[R-G] BAE Linked to Zimbabwean Arms Dealer + Harare Tycoon Rides Political Upheaval

[Yoshie Furuhashi]

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BAE linked to Zimbabwean arms dealer

By Christopher Thompson and Michael Peel in London

Published: July 31 2008 23:31 | Last updated: July 31 2008 23:31

BAE Systems, the British arms manufacturer under investigation in
several countries for alleged bribery, paid at least £20m to a company
linked to a Zimbabwean arms trader allied to President Robert Mugabe,
documents seen by the Financial Times show.

John Bredenkamp, who has indefinite leave to remain in Britain, has
had a controversial career ranging from supplying military equipment
to the Zimbabwean military to mining in the Democratic Republic of
Congo.

British properties owned by Mr Bredenkamp were raided by the Serious
Fraud Office more than 18 months ago as part of a long-running
investigation into BAE aircraft sales to South Africa. The payment of
at least £20m is the first detailed evidence of a financial
relationship between Mr Bredenkamp and the group.

The payments raise fresh questions about BAE's dealings with outside
agents, intermediaries who sometimes act as brokers in arms deals.
Agents have featured in investigations into whether BAE channelled
bribes to foreign officials to win contracts.

BAE refuses to provide details of its relationships with agents,
although it has pledged to introduce reforms as part of an effort to
improve its image after the corruption investigation into its
multibillion-pound al-Yamamah arms deal with Saudi Arabia.

The payments linked to Mr Bredenkamp were made between 2003 and 2005
by Red Diamond Trading, a BAE subsidiary registered in the British
Virgin Islands, from a London-based Lloyds TSB account, according to
documents seen by the FT. The money was transferred to Kayswell
Services, also registered in the British Virgin Islands, a company in
which the documents list Mr Bredenkamp as a beneficiary.

British Virgin Island company records show Red Diamond was liquidated
on May 30 last year, just two weeks before BAE announced that Lord
Woolf, the former lord chief justice, would investigate its ethical
conduct and compliance with anti-corruption rules. BAE, Mr Bredenkamp
and Kayswell all declined to confirm the payments or comment on what
the money was for.

Less than two weeks ago, BAE unveiled a plan to achieve "benchmark
standards of governance" as part of its response to Lord Woolf's
recommendations.

Mr Bredenkamp has been involved in tobacco trading, oil procurement
and – according to the United Nations – the supply of equipment to the
Zimbabwe air force. Mr Bredenkamp says he has always complied with
European Union arms sanctions, in force against Zimbabwe since 2002,
which ban "the provision of financing related to military activities".

Mr Bredenkamp, who prospered under Ian Smith's white Rhodesian regime,
is now a close associate of Zimbabwe's rural housing minister,
Emmerson Mnangagwa, head of the Mugabe government's Joint Operational
Command, a body widely identified as leading the campaign of violence
against the government's political opponents.

The Serious Fraud Office raids on Mr Bredenkamp's UK properties were
part of an ongoing investigation into BAE's 1999 £1.6bn jet fighter
sale to South Africa, when several ruling African National Congress
officials allegedly received bribes.

A spokesman for Mr Bredenkamp denied he had any involvement in the
South African sale and said it was "wholly inappropriate" for him to
make any comment while the SFO inquiry continued.

BAE said: "It is our policy not to comment on payments to individual
parties or organisations, or on the individuals, parties or
organisations themselves."

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Harare tycoon rides political upheaval

By FT reporters

Published: July 31 2008 23:31 | Last updated: July 31 2008 23:31

John Bredenkamp, the Zimbabwean tycoon linked to £20m of payments made
by BAE Systems, has ridden political upheaval to become one of his
country's richest international businessmen.

Over a four-decade career that has taken him from Harare's tobacco
auction floors to Downing Street, he has shown himself an opportunist
whose business dealings have come under attack from the United Nations
and non-governmental groups.

After flourishing under the white minority regime of Ian Smith, he
later allied himself to President Robert Mugabe's post-independence
government and built up substantial British assets, including
residences in Berkshire and London's Mayfair.

Patrick Smith, editor of Africa Confidential, the London-based
newsletter, said: "On a continent where businessmen progress through a
combination of hard-nosed pragmatism and personal networks, Bredenkamp
is in the premier league."

Mr Bredenkamp's history has come under the spotlight again following
the emergence of documents showing he is a beneficiary of Kayswell
Services, an offshore company paid at least £20m ($40m, €25m) by BAE
between 2003 and 2005.

Mr Bredenkamp, who was born in 1940, began his career when he took a
tobacco auction house job found for him by one of his teachers at
Prince Edward, a top Harare state school.

By the late 1960s, he was captaining the Rhodesian rugby team and
busting tobacco export sanctions imposed by the United Nations after
the Smith government's unilateral declaration of independence from
Britain in 1965.

Mr Bredenkamp later expanded into oil procurement and dabbled in
sports management. His spokesman said his clients included Nick Price,
the Zimbabwean golfer, and Garry Kasparov, the former world chess
champion.

Mr Bredenkamp's new line of business took him to a Downing Street
reception in the mid-1990s with John Major, the cricket-loving UK
prime minister at the time.

One of Mr Bredenkamp's most controversial business ventures was mining
in the war-torn Democratic Republic of Congo. UN investigators
concluded in 2002 that some of his business interests had illegally
exploited mineral resources, although he denied the allegation.

Mr Bredenkamp's main business venture today is Breco, an international
private equity group set up after he sold his Casalee tobacco company
for $100m in 1993. He also has longstanding – if opaque – links with
the arms industry in southern Africa, although he says he has always
complied with arms sanctions imposed against Zimbabwe by the European
Union in 2002.

He was a business partner of Billy Rautenbach, a fellow white
Zimbabwean wanted by South African police, before the two fell out
over a mining deal in the DRC.

Mr Bredenkamp was detained for several days last year in Harare's
notorious central prison over alleged passport irregularities, a case
his spokesperson said was later dismissed.

It was another exotic twist in a career governed by a pragmatism
exemplified by the aphorism on the Breco website that "in Africa, it
is essential to work with change, not against it".

It is a mantra that has helped Mr Bredenkamp make money, at the
expense of inviting criticism about the ever-shifting business and
political relationships he has exploited to do so.

Reporting by Michael Peel, William Wallis and Christopher Thompson in London

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Payments form part of opaque dealings

By Michael Peeland Christopher Thompson

Published: July 31 2008 23:31 | Last updated: July 31 2008 23:31

BAE Systems' £20m of payments to a company linked to John Bredenkamp,
a Zimbabwean arms dealer, are part of a web of opaque international
dealings that the company has proved reluctant to explain despite
launching a high-profile inquiry into its business ethics.

The latest payments highlight the contentious role of Red Diamond
Trading, a secretive BAE offshore subsidiary that was dissolved last
year at a time when the company was making a big effort to improve its
damaged reputation.

Red Diamond was part of a worldwide network of BAE companies and
agents that have helped win the company tens of billions of dollars of
business but have attracted high-profile attention from corruption
investigators at the Serious Fraud Office and elsewhere.

The latest disclosures relate to payments made by Red Diamond to
Kayswell Services, a British Virgin Islands company in which Mr
Bredenkamp was a beneficiary, according to documents seen by the
Financial Times. Mr Bredenkamp and BAE decline to comment on the
payments.

The payments cast fresh light on BAE's use of Red Diamond, whose name
has cropped up in the SFO investigation into a giant 1999 South
African arms deal in which BAE sold £1.6bn of fighter aircraft.
According to reports last year in South Africa's Mail & Guardian
newspaper, a 2006 letter from the SFO to the South African government
said that between 2000 and 2005, South African agents "received over
£70m through Red Diamond".

Like many other companies based in the British Virgin Islands, Red
Diamond is a secretive venture that carries no details of the
company's directors, shareholders or ultimate owners on its public
file.

Although BAE told the Financial Times that Red Diamond's status as a
subsidiary was a "matter of public record", it declined to identify
any company documents where this fact was ever revealed. Annual
reports did not refer to Red Diamond because the company was not a
"principal subsidiary", BAE said.

The one substantive piece of information available from Red Diamond's
public file is that it was liquidated in May last year by a Mr S.C.
Wood, whose address is given as BAE's Warwick House office at
Farnborough Aerospace Centre, in the UK. Two weeks after the
liquidation was completed, BAE held a much-publicised press conference
in London to announce the appointment of Lord Woolf, the former lord
chief justice, to investigate the company's ethical conduct and
compliance with anti-corruption rules.

The British Virgin Islands' notice of liquidation says Red Diamond was
dissolved because it was "considered to serve no useful purpose". BAE
declines to comment on what the company's purpose was, or on why it
was wound up.

Less than three weeks after the liquidation was completed, Mike
Turner, BAE's chief executive, said the company would more than halve
the 240 agents it used worldwide, in part because it did not want to
take any risks with its reputation in the key US arms market. BAE –
which has denied wrongdoing – is under investigation for alleged
bribery by the US Department of Justice, as well as in Switzerland and
Britain.

BAE's latest initiative to build confidence is a three-year programme
announced earlier this month to implement Lord Woolf's 23
recommendations for reform, including developing a uniform contract
for the appointment and oversight of external advisers, such as
agents. Mr Turner said BAE wanted to be a "leader in standards of
ethical business conduct among global companies".

Those words are as good an indicator as any of the company's desire to
escape – if not account for – a past that is still throwing up big
unanswered questions such as those surrounding Red Diamond.