An investigation launched by the United States into BAE corruption allegations has raised more questions about the role of the British goverment in the affair, write David Leigh and Rob Evans.

BAE’s chief executive, Mike Turner, is eating his words today, only days after trying to dismiss the Guardian’s accurate prediction that the arms giant would face a criminal investigation in Washington.

Named as a potential corruption suspect himself in the Serious Fraud Office BAE dossiers, Mr Turner told a Sunday paper the only reason the SFO had begun its previous investigation was because of allegations in the British media.

“I think the US department of justice is more robust about standing up to the press,” he said patronisingly. “Just because the press make accusations, you don’t have to then start an investigation. We’ve done nothing wrong.”

Mr Turner is not the only one with egg on his face today. Had he not already announced he would quit, the attorney general, Lord Goldsmith, would face harsh questions about his behaviour as the British government’s chief law officer.
He is now seen to have played a part in suppressing a British investigation into allegations that Prince Bandar of Saudi Arabia was paid £1bn for arranging an arms deal, only to have the US authorities take up the same issue under their own Foreign Corrupt Practices Act.

Tony Blair too, as outgoing prime minister, is now in a curious position. He wrote a letter to Lord Goldsmith, who showed it to the head of the SFO, Robert Wardle, claiming that British “national security” was at risk if the Saudi investigation went ahead. This left the SFO with no choice but to cancel its own inquiry.

The politicians went so far as to claim that the lives of British soldiers and citizens would be endangered because the Saudis would cut off intelligence about al-Qaida terrorists and insurgents in Iraq.

Does Mr Blair claim British lives will now be lost because of the US action? And will the Saudis cancel the new BAE arms contract, which many believe was the real reason behind the controversy?

The questions do not stop there. The British Ministry of Defence and its top officials were revealed to have been complicit in the payments to Prince Bandar and the purchase of a brand new Airbus for his use while he was Saudi ambassador in Washington.

Does that open up the extraordinary prospect of US charges against such British government officials as the head of the Defence Export Services Organisation (Deso), the MoD’s arms sales unit?

The Liberal Democrats, the only British political party with clean hands in the massive 20-year al-Yamamah Saudi arms programme, were quick to see the implications today.

They put down an urgent question: “What role does the government intend to play in assisting the US department of justice in the investigation which it has announced today into alleged corruption by BAE Systems?”

The Lib Dem frontbencher Vince Cable said: “It is extraordinary and embarrassing that we have to rely on the higher standards of probity in the United States to investigate alleged corruption by a British company in its overseas business operations.

“One of the most important challenges facing Gordon Brown is to alter the sleazy behaviour of the outgoing Blair administration and ensure that this government is committed to higher ethical standards and the rule of law.”

There will be a grim satisfaction with the US move in parts of the SFO’s London headquarters. Many of the 18’strong team of lawyers, accountants and MoD police officers were demoralised to see their three-year Saudi investigation called off for political reasons, just when they were on the point of accessing crucial Swiss bank accounts of Saudi middlemen.

There will no doubt be consternation among the Saudis and their circle at the prospect of a renewed investigation. The millionaire middleman Wafic Said, although not a corruption target himself, was one of those whose Swiss accounts were about to be accessed last autumn, to see if offshore payments from BAE linked to him had found their way to Saudi or even British destinations. Swiss prosecutors, who have declared their own money-laundering inquiry into BAE, will have no reason not to cooperate with the Americans.

Prince Bandar, who is currently playing a key role as the national security adviser to King Abdullah in Riyadh, has already protested that all the payments he received were legitimate. He will not relish the prospect of US prosecutors combing through the boxes of his embassy banking records in Washington. They are already in the possession of investigators thanks to a 2004 financial scandal at Riggs Bank where Bandar controlled a number of multi-million pound embassy accounts.

But the biggest anxiety may well be felt by individual BAE executives. The former chairman Sir Dick Evans was at the centre of BAE’s suspect deals in Saudi Arabia and around the world. He has now stepped down, although he remains on BAE’s payroll as an adviser. If the US department of justice was to find substance in the allegations, it is in a position to seize assets, make arrests and even, under new US-UK arrangements, seek extradition of British businessmen. That must be a dismaying prospect.