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	Prince Used Cash in BAE-Linked Account for Palace Former Saudi Ambassador Says $17m Withdrawal was for Legitimate Expense By David Leigh and Rob Evans The Guardian [United Kingdom] June 9, 2007 http://www.guardian.co.uk/baefiles/story/0,,2098953,00.html Lawyers for Prince Bandar, the Saudi royal who received ?1bn from BAE, accepted last night that he had spent $17m (?8.6m) on refurbishing one of his palaces, using cash from the US accounts concerned. But his lawyers, Herbert Smith, said that as the palace in Riyadh was an official residence, there was nothing illegal or untoward spending money out of a Saudi official defence ministry account held at Riggs Banks in Washington DC. Documents questioning the use Prince Bandar made of the ?1bn he received from BAE emerged in the US in 2004. In one "suspicious activity report", bank auditors said $17.4m had apparently been spent on "home improvement" for a Bandar palace. The payments to a man described in the report as a home improvement coordinator for Prince Bandar in Saudi Arabia, consisted of quarterly transfers of $4m a time.Prince Bandar's lawyers said last night: "We are instructed that the palace ... is our client's official residence from which he conducts business in Saudi Arabia ... refurbishment works to his official residence are the responsibility of the Saudi government. Therefore there is nothing untoward or illegal about this payment which will have been approved by the MODA [Ministry of Defence and Aviation] and audited by the Saudi Arabian Ministry of Finance." In a statement this week, Prince Bandar did not dispute that the ?1bn had been paid into the accounts he controlled at Riggs Bank, the disclosure of which has caused international uproar. But he said Saudi authorities had never identified any irregularities in the accounts' conduct. "Any money paid out of those accounts was exclusively for purposes approved by MODA." The ministry was run by Prince Bandar's father, Prince Sultan. The accounts were investigated by the US authorities, starting in 2002. The US treasury issued a report two years later fining Riggs $25m and criticising the bank for the loose nature of transactions that Prince Bandar controlled. The office of the comptroller of the currency said there was "potentially suspicious activity pertaining to tens of millions of dollars in cash withdrawals from accounts related to the Saudi Arabian embassy". Prince Bandar's lawyers said last night: "Upon completion of the ... investigation our client and his family were absolved of any wrongdoing." According to Newsweek magazine in the US, the minutes of a Riggs Bank internal meeting on April 7 2004 said that on one occasion the bank refused to let Prince Bandar personally withdraw $2m in cash, said to be for "travelling expenses". Prince Bandar's lawyers said yesterday: "In the course of performing his official duties [he] was required to undertake extensive and often unexpected travel including to places where other methods of payment were not always ... convenient or possible Bandar-controlled accounts were shut down by Riggs. When asked about Newsweek's disclosures Prince Bandar told the US media the accounts were "terminated by mutual agreement".He said: "As far as the embassy accounts or my wife's accounts or my account, there is not one question that we had from the US government about what happened to those accounts ... The FBI came and after two years of investigation there is no ... foul play." Prince Bandar has spoken himself of his unorthodox methods with cash. He is quoted in a recent biography saying that he personally flew $10m in a suitcase to Rome and gave it to a priest at the Vatican Bank, in order to covertly fund the Christian Democrats against the Communists in the 1983 Italian elections. He is quoted saying he did this at the request of the Pope, Lady Thatcher and then head of the CIA, Bill Casey. They wanted him to shift the cash so no western fingerprints would be on it. American investigations into Prince Bandar's bank accounts began in 2002 because of an apparent receipt of charitable funds by one of the 9/11 hijackers. The FBI were called in. The link to a donation made by Prince Bandar's wife proved to be entirely innocent and he and his family were completely exonerated. But Riggs Bank was discovered to be operating secret accounts for corrupt politicians around the world, including Chile's General Augusto Pinochet and President Teodoro Obiang of Equatorial Guinea. Treasury and Senate committee inquiries ensued, and the bank, a prominent feature of the Washington financial landscape, was exposed for massive irregularities and eventually shut down. Hundreds of boxes of Riggs records were retained by the US department of justice in Washington. Last year, Serious Fraud Office investigators who had stumbled on the billion-pound transfers from London, asked for access. Legal sources said that classified Ministry of Defence documents had revealed the payments made to Prince Bandar over more than a decade, which were made with secret British government knowledge and authority. But their inquiry was called off before the accounts could be re-examined. FAQ: Arms and the men What is al-Yamamah? Agreed in 1985, it is Britain's biggest ever weapons deal. So far, it has been worth ?43bn to BAE Systems, Britain's biggest arms manufacturer. More than 120 Tornado warplanes and 50 Hawk aircraft, and other military equipment, have been sold to Saudi Arabia. In its latest phase, BAE is hoping to sell the Saudis Typhoon warplanes, in a contract valued at about ?20bn. Who was behind the agreement? Margaret Thatcher was personally involved in securing the contract. The deal was done in the summer of 1985 when Prince Bandar, then the Saudi ambassador to Washington, flew to Salzburg, where Mrs Thatcher was on holiday. In a recent biography of the prince, he is quoted as saying: "I told her specific numbers, shook hands, and the deal was done." When were concerns raised about the nature of the deal? Within weeks, the Guardian was reporting allegations that huge commissions had been paid. However, ministers in successive governments denied knowing anything about them. A National Audit Office report was suppressed in 1992, on the grounds that it would inflame the Saudis. Why did the Serious Fraud Office launch its investigation? In 2004, the SFO, which has responsibility for investigating allegations of corruption and bribery in business deals, started investigating BAE following reports in the Guardian about a slush fund allegedly run by BAE to bribe Saudis. Two years earlier, Britain had tightened the law so that bribing officials to secure contracts overseas is now explicitly a criminal offence. BAE has consistently denied wrongdoing. Why was the SFO inquiry halted in December last year? The official reason, detailed by the attorney general, Lord Goldsmith, is that the inquiry had the potential to damage national security. It was argued that if the inquiry had continued, the Saudis would withhold vital intelligence about al-Qaida. Lord Goldsmith added there was little prospect of anyone being prosecuted. Tony Blair also said that thousands of British jobs were being put at risk by the prospect of the Saudis taking their business to other arms manufacturers. But MPs and anti-bribery campaigners said the abandonment showed the UK was not serious about stamping out corruption in big business. They pointed out that Mr Blair had himself claimed that Britain was doing more than any other country to stop this kind of corruption. Earlier this year, the world's anti-bribery body, the OECD, launched an inquiry into the circumstances surrounding the decision. What has emerged since then? A Guardian investigation made two potentially important and related discoveries. -Before the SFO inquiry was halted, its investigators had found that money had been channelled from an account held at the Bank of England to accounts in Washington that Prince Bandar could draw on. Sums of ?30m were sent every quarter for at least 10 years. At least ?1bn was sent to America. The money was transferred with the knowledge of the Ministry of Defence. -The attorney general learned of the payments to Prince Bandar before the SFO investigation was pulled. He warned colleagues that official knowledge of the payments, which had never been revealed, could lead to accusations of "government complicity" in the transfers. That could fatally undermine any potential prosecution of BAE executives, who could argue that they were acting with the government's blessing. Was the OECD inquiry told about these revelations? No. Representatives from the OECD have met British officials twice this year in closed sessions in Paris. Its members were not told about the payments at either meeting. Yesterday, Robert Wardle, the head of the SFO, said he took responsibility for that decision, citing the "need to protect national security". His statement came after Lord Goldsmith denied he had ordered concealment of the payments. Did the Saudi government know about the payments to Prince Bandar? According to statements made on his behalf on Thursday, it did. Prince Bandar's lawyers say the money from BAE was paid into accounts that "were in the name of the Saudi Arabian ministry of defence and aviation." They say the accounts were properly audited and that any money paid out of them was used for "purposes approved by the MODA". Was it improper for the payments to be made to Prince Bandar? That depends on the timing. Under UK law, it has been illegal for a British exporter to pay a bribe to a foreign official to secure an overseas business deal for the last five years. Before 2002, the law was opaque. The British government is unlikely to reopen the SFO investigation. However American prosecutors could launch their own investigation, as foreign bribery has been illegal there since 1977.
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