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MoD accused over role in Bandar's £1bn

David Leigh and Rob Evans
June 12, 2007

Pressure was mounting on ministers for full disclosure of the government's role in Britain's biggest arms deal last night after claims that the Ministry of Defence directly administered payments of more than £1bn to Prince Bandar of Saudi Arabia.

The MoD refused to address the specific allegations, made in BBC's Panorama, while the attorney general, Lord Goldsmith, continued to stonewall questions over his role in the affair. BAE, the weapons manufacuturer at the centre of the controversy, remained silent.

Last week, the Guardian revealed how the payments had been made to Prince Bandar with the full knowledge and authorisation of the MoD. However, last night, the BBC went further and accused the MoD of having a much more direct involvement in the transfers of money, which were uncovered by investigators for the Serious Fraud Office (SFO).

According to the BBC, MoD officials in Whitehall themselves processed quarterly "invoices" from the Saudi prince, who was seeking payment for "support services" for his role in the al-Yamamah arms deal. The invoices were passed on to BAE executives, who would then wire the latest instalment of cash to accounts at Riggs bank in Washington.

The transfers from an account held at the Bank of England went in batches of £30m a quarter for at least a decade.

The officials involved in handling any such payments are based at Deso, the MoD's arms sales unit. It is headed by Alan Garwood, a former BAE executive himself, and supervised by Paul Drayson, a businessman appointed by Tony Blair as arms sales minister. BAE has already said it made the payments with the "express approval" of the MoD.

The MoD arms sales department said last night that disclosing confidential information about the al-Yamamah contract, which was signed in the mid-1980s, would cause damage to national security. It also refused to say if payments to Prince Bandar were continuing today. Vince Cable, the Liberal Democrats' deputy leader, said last night: "If the Ministry of Defence was actually directly involved in running the payment system, this is absolutely shocking and reveals the depths of the government's complicity in this scandal.

"We must know if BAE's payments to Prince Bandar are still going on today".

Prince Bandar said in a statement yesterday that the allegations in the Guardian were "not only untrue but are grotesque in their absurdity". The account in Washington where the money went was "a Saudi government account and not my personal account", the Prince said.

He said the money was not "a corrupt personal benefit" from BAE but "Saudi government money from start to finish". He added: "BAE was not a party to any of these accounts."

In last night's Panorama programme, a Riggs bank investigator, David Caruso, was quoted. He said: "There wasn't a distinction between the accounts of the embassy or official government accounts as we would call them and the accounts of the Royal Family."

He said the money was apparently used for embassy operations and for the Prince's personal expenditure.

Last night as Lib-Dem politicians renewed their questioning, Lord Goldsmith remained silent on whether he had advised that information about the Bandar payments be concealed from the OECD - the world's anti-corruption organisation.

Robert Wardle, head of the SFO, says that he himself took the decision to withhold the facts from the OECD on the grounds of "national security". This followed meetings with Lord Goldsmith's staff and MOD officials. Lord Goldsmith insists that he did not personally give the order, but has not so far disassociated himself from it.

Lord Goldsmith is responsible for the SFO to parliament, and played a key role in the termination of the SFO's inquiry into allegations about the Saudi contract.

The Guardian

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