[A-List] UK state: the al-Yamamah deal again

[Michael Keaney]

Questions over secret bank transfers

· £13m allegedly paid to firm linked to lobbyist 
· Family says payments not connected to Saudi deal 

David Leigh and Rob Evans
Monday June 11, 2007
The Guardian 

The arms company BAE Systems used a secret payments system to transfer
more than £13m to a company linked to David Hart, the controversial
former Conservative defence adviser, according to legal sources.

He has acted as a lobbyist both for Britain's biggest arms company and
also for the giant military manufacturer Boeing in the US.

Mr Hart, an Old Etonian who lives in a Suffolk mansion, became notorious
in the 1980s for helping the then prime minster Margaret Thatcher break
the miners' strike in an operation he ran from a luxury suite at
Claridges hotel, in London.

BAE is alleged to have paid the money into a previously unknown offshore
company linked to Mr Hart called Defence Consultancy Ltd (DCL).
The company was registered anonymously in 1997 in the British Virgin
Islands, with a bank account in the Channel Islands tax haven of
Guernsey, at the Henry Ansbacher merchant bank. Mr Hart's late father,
Louis "Boy" Hart, was the bank's chairman.

This is the latest allegation to emerge from corruption investigations
into BAE, being conducted by prosecutors from three countries -
Switzerland, Sweden, and the Serious Fraud Office in the UK.

The family of Mr Hart, who is seriously ill at present, say that none of
the payments were linked to BAE's al-Yamamah arms deals with Saudi
Arabia - worth £40bn. These deals have been at the centre of corruption
inquiries. Mr Hart's family said he did not personally "own or control"
DCL.

Legal sources said Mr Hart was not regarded as a corruption suspect.
They said it was unclear for what purpose such huge payments had been
made.

BAE is alleged to have made the cash transfers via its secret Red
Diamond operation, which is currently under investigation by the SFO.

The SFO said of Red Diamond in a leaked document: "The whole system is
maintained in such conditions of secrecy that there is a legitimate
suspicion concerning the real purpose of the payments."

Red Diamond was a concealed BAE subsidiary, registered anonymously in
the British Virgin Islands, the existence of which was never disclosed
to shareholders in the company's published accounts.

With the help of LloydsTSB bank, BAE is said to have used Red Diamond to
channel hundreds of millions of pounds to confidential agents with
offshore accounts all over the world.

The reported payments to the offshore company linked to Mr Hart, set up
in 1997, were among the biggest discovered by the SFO when it launched
its inquiry, legal sources claim.

But an investigation revealed no connection with any of BAE's arms deals
in Europe, Africa and the Middle East which were on the SFO's corruption
target list. Defence sources say Mr Hart was hired by BAE to promote its
interests in the US, where the company has been embarking on a series of
joint deals and acquisitions.

The Guardian asked BAE why it had paid Mr Hart so much money through
such an unusual route. The firm refused to answer. BAE said it would not
discuss such "confidential contractual arrangements". It added: "It is
well known that David Hart was an adviser to BAE Systems and its
predecessor companies over many years."

BAE has always refused to explain the purpose of its elaborate Red
Diamond operation, whose existence was first revealed by the Guardian in
December 2003.

The company says it has not broken any laws and its current chairman,
Dick Olver, told the company's AGM this year that there had been "no
bribes" paid.


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