Questions over secret bank transfers
The Guardian BAE investigation
London Guardian | June 11, 2007
David Leigh and Rob Evans
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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