. Allegations of corruption surfaced almost immediately, but investigations were thwarted until a large cache of documents was leaked in the early 2000s. An investigation by the UK government’s Serious Fraud Office (SFO) uncovered ‘commission’ payments, or bribes, totaling as much as GBP 6 billion paid by BAE Systems to members of the Saudi royal family and others. A key recipient of these payments, including over GBP 1 billion, was Prince Bandar bin Sultan, son of the Saudi Crown Prince. However, the SFO investigation was shut down by the British government in 2006, under heavy pressure from the Saudis.
Buyer: Saudi Arabia
Seller: UK (British Aerospace, later BAE Systems)
Year of deal: 1985 (Al Yamamah I), 1993 (Al Yamamah II), 2007 (Al Salam)
Al Yamamah I: 30 Hawks (1985); 48 Tornado IDS (1986); 102 Sea Eagle anti-ship missiles (1986); 24 Tornado ADV (1986); 560 Skyflash BVRAAM missiles for Tornados (1986); 2 Jetstream light transport ac (1986); 3 Sandown Minehunter ships (1988); 6 Hawker-800 VIP jets (1988); 250 Alarm missiles (1991);
Al Yamamah II: 48 Tornado IDS, including 6 recon version (1993); 20 Hawk 60s (1993);
Al Salam: 24 Typhoon block 20 (2007); Modernization of 84 Tornados (2007); 48 Typhoon block 8 (2008); 350 Storm Shadow missiles for modernized Tornados; 22 Hawk-100 (2012); 22 more Hawk-100s in 2015.
Plus ongoing support services in Saudi Arabia.
Value of deal: GBP 43 billion by 2010.
Sum involved in corruption allegations: Maximum total cited GBP 6 billion. Includes over GBP 1 billion to Prince Bandar bin Sultan
Margaret Thatcher, UK Prime Minister (1979-1990), concluded Memorandum of Understanding (MoU) with Saudi Arabia
Prince Bandar bin Sultan, key negotiator of Al Yamamah deal, Saudi Ambassador to USA (1983-2005), son of Prince Sultan (Minister of Defence of Saudi Arabia 1963-2011). Received GBP 30 million in commission payments every quarter for at least 10 years.
Richard Evans, BAE senior executive, later CEO (1990-98) and Chairman (1998-2004), led BAE team negotiating Al Yamamah.
Prince Turki bin Nasser, Saudi prince, received at least GBP 60 million in bribes and services in kind, including travel, entertainment, etc.
Wafiq Said, Syrian businessman, key BAE agent for Al Yamamah
Tony Winship, Former Royal Air Force (RAF) pilot, BAE agent in Saudi Arabia
Traveller’s World (TW), UK company hired by Winship to provide services for Prince Turki bin Nasser
Robert Wardle, Director of UK Serious Fraud Office (SFO) (2003-2008), conducting investigation into Al Yamamah
Helen Garlick, SFO investigator
Tony Blair, UK Prime Minister (1997-2007) who forced cancellation of SFO Investigation
The arms deal
The Al Yamamah deal resulted from the reluctance of the US Congress in the early 1980s to allow sales of major combat aircraft to Saudi Arabia, fearing they may be used against Israel. While Saudi Arabia was initially looking at purchasing French Mirage jets, hard lobbying by the UK government, including Prime Minister Margaret Thatcher, and by British Aerospace (now BAE Systems), led by Dick Evans, led Saudi Arabia to choose the joint UK-French made Tornado instead. The ‘lobbying’ effort included massive bribes offered to key Saudi decision-makers, especially Prince Bandar bin Sultan, son of Defence Minister and Crown Prince Sultan.
The Al Yamamah Memorandum of Understanding was signed by Margaret Thatcher and Prince Bandar in 1985, and swiftly led to numerous large deals, initially worth around 7 billion USD, most notably 72 Tornados, 30 Hawk trainer/light attack aircraft, 3 Sandown Minehunter ships, and an array of missiles and other equipment. This deal was followed by Al Yamamah II in 1993, worth initially 17 billion USD, including 48 more Tornados and 20 Hawks. The deals also included extensive maintenance and support services for the Saudi Air Force, for which BAE continues to employ around 5,000 staff in Saudi Arabia. A third deal, Al Salam, for 72 Eurofighter combat aircraft and other equipment, was signed in 2007, although as yet no corruption allegations have been specifically linked to this deal. All in all, the deals were said to have been worth 43 billion USD in revenue to BAE by 2007.
Saudi Arabia paid for the deal with oil, transferring 300,000 barrels a day to a dedicated UK Ministry of Defence (MOD) account to manage it. The cost was therefore not part of the state budget.
Swinging the Al Yamamah deal in favour of BAE, and securing subsequent deals, required massive bribery of key members of the Saudi royal family and other relevant individuals in the Saudi government and military.
Evidence of corruption reached the public domain via information from whistleblowers within BAE, investigative journalism by David Leigh and Rob Evans of the Guardian newspaper, and research in the National Archives by author and activist Nicholas Gilby, who uncovered documents mistakenly released by the British government that revealed some of the corruption around the deals.
In total, the UK SFO and police identified up to GBP 6 billion in corrupt payments. The most prominent recipient was Prince Bandar, who negotiated the deal for the Saudi government, and who, according to legal sources within the SFO investigation, received GBP 30 million per quarter paid into a US bank account for at least 10 years, thus totaling GBP 1.2 billion.
Other revelations concerned ‘slush funds’ of tens to hundreds of millions of pounds, used by BAE to entertain Saudi royals on visits to the UK as well as foreign travel. Prince Turki bin Nasser in particular received at least GBP 60 million worth of such services, including travel, hotels, unlimited restaurant meals, cars, sexual services, and much else. This was organized using a UK travel company, Traveller’s World (TW), whose Managing Director Peter Gardiner was recruited by BAE agent Tony Winship. TW kept detailed accounts of all transactions, which were subsequently accessed by Nicholas Gilby, and detailed in his book Deception in High Places.
BAE used a network of agents and shell companies to carry out these payments. Agents included prolific Syrian arms trader Wafiq Said, who got rich through the deal. Allegedly, Mark Thatcher, son of the Prime Minister, was also an agent, and may have received as much as 17 million USD. Shell companies included Red Diamond Trading, established by BAE in the British Virgin Islands, to handle commission payments for numerous arms deals.
Some of the early commissions were funded by a GBP 600 million, or 32%, increase in the price of the Tornados in 1985, revealed in a telegram from Colin Chandler, then-head of sales for the Ministry of Defense (MOD) sales unit in Riyadh. This was part of a deal with Defence Minister Prince Sultan (Bandar’s father), who had ‘a corrupt interest in all defence contracts’, according to a dispatch from hen UK Ambassador to Saudi Arabia Willie Morris, quoted in a UK House of Commons report.
Allegations of corruption associated with the Al Yamamah deal surfaced in some Arab press reports within weeks of the deal in 1985. However, the first investigation did not begin until 1989, when the UK government referred the matter to the National Audit Office (NAO). The NAO completed their report in 1992, but it was withheld from the public domain due to the risk that it would offend the Saudis – the only NAO report ever to have been withheld from the public.
Investigative journalists pursued subsequent investigations in the absence of any official investigation. (There was never an investigation in Saudi Arabia). However, revelations by the Guardian newspaper in 2003 that BAE had maintained a GBP 20 million ‘slush fund’ for entertaining Saudi royals – the tip of the iceberg of the corruption allegations – prompted the Serious Fraud Office to commence an investigation in 2004. In parallel, investigations by civil society and media continued, aided by information from corporate whistleblowers connected to the deals, revealing an additional GBP 1.2 billion payments to Prince Bandar.
In 2007, following allegations that a US bank had been used to channel payments to Prince Bandar the US Department of Justice (DOJ) launched an investigation into BAE, which has major subsidiaries in the US.
In 2006, the Serious Fraud Office investigation was making considerable progress untangling the web of shell companies, agents and overseas bank accounts used by BAE to pay commissions associated with Al Yamamah. The Saudi government began anxiously lobbying to try to stop the investigation. At the time, BAE was negotiating a further deal with Saudi Arabia, the Al Salam deal for Eurofighter aircraft (eventually signed in 2007), and this deal was said to be at serious risk if the investigations continued. Lobbying by the UK government and elements of the media, ostensibly based on concerns for British jobs, failed to convince the SFO to stop. By September 2006, the SFO had discovered that some commission payments may have been made to Swiss bank accounts belonging to Wafiq Said and another intermediary. The SFO put in a formal request to the Swiss authorities for information on these accounts. Following this, BAE and the Saudi government intensified their lobbying effort, until in December 2006, Prime Minister Tony Blair personally intervened by compelling SFO Director Robert Wardle to cancel the investigation. Blair and Attorney General Lord Goldsmith cited threats from the Saudis to break off intelligence cooperation on terrorism with the UK, leading potentially to “blood on the streets” of London, according to the UK government.
The decision to cancel the investigation was highly controversial, and the subject of a judicial review sought by NGOs Campaign Against Arms Trade and Cornerhouse. A High Court judge ruled that the decision to cancel the investigation was illegal, noting that the UK government had not explored any alternative responses to the Saudi threat other than immediately canceling an ongoing criminal investigation. This verdict was upheld in the Court of Appeal, but overturned in the House of Lords, then the UK’s supreme court.
The UK decision was subject to further criticism by the Organization for Economic Cooperation and Development (OECD), as countervening the UK’s commitments under the 2000 OECD Convention on Bribery.
The US DOJ investigation resulted in a plea-bargain in 2010, by which BAE admitted to a lesser charge of false accounting, but not bribery, in relation to both the Al Yamamah case and the sale of Gripen fighters to the Czech Republic and Hungary. They were fined 400 million USD. The judge in the case commented that the company had committed “deception, duplicity and knowing violations of law, I think it’s fair to say, on an enormous scale”.
With the cancellation of the SFO investigation, BAE were subject to no legal consequences in the UK in relation to Al Yamamah, nor was any individual ever prosecuted in the UK, Saudi Arabia, or elsewhere.
Background – Saudi Arabia’s deteriorating financial health
Saudi Arabia is almost entirely dependent on its one main export – oil. In May 1985 ECGD recommended downgrading Saudi from its
A credit rating to
B. The fall in the world oil price in the early 1980s meant that Saudi Arabia was running up large deficits and drawing down its reserves on a massive and unsustainable scale. Thatcher was told in September 1985 that Saudi Arabia’s financial reserves
could be exhausted in less than two years. (PJ5_39_Thatcher_Sultan_1985)
ECGD recognised that
the [Saudi] government will seek to limit expenditure and that it had implications
for the payment prospects on some contracts. ECGD noted there was a low level of recoveries achieved for Saudi Arabia and
it is also extremely difficult to seek redress through the Courts for payment default. Saudi Arabia has yet to evolve a system of commercial law which can be easily applied particularly by those not resident in the Kingdom. (PJ5_39_ECGD_want_downgrade)
In the knowledge of the ongoing Al Yamamah negotiations, the Embassy in Riyadh lobbied hard against the downgrading of Saudi Arabia. The official leading the lobbying, Sir Jeremy Greenstock, then a Counsellor (Economic) at the Embassy, did so though conceding that on paying its bills
MODA [Ministry of Defence and Aviation]’s record is not good. (PJ5_39_FCO_successfully_lobby)
Two weeks before the Al Yamamah Memorandum of Understanding (MoU) was agreed the Export Guarantees Advisory Council decided to downgrade Saudi Arabia but this was overruled within days (the files do not disclose by whom).
The Memorandum of Understanding is signed (26 September 1985)
Colin Chandler had been Group Marketing Director at BAe and was likely to have been involved in the Al Yamamah negotiations. On 13 May 1985 he became head of the MoD’s Defence Export Services Organisation (DESO) and played a major part in finalising the deal for BAe within Government, where only the MoD and No.10 were kept in the loop (PJ5_39_Heseltine_apologises_secretive). BAe therefore got what it wanted despite the massive risks the Government then had to take (see below).
Six days before the MoU was signed ECGD were told no credit would be needed (PJ5_39_Heseltine_signs_AY). However, the MoU itself said
production of Tornado aircraft and equipment must commence before detailed planning is complete (PJ5_39_AY_MoU_1985). But as the MoD admitted in October 1985
nor have the Saudis told us yet exactly how the deal is to be financed (PJ5_39_MoD_admits_Oct85).
The Al Yamamah deals are Government-to-Government. The MoD contracts with Saudi Arabia to provide the arms and related services and the MoD contracts with BAe who do all the work. So BAe started work on Al Yamamah without any guarantee the MoD would be paid. In early December Heseltine told Thatcher that
Prince Sultan told Mr Chandler that he hoped to be able to make an initial cash payment and said
the only fly in the ointment so far is the lack of any funding mechanism. (PJ5_39_Thatcher_AY_sitrep)
- Minutes of Mrs Thatcher’s meeting with Prince Sultan 26 September 1985
- DTI Minute 2 October 1985
- DTI Minute 2 October 1985
- Brief for Trade & Industry Secretary meeting with BAe Chief Executive Sir Raymond Lygo
- DTI Minute 3 October 1985
- DTI letter to MoD 16 October 1985
- DTI Minute 24 January 1986
- DTI Minute 11 February 1986
The overdraft request (early 1986)
Al Yamamah is a barter agreement – the Saudis pay for their planes in oil. The Saudis contract with the MoD to pay a fixed number of barrels per day. The oil is given to Shell and BP who sell it on the world market and take commission for doing so. The proceeds then sit in a bank account and the MoD takes payment as BAe provide the support services (and the aircraft, when it was producing them).
In January 1986 the Saudis agreed to give Shell and BP 300,000 barrels per day as payment (PJ5_40_DESO_oil_agreement). The problem was because of their deficit the Saudis could not pay in cash, and the low oil prices meant the 300,000 bpd would not cover the cost of the deal until prices recovered. To avoid a BAe cash flow crisis, BAe asked ECGD to guarantee an overdraft facility of £3 billion (£6 billion in 2005/6 prices). The Saudis would borrow money from a bank and use it on top of the oil deal to pay BAe. If the Saudis failed to pay the bank back, ECGD would pick up the bill (PJ5_40_ECGD_ask_Treasury). Effectively, ECGD was being asked to bear the risk of world oil price fluctuations.
As a meeting of the Export Guarantees Committee noted in January 1986
the reluctance of HMT and other departments to endorse the overdraft guarantee as presently proposed was tempered by a recognition of the political commitment already made to the project(PJ5_40_EGC_meeting_Jan). The MoD conceded in February 1986
work has started well in advance of formal contract approval and revenues either in oil, or in cash, have been lower, over the period from September 1985, than originally envisaged (PJ5_40_DESO_on_ECGD). The Bank of England complained
there is all too much evidence of Saudi reluctance to be bound by the letter of contractural commitments, as is evident from ECGD’s claims record (PJ5_40_BoE_respond_DESO).
Considerable opposition to the overdraft idea meant ECGD had to agree to offer a guarantee of £1 billion instead (£2 billion at 2005/6 prices). Paul Channon, the Secretary of State for Trade and Industry, wrote to Nigel Lawson, the Chancellor, asking for his agreement. Mrs Thatcher responded the next day stating
we really have no alternative but to accept this risk, both in the light of the enormous importance of the Tornado order and of our relations with the Saudi Arabian Government(PJ5_40_Thatcher_agrees_AY). Foreign Secretary Geoffrey Howe was concerned the Saudis were not adjusting quickly enough to falling oil prices and suggested future deals should
ensure that payment by Saudi Arabia runs ahead of commitments entered into in the United Kingdom(PJ5_40_Howe_agrees_AY). Other Ministers were more forthright in their criticism of the MoD’s recklessness: John MacGregor, Chief Secretary to the Treasury, warned
the Exchequer is being drawn inexorably into financial commitments on this deal which would be difficult to control, pointing out Saudi default would seriously constrain future Budget options (PJ5_40_MacGregor_agrees_AY). Peter Walker, Secretary of State for Energy, suggested
it hardly seems sensible to increase our exposure to Middle East, oil-exporting countries so dramatically when oil prices have just halved (PJ5_40_Walker_AY_bad).
- Chandler Telegram to London 6 January 1986
- Bank of England letter to HM Treasury 9 January 1986
- HM Treasury letter to ECGD 13 January 1986
- DoE letter to ECGD 16 January 1986
- DTI Minute 17 January 1986
- DTI Minute 17 January 1986
- ECGD letter to HM Treasury 24 January 1986
- HM Treasury Minute 24 January 1986
- HM Treasury Minute 4 February 1986
- EGC minutes February 1986
- DTI Minute 17 February 1986
- Draft ECGD Ministerial submission March 1986
- ECGD Minute 18 March 1986
- DTI Minute 25 March 1986
- DTI letter to HM Treasury 25 March 1986
The Saudis refuse to borrow (spring 1986)
In April 1986 the Saudis said they did not want to borrow money to finance the deal. As the MoD were now so committed, officials scrambled to make an alternative arrangement. Lloyds would lend BAe the money it required prior to Saudi payments. The plan was for the Saudis to adjust the amount of barrels of oil given to Shell/BP as necessary and, should the oil proceeds not fully cover the costs, pay cash to the MoD for any shortfall. The MoD would then pay Lloyds back. If the barrels per day and Saudi cash did not make up the shortfall ECGD would pick up the bill.
The DTI knew
the contractural arrangements with the KSA [Kingdom of Saudi Arabia] are much more tenuous and that the deal would mean the Saudis would have to pump much more oil (up to 600,000 barrels per day). Effectively world oil prices would to some extent be driven by BAe’s cash flow needs (PJ5_40_DTI_support_revised).
MacGregor was still hostile, pointing out Treasury officials had not been consulted and that if the Saudis defaulted the ECGD would want to direct MoD actions (for example by suspending deliveries) and effectively dictate British policies towards Saudi Arabia (PJ5_40_MacGregor_revised_bad). Peter Walker pointed out that there would be grave diplomatic and economic problems if Britain got involved in a downward oil market spiral and he opposed the increase in the Saudis’ barrels per day commitment (PJ5_40_Walker_stands_firm).
- DTI Minute 30 April 1986
- MoD letter to HM Treasury 30 April 1986
- DoE letter to MoD 2 May 1986
- MoD letter to DoE 2 May 1986
- DTI Minute 19 May 1986
The financing of Al Yamamah is finally agreed (late 1986)
The Saudis declined Lloyds’ offer to finance the deal and the final arrangements involved BAe’s cash flow being covered by a loan from a French bank, Banque Indosuez who led a syndicate of banks guaranteed by ECGD. The loan was to be drawn by BAe in full at once, and repaid on a monthly basis from the oil sale proceeds. The bank had priority over BAe to the oil proceeds money. If the Saudis didn’t deliver the 400,000 barrels per day they had now agreed to, ECGD would make sure Banque Indosuez got their money back.
ECGD admitted that the proposal
does not contain legally enforceable obligations on the part of the Saudis to continue to make oil available to meet all the costs of the Project and
the legal framework is imperfect and it is very doubtful if the Saudi commitment would be enforceable in the courts (PJ5_40_AY_revised_Aug). The Treasury complained they had been backed into a corner saying
this is a most unsatisfactory state of affairs and one that would hardly have been contemplated if proposed at the outset (PJ5_40_Treasury_sceptical).
Channon asked his colleagues to agree to a total ECGD cover of £1.43 billion (PJ5_40_Channon_Lawson_Aug). MacGregor again complained that
the risks under the revised proposals are substantial, and to the extent that the guarantee is not subject to ECGD’s normal conditions, including not being legally enforceable, the risks are greater now than previously. But the cover was finally agreed.
- MoD/Saudi Arabia exchange of notes July 1986
- DESO letter to HM Treasury 9 September 1986
- BoE letter to HM Treasury 10 September 1986
- ECGD letter to HM Treasury 23 October 1986
- DESO letter to HM Treasury 24 October 1986
- BoE letter to HM Treasury 3 November 1986
- HM Treasury letter to ECGD 5 November 1986
- DESO letter to HM Treasury 7 November 1986
- DTI Minute 18 November 1986
- DoE letter to MoD 25 November 1986
- DESO letter to HM Treasury 3 December 1986
- MoD letter to DoE 4 December 1986
- BoE letter to HM Treasury 8 December 1986
- HM Treasury letter to ECGD 9 December 1986
- HM Treasury letter to DTI 15 December 1986
- DoE letter to DTI 15 December 1986
- ECGD letter to BoE 18 December 1986