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US: BAE faces class-action suit in America

by Josephine MouldsThe Daily Telegraph (UK)
September 21st, 2007

BAE Systems is facing a class-action lawsuit in the US related to alleged bribery, which could lift the lid on the inner workings of the defence company.

The suit accuses current and former BAE directors of "intentional, reckless and negligent breaches of their fiduciary duties of care, control and compliance and candour''.

It claims that company officers and directors resorted to, or encouraged managers to use, illegal tactics to boost the company's reported results.

Law firm Coughlin Stoia Geller Rudman & Robbins is acting on behalf of a Michigan-based pension fund in an attempt to recover losses suffered in connection with more than $2bn ( pounds 1bn) in alleged bribes paid to the former Saudi ambassador to America, Prince Bandar bin Sultan, and other Saudi officials.

BAE chief executive Mike Turner and Prince Bandar are both named in the lawsuit, filed at the US District Court in Washington.

Other defendants include current and former non-executive directors Sir Nigel Rudd, chairman of Boots, Conservative peer Lord Alexander Hesketh, and Michael Portillo, former UK defence secretary.

A BAE spokesman said: "The company intends vigorously to defend any such proceedings served upon it.''

Prince Bandar was not available for comment but has previously denied any wrongdoing.

The case will open up the company to public scrutiny, forcing the disclosure of anything from email exchanges to telephone logs. Defendants may also be required to give video testimonies.

The US Department of Justice launched an investigation in June into BAE's compliance with anti-bribery laws, including past dealings with Saudi Arabia.

Britain's Serious Fraud Office abruptly halted a similar probe last December after then Prime Minister Tony Blair said pursuing it could harm Saudi-UK relations. BAE served as prime contractor on arms-for-oil deals signed between the governments of Britain and Saudi Arabia beginning in the 1980s.

The City of Harper Woods pension fund is a small shareholder with fewer than 10,000 BAE shares. Other shareholders can and are expected to join the suit.

Coughlin Stoia Geller Rudman & Robbins has recovered over $7bn for Enron investors in the wake of the energy company's collapse in 2001.

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