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Saudis mount cleanup amid defense scandal
by Staff Writers
Riyadh, Saudi Arabia (UPI) Jun 10, 2011

As Britain's Serious Fraud Office investigates allegations that top European defense group EADS bribed Saudi Arabian officials to win a $3.3 billion contract, the Saudis are mounting an anti-corruption campaign that could affect Western companies.

King Abdallah, who has long sought to crack down on high-level official corruption in the kingdom's elite, discreetly initiated the campaign in March, Intelligence Online web site said.

Abdallah's decision appeared to be stem from the political upheaval across the Arab world against dictatorial regimes triggered by pro-democracy protesters demanding reforms and action against corrupt leaders.

Tunisian President Zine el-Abidine Ben Ali was driven from power in January and the following month President Hosni Mubarak was forced to step down.

Mubarak, his two sons and senior officials in his 30-year regime face trial on corruption and other charges. That's unheard of in the Middle East, where all countries are either monarchies, all but one of them absolute, or authoritarian republics.

Intelligence Online reported that Abdallah's anti-corruption operation was aimed primarily at the defense and interior ministries, which are regularly involved in big-ticket contracts with Western defense and security companies.

IO said at least a dozen civil servants have been arrested, including a high-ranking official at the Interior Ministry, which supervises the Miksa security project along Saudi Arabia's 5,625 miles of borders.

EADS Defense and Security, a subsidiary of the French-German aerospace and defense conglomerate, won the five-year contract in July 2009.

It eclipsed bids from the U.S. company DRS Technologies and the Raytheon Corp., LG Electronics of South Korea, Thales of France and BAE Systems of Britain.

BAE is one of Europe's biggest defense companies with a long history of contacts with Saudi Arabia, several of which produced allegations of corruption.

Saudi Arabia is the world's largest border protection market, worth an estimated $20 billion over the next decade, bigger than the U.S.-Mexico and U.S.-Canada border fence projects combined.

The EADS contract under investigation by Britain's Serious Fraud Office was awarded by the Saudis to the company's GPT Special Project Management to provide satellite communications and intranet services for the Saudi national guard.

That 120,000-strong force, largely made up of Bedouin tribesmen, is a counterweight to the regular army and is controlled by Abdallah. Its primary mission is to protect the royal family.

The SFO, which investigates complex corruption cases, is focusing on allegations that EADS handed out automobiles, jewelry and cash to Saudi officials to secure the communications contract.

The allegations were made by Lt. Col. Ian Foxley, ex-British army and a former GPT employee who oversaw the national guard contract until he was dismissed last December.

GPT, which has headquarters in Riyadh, is owned by Paradigm Services. That, in turn, is owned by EADS, one of Europe's biggest military contractors and the parent company of the manufacturer of the Airbus.

The allegations surfaced during employment tribunal proceedings. Foxley asserted that Saudi officials were given expensive gifts and large amounts of cash from London bank accounts through intermediaries.

These claims were similar to corruption investigations in the United States and Britain involving BAE Systems, and which put multibillion-dollar defense contracts with the kingdom under intense public and legal scrutiny.

In 2006, the British Labor government of Prime Minister Tony Blair ordered the SFO to drop an investigation into allegations BAE paid bribes to members of Saudi Arabia's royal family out of a London slush fund to clinch a $66 billion arms contract.

Blair cited a need to "safeguard national and international security," claiming Riyadh had threatened to halt all cooperation on intelligence about al-Qaida.

That bombshell came weeks after it emerged that Riyadh had threatened to pull out of a new deal for 72 Eurofighter strike jets from BAE if the investigation wasn't scrapped.

Labor's main rivals, the Liberal Democrats, declared Blair had been the victim of blackmail by the Saudis because the bribery allegations reached into the top echelons of the House of Saud.

In 2010, BAE agreed to pay around $450 million in fines in the United States and Britain after corruption investigations into defense deals in Saudi Arabia, Tanzania, Sweden, Hungary and the Czech Republic.

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