The multi-jurisdiction investigation into Rolls-Royce’s extensive history of paying bribes, prompted by a whistleblower’s allegations in 2012, included one major defense deal. According to investigations in India and the United Kingdom, the British engine-manufacturing company used a series of agents to secure a contract in India for trainer-aircraft jet engines. The GBP 200 million (USD 310 million) contract, finalized in 2010, was backed by more than USD 17 million in bribes paid through arms broker Sudhir Choudhrie and a consultancy, Aashmore Private Ltd. Likely due to India’s long history of cooperation with Rolls-Royce on jet engines, Prime Minister Narendra Modi’s government has not blacklisted the firm.
This series of posts by World Peace Foundation details 29 cases of corruption in the international arms trade and broader military sector. It forms part of WPF’s ongoing program on the Global Arms Trade and Corruption.
The cases are also displayed on an interactive map, designed by Tufts GIS Data Lab.
The global arms business—especially the international arms trade, but also domestic military procurement—is widely seen as one of the areas of legal business that is most subject to corruption. Researcher and former oil industry executive Joe Roeber, in Parallel Markets (2005), estimated that 40% of corruption in international trade was related to the arms trade. This was based on a detailed survey of materials not in the public domain, relating to complaints of corrupt activities in international trade, to which he had access. Among recent works documenting the ubiquitous corruption that characterizes the arms business are Andrew Feinstein’s The Shadow World (2011), Nick Gilby’s Deception in High Places (2014), focusing on the UK, and Jean Guisnel’s Armes de Corruption Massive (2011), focusing on France.
The Al Yamamah series of arms deals with Saudi Arabia was, and remains, Britain’s biggest arms deal ever concluded, earning the prime contractor, BAE Systems, at least GBP 43 billion in revenue between 1985 and 2007, with further deals still ongoing. In 1985, the UK and Saudi governments signed an initial Memorandum of Understanding, that led to a series of contracts for combat aircraft and a variety of other military equipment and support services over the period 1985-93. A major follow-up deal, Al Salam, was concluded in 2003. Allegations of corruption surfaced almost immediately, but investigations were thwarted until a large cache of documents was leaked in the early 2000s. An investigation by the UK government’s Serious Fraud Office (SFO) uncovered ‘commission’ payments, or bribes, totaling as much as GBP 6 billion paid by BAE Systems to members of the Saudi royal family and others. A key recipient of these payments, including over GBP 1 billion, was Prince Bandar bin Sultan, son of the Saudi Crown Prince. However, the SFO investigation was shut down by the British government in 2006, under heavy pressure from the Saudis.
The Angolagate scandal rocked the French political world when it came to light in 1999. It revealed a plot t, involving several senior French political figures to covertly supply arms to the Angolan government for use in its renewed war against UNITA rebels, circumventing an arms embargo. Beyond the illegality of the arms sales themselves, the Angolagate deals involved both bribery of Angolan political and military figures, and reverse kickbacks allegedly in support of French political campaign funds. A French court convicted 36 individuals in 2008 in connection with the scandal on a variety of charges, but some of these convictions were overturned on appeal in 2011.
Most corruption in arms procurement takes the form of bribes or kickbacks. In return for being awarded an arms contract, often as a result of having selection criteria manipulated in its favor, the supplier company pays bribes to officials involved in the decision-making process. Payments typically are channeled through an in-country middleman or agent.
But why be satisfied with bribes or kickbacks equaling 10% of the value of a contract when you can take the whole lot? In countries where oversight of military funds is at its weakest, or indeed non-existent, top officials and military officers have essentially free reign over how money is spent. In such circumstances, those in charge can simply misappropriate funds directly, needing only the thin cover of a fake contract for non-existent equipment.
The U.S. defense acquisition system’s “revolving door” is legendary, but few cases of officials performing favors in exchange for post-retirement jobs have been successfully prosecuted. In 2004, a senior U.S. Air Force procurement official was arrested in a textbook example of revolving door corruption, landing not only herself but also senior executives from contractor Boeing in jail. The case stemmed from a USD 23 billion contract for the lease of 100 tanker aircraft from Boeing, in return for a lucrative job at the company on retirement from the Department of Defense (DOD). The Air Force’s uniformed officials opposed the deal, and auditors warned that buying the aircraft outright would be cheaper than leasing, but Darleen Druyun, the senior-most civil service employee in charge of air force procurement, worked around. In emails made public by investigators, Druyun was shown to have exercised her influence to convince the Air Force to accept a higher price. In exchange, Boeing worked with her daughter, who had previously been given a job by the same company through her mother’s influence, to set Druyun up for a high-paying role in Boeing’s missile defense systems department.
Not all corruption investigations can uncover enough evidence to proceed to prosecution, and in the case of India’s Barak 1 missile acquisition in 2000, even the help of extensive undercover tape recordings failed to secure an indictment—although it did lead to several senior figures being removed from their positions, and the resignation of the Minister of Defence. The circumstantial evidence uncovered by India’s Central Bureau of Investigation (CBI) suggested strongly, however, that the acquisition program, which sought to equip India’s surface fleet with anti-air/anti-missile systems, was influenced at the selection stage to give an advantage to an Israeli consortium’s offering over an indigenously produced alternative. The links CBI drew between agents, officials, and bank accounts led to a seven year investigation that was terminated in 2013, after drawing in a former defense minister, former Navy chief, and minor party leader.
The practice of buying and selling military positions and ranks has a long history, even if today it is strictly forbidden in almost all armed forces. For example, from 1683 to 1871, most commissions in the British Army were paid for. This was not a matter of bribes and back-handers, but rather an officially-sanctioned system with established prices for each rank in each type of military unit. This practice was perceived as a guard against corruption, ensuring that officers were men of private means who would not need to engage in pillaging or profiteering. Of course, there was also widespread corruption in the system, with commissions frequently being sold to the highest bidder well above the official price. Monetary payments, now illegal, did not immediately disappear from the military promotion system when the practice of selling commissions was officially abolished in 1871, and have lived on in other military systems.
Shortly after joining NATO in 1999, both the Czech Republic and Hungary started procurement processes to acquire new major combat aircraft to replace ageing Russian planes. In each case, the Gripen, produced jointly by Saab (Sweden) and BAE (UK), was selected over rival contenders, including the US F-16, believed to have been the favourite in each case. Subsequent allegations of corruption centered around a network of agents employed by BAE Systems to bribe politicians in Central Europe to sway decisions in favour of the Gripen, in particular in the Czech Republic and Hungary.
In the decade following the late-1990s, a network of intrepid fraudsters sold fake bomb detectors worth tens of millions of dollars to security services around the world, most notably Iraq, Thailand and Mexico. The fake bomb detectors, variously marketed as the ADE 651, GT200, Alpha Six, and, earlier, the MOLE Programmable Detection System, Quadro Tracker, and Sniffex, were completely non-functional and sold solely for the purpose of enriching its producers.