The Shadow World

Riggs Bank of Washington DC was not only the capital’s oldest and largest financial institution but also its most august.1 It financed the Mexican–American War in 1847, the purchase of Alaska from the Russians in 1868 and the completion of the Capitol.2 It was banker to twenty-two Presidents, including Lincoln, Roosevelt, Eisenhower and Nixon,3 and most of the world’s Washington-based embassies.4 Riggs was so much a part of the American establishment that its majestic colonnaded headquarters, which neighbour the White House, were featured on the ten-dollar note for decades.5

Among its most valued customers was the long-time Saudi ambassador to the US, and the Bush family’s confidant, Prince Bandar bin Sultan. George W. Bush’s uncle was an executive at the bank during this time.6

Despite the bank’s stellar reputation, it came to light that in 2000, about two weeks after a fellow Saudi, Omar al-Bayoumi, opened bank accounts for two of the 9/11 hijackers, al-Bayoumi’s wife began to receive monthly payments that amounted to tens of thousands of dollars from an account at Riggs Bank held by Princess Haifa bint Faisal, the wife of Prince Bandar.7

When these transactions were discovered, the FBI began investigating the bank for possible connections with money laundering and the financing of terrorism.8 Although the FBI and later the 9/11 Commission ultimately stated that the money was not intentionally being diverted to fund terrorists,9 investigators were surprised to discover how lax the safeguards at Riggs Bank were,10 especially as the bank was known to have close links to the CIA.11

In addition to revealing accounts for the Liberian dictator and one-time Merex arms dealer Charles Taylor, the Chilean military ruler Augusto Pinochet and assorted other despots, several Saudi accounts were discovered to contain financial improprieties, including a lack of the required background checks and a consistent failure to alert regulators to large transactions, in violation of federal banking laws.12

Many of these transactions involved Prince Bandar personally, often transferring over $1m at a time. For instance, he transferred a total of $17,478,870.87 to the architect/builder of his palace in Riyadh.13 The source of much of the money in Bandar’s account was the British arms company BAE, which had transferred in excess of £1bn into the Washington bank, over a period of a decade and a half, through the Bank of England account jointly controlled by BAE and Deso, the UK arms export promotion agency.14 The money was at least in part the Prince’s commission for his involvement in the world’s biggest ever arms deal.15

Police estimate that commissions of more than £6bn were paid on the Al Yamamah deal, primarily through a British Virgin Islands-based company, Poseidon Trading Investments Ltd, the Bank of England account and subcontractor payments.16 In addition to the more than £1bn that went into Prince Bandar’s accounts,17 Mark Thatcher, the son of the British Prime Minister at the time, is reported to have received about £12m as an agent on the deal, an allegation he denies.18

Corruption has been rife in Saudi Arabia since the discovery of oil, with three main methods employed. The most common is where the supplier makes payments to his agent in the kingdom. The agent could be a Saudi or foreign citizen with good contacts in the country’s hierarchy, and he simply passes money from the source to his mentor or key decision-maker within the royal family. There are also barter agreements, where military hardware is exchanged for oil. How this works is that a delivery of say 400,000 barrels is transferred to the military supplier’s agent. However, a delivery of 440,000 barrels is recorded in the Saudi accounts. The extra 40,000 barrels is diverted and sold by the Saudi dealer and his associates for their own profit.19 The barter system is also open to abuse, especially where an oil fund is created to be used against expenditure by the parties. And finally, there is the trusted and simple mechanism of overcharging for various aspects of a contract.

All three methods were employed on Al Yamamah, with members of the Saudi royal family and Saudi agents netting millions, sometimes billions, of pounds. As Lord Gilmour, a former Defence Minister, told BBC’s Newsnight in an interview: ‘You either got the business and bribed, or you didn’t bribe and didn’t get the business. You either went along with how the Saudis behaved, or what they wanted, or you let the US and France have all the business. It’s not something you emblazon or are particularly proud of. It just happens to be the terms of trade.’20

The suspicion of bribery in the Al Yamamah deal started while its final details were still being negotiated. An Arabic language newsletter, Sourakia, raised concerns in its October 1985 issue, soon after the deal was announced. The Guardian picked this up and ran a front page story headlined ‘Bribes of £600m in jets deal’.21 The day before, the Labour Party’s defence spokesman, Denzil Davies, had called on the government to confirm or deny reports that it was to pay secret commissions of between £300m and £600m to secure the deal. The MoD ‘refused to comment, although officials said negotiations were still going on’.22 At the time, the Guardian cited Arab sources who alleged that the commission would be shared between two or three leading members of the royal family, two relatives by marriage of King Fahd and a business agent. Whitehall advice to ministers was not even to attempt a denial but rather: ‘We suggest MoD should simply refuse all comment.’23

For years, whenever questioned, the Conservative government denied that Al Yamamah involved any commissions. Roger Freeman, the Defence Procurement Minister, stated in the House of Commons in October 1994: ‘The transaction between Her Majesty’s government and Saudi Arabia was on a government-to-government basis in which no commissions were paid and no agents or any middlemen were involved.’ He added that ‘Details of the contracts are confidential between the British and Saudi governments.’24

However, these lies were soon exposed when that same year executives from an Al Yamamah subcontractor, Thorn EMI, better known as a music label, disclosed that they had paid £40m in commissions on their contract for bomb fuses on the deal. The commissions, totalling 26 per cent of the contract price, were split between their Saudi agent and the Bermuda account of a Preston-based agency run by a former BAE employee.25 Once ranks had been broken, further corruption among subcontractors soon came to light. Rolls-Royce, which manufactured the engine for the Tornado and Hawk jets, admitted to paying £23m as an 8 per cent commission to a Panama-registered entity, Aerospace Engineering Design Corporation (AEDC). The company was controlled by members of the Ibrahim family, the favoured in-laws of King Fahd. The Ibrahims claimed that Rolls-Royce had committed to a commission of 15 per cent on the £600m engine deal. AEDC issued a writ on 12 December 1997 demanding the unpaid sum and plunging the Rolls-Royce and BAE boards into ill-disguised panic. As the embarrassment grew Rolls-Royce and AEDC hired heavyweight legal teams to hastily negotiate an out-of-court settlement.26

Vosper Thorneycroft was also said to have paid substantial commissions on its Al Yamamah contract. The MP George Galloway told the Commons under parliamentary privilege:

Another part of the deal was concluded in 1988, when the regime agreed to buy minesweepers from Vosper Thorneycroft. Vosper used as its agent a Saudi named Fahd al-Athel, who, like the right hon. Member for South Thanet [Jonathan Aitken], worked for Prince Mohammed. Vosper made huge payments to al-Athel’s company, which were laundered with the knowledge of Vosper through a front company in Saudi Arabia and were divided 20 per cent to al-Athel, 40 per cent to Prince Mohammed and 40 per cent to unnamed others, some of them known to be prominent figures in British life.27

Colonel Thomas Dooley, an executive of Sikorsky, the helicopter manufacturer, testified in a United States court that, while trying to sell Black Hawk helicopters to the Saudi regime, he experienced a ‘competition for bribes’. He explained that Prince Bandar told him explicitly ‘what bribes needed to be paid for the deal, through which middleman they must be routed and how he would distribute the money to other members of the royal family’.28

The British government’s discomfort intensified during a 1997 High Court libel case in which the MP named by Galloway, the former Defence Procurement Minister Jonathan Aitken, sued the Guardian and Granada TV. David Trigger, a former executive at BMARC, a company where Aitken was a director, testified that he had negotiated a deal between BAE and Royal Ordinance for armaments to equip the Tornado fighter jets. When asked about the commission rate on the deal Trigger replied: ‘No, I cannot tell you that.’ When asked if it was a secret, Trigger responded: ‘Yes, it is. The Al Yamamah contract is a very complicated one that has an involvement with the Government, British Aerospace and other people, and it would be very difficult to put a figure on commission. Commission was obviously paid but my understanding is that all my work connected with that contract is governed by the Official Secrets Act.’29 Trigger also admitted that he negotiated a 15 per cent commission agreement with Sheikh Fahad al-Athel, Mr Aitken’s business friend, for future contracts.30 Saudi Arabian law allowed agents only 5 per cent. After giving evidence Trigger walked to the back of the court and presented a memento to Aitken from his briefcase. As journalists present recorded: ‘The former Cabinet minister turned on his usual puckered grin, and affected a friendly interest. Inside, his gut must have been knotting in disbelief.’31

Years later, after being jailed for perjury, Aitken would contradict his government’s constant denials: ‘Living in the real world there were always going to be some parts of the contract – training, spares and construction, for example – for which agents would receive commission. Sales commission is what makes the world of commerce go round. The big picture is that Saudi Arabia is a crucial ally for intelligence and is a stabilising influence in a volatile region.’32 The former Defence Secretary Michael Heseltine agreed: ‘If this is the way the Saudis want arrangements for their procurement programme, an international company would have had no choice but to go along with that. It’s massively important to us and the stability of the Middle East that we have those defence interests in Saudi.’33

But it took intrepid work from a pair of Guardian journalists, with the help of a number of whistle-blowers, to reveal the full extent of the corruption perpetrated by the main contractor, BAE, in the Al Yamamah deal.34

David Leigh is an unassuming man. His bespectacled, donnish appearance is that of an unambitious academic. His craggy features, however, hint at a more stressful and interesting life. A Guardian veteran of over twenty years, David is one of the world’s leading investigative reporters. He was famously responsible for bringing down Jonathan Aitken after the minister had sued the Guardian for reporting a trip to Paris, where he stayed at the Ritz Hotel at the expense of Said Ayas, ‘man of business’ to King Fahd’s son, Prince Mohammed. Aitken, after denying he had made the trip and claiming that he would ‘cut out the cancer of bent and twisted journalism in our country with the simple sword of truth and the trusty shield of British fair play’,35 was found guilty of lying to the court once Leigh produced receipts the minister had signed at the Ritz. Aitken ultimately served seven months of an eighteen-month prison sentence, and Leigh’s reputation was made.

Leigh, together with his meticulous colleague Rob Evans, had written a few articles about the British government and the arms trade, including US complaints about alleged BAE skullduggery in bidding for contracts in Eastern Europe. During their trawl through government archives, they came upon the Stokes Report, a 1965 document that led to the setting up of the Defence Sales Organisation (DSO, renamed the Defence Export Services Organisation (Deso) in 1985). The report’s author, the industrialist Donald Stokes, remarked that ‘a great many arms sales were made not because anyone wanted the arms, but because of the commission involved en route’,36 and that ‘it was often necessary to offer bribes to make sales’.37 He also reported that ‘good commercial agents … are better placed than an official to dispense the less orthodox inducements’.38 These comments, and the corrupt UK–Saudi arms deals that followed the Stokes report, piqued the journalists’ interest. They began to dig deeper into BAE’s more recent business practices.

The journalists’ investigations took them to a dark council flat in Liverpool, home to Eddie Cunningham, a disgruntled ex-employee of a company called Robert Lee International (RLI), which was contracted by BAE in 1986 to make the arrangements for Saudi pilots to travel to the UK in relation to the Al Yamamah deal. RLI was requested to provide ‘hospitality’ for the pilots and Cunningham was their minder. He was more than willing to spill the beans on BAE.

Cunningham described the ‘hospitality’ the pilots enjoyed as amounting to millions of pounds spent providing cars, yachts, pleasure trips and a constant stream of women. He related how the Saudi Royal Air Force pilots ‘would ask me to get women for them … they would have two or three women a night and then they’d want to go have a meal somewhere at three in the morning, come back again and start again … it used to wear me out’.39 Cunningham was told by senior BAE executives that the entertainment was paid for with Saudi money and was allowed for in the Al Yamamah contract: ‘I was told that this was necessary otherwise you could say goodbye to this contract and they’d look elsewhere.’40

Cunningham recounted how, a few years before in 1996, he had alerted a BAE security officer to the fact that there was fraud taking place in the administration of these ‘hospitality’ funds. The officer’s report documented:

blackmail by an ex-prostitute over sex and bondage with Saudis, tax evasion and VAT fraud valued at over a million pounds. It also made reference to a house, paid for by BAE but registered in the name of a Saudi prince, which was actually occupied by a BAE executive and his mistress, who was employed at RLI. The director of RLI claims it was a gift from the Saudi prince.41

The nature and extent of this fraud were confirmed by Sylvia St John, the mistress of the BAE executive Tony Winship, a debonair, silver-haired former RAF wing commander, who was officially BAE’s Saudi ‘customer relations officer’ and in charge of the ‘hospitality’ funds. St John personally acquired two houses worth £300,000, one in south-west London and another in Northern Ireland. The money went through the books as payments to the Saudi Prince Turki, though it seems it passed straight to Ms St John. According to a signed statement by the manager of RLI, John Sharp, ‘BAe authorised and approved the expenditure.’ The London house is held in the name of Prince Turki, the Northern Ireland house in the name of Ms St John, who claims that she holds the title deeds to the London house as well and lived there with Winship.42 Sharp claimed that Prince Turki wanted St John to have the houses as a gift, adding that the fund under Winship’s control would be used to pay the council tax and utility bills of the Northern Ireland house, while receipts ranging from building renovation to ‘a pair of antique brass firedogs’ were also charged to BAE. Ms St John, although employed at RLI, described herself as a ‘customer families officer, Saudi Arabian support department, British Aerospace (Military Aircraft) Ltd’. She justified the gifts on the basis that she had visited in hospital and comforted a sister of Prince Turki’s who was dying of cancer, and had, therefore, ‘earned the money’.43

The Guardian also unearthed an £80,000 yacht, the Faye Samantha, that had been bought using the funds, and was owned by Tony Winship and moored at Lymington in Hampshire, near his home.44

Cunningham described how, shortly after raising his concerns about the fraud, he was fired. He was furious, took issue with BAE and was ultimately awarded £20,000 in a settlement. Not satisfied, in 2001 he approached the UK’s Serious Fraud Office (SFO) with evidence of unsupported invoices for amounts up to £250,000 a month billed to BAE by RLI and ‘excessive expenses, hospitality and some evidence of assets being used for private purposes’.45

The SFO raised the case with the Ministry of Defence as the overseer of the government-to-government deal. But the SFO’s concern that government money was being misused was rejected by Sir Kevin Tebbit, the Permanent Secretary at the MoD: ‘I have no wish to set damaging hares running, but given the sensitive issues raised in your letter, I have conducted a discreet initial exploration of the allegations’ implications for the department.’46 This inquiry seems to have amounted to the acceptance of personal assurances from BAE’s chairman, Dick Evans, that there was no need for an investigation. Cunningham was angry, claiming: ‘it’s an unhealthy relationship between MoD and BAE. I found the attitude of the MoD was “don’t upset these people, they’re bringing money into this country, look at this money … we can condone these little things”.’47

The MoD issued a statement in which it reiterated that Tebbit’s actions were in the context of ‘the Government’s robust anti-fraud policy’. The statement went on to say that the SFO acknowledged that proper action was taken and that it was grateful for Sir Kevin’s help.48

Cunningham further claimed to Leigh and Evans that the expenditure on the pilots was just the tip of the iceberg. Saudi royals were the beneficiaries of far greater munificence, diverted from a massive slush fund operated by BAE through RLI and another company, Traveller’s World Ltd, run by Peter Gardiner.

After seeing their articles in the Guardian, Gardiner made contact with the journalists. Confronted with Cunningham’s information he was desperate to be a witness rather than a suspect and he too turned whistle-blower. He told the journalists how his small travel agency had been transformed into a conduit for millions of BAE’s pounds spent secretly on Saudi royals. He had boxes and boxes of documents to back up his claims. The two reporters spent weeks with Gardiner going through piles of invoices, linking events, locations and people. At the same time, they encouraged Cunningham to use the Data Protection Act to access further information.

Based on the information in Gardiner’s boxes and the replies to Cunningham’s data protection requests they were able to piece together the mechanics of the massive slush fund: ‘The Principal Beneficiary’ of the fund, unimaginatively codenamed PB, was Prince Turki Bin Nasser. Married to King Abdullah’s niece, Prince Sultan’s daughter, Princess Nura, Turki was head of the Saudi Royal Air Force and a key Saudi politician for arms purchases until 2000. He was paid £17m in benefits and cash, mainly through large payments into his Bank of America account in Los Angeles.49 The benefits included luxury holidays, shopping sprees and, of course, women.

While the Saudi rulers demand that their subjects adhere strictly to a rigid Wahhabism, their own behaviour could not be further removed from their faith. Anouska Bolton-Lee, a vivacious actress-model and former girlfriend of Leonardo Di Caprio, revealed how for two years she was Prince Turki’s mistress. She was introduced to the Prince by Tony Winship. Between 2001 and 2003, Mr Winship ‘took care’ of the £13,000-a-year rent on Ms Bolton-Lee’s Holland Park flat and paid for her to attend a two-year drama course in London. On several occasions Winship handed her cash in white envelopes to pay for bills and the cost of driving lessons. She received around £4,000 in this way and said of the cash: ‘I thought this was all the prince’s money.’ In addition to the money from Winship there were also times when Prince Turki would give Anouska wads of cash himself: £12,000 for a sheepskin coat, for instance, and £3,000 for a Fendi handbag. She believed that ‘the prince had paid for my flat and drama school and driving lessons, but now it seems that wasn’t true and that it was BAE. I find that very sad.’50

While romancing glamorous women at BAE’s expense, the Prince ensured that his family did not want. They received gifts from the company, most often cars, including a $30,000 Mercedes for his daughter, a peacock blue Rolls-Royce for his wife and a £175,000 Aston Martin Le Mans for himself. The cars were regularly transported between Saudi Arabia and Los Angeles on privately chartered aircraft. In 1995, a cargo plane was hired for almost $300,000 to carry cars and Prince Turki’s shopping home to Saudi Arabia.51 They were treated to luxurious annual holidays at the most expensive hotels in the world, where they were accompanied by a thirty-five-strong entourage of servants, drivers and bodyguards.

In August 2001, the Turki family flew in two private airliners – an Airbus and their pink Boeing business jet – for a holiday in Cancún, Mexico. BAE picked up the £41,000 tab at the Cancún Ritz-Carlton. The defence company paid £99,000 for Nura’s son, the thirty-year-old Prince Faisal, to ski at an exclusive Colorado resort and another £56,000 to charter him a plane. He arrived in Colorado fresh from spending £21,000 at the Four Seasons in Milan. That summer his mother cost BAE £56,000 at the Intercontinental hotel in Athens and a further £36,000 on a limousine service during her stay. Hiring a yacht cost another £13,000. She then moved on to Italy, where at the Grand Hotel des Bains, near Rimini, BAE handed over a further £26,000, plus £28,000 for limousines and £14,000 for bodyguards. The Princess and her family proceeded to the south of France, where they ran through £99,000 at the Majestic in Cannes. But the summer’s climax was to fly across the Atlantic to settle friends and guests in at the Beverly Hills Hilton, within walking distance of the famously expensive shopping of Rodeo Drive. The cost to BAE: £101,000.52

After the Cancún trip with her husband, Princess Nura headed back east in leisurely fashion. Her stay at the Plaza – ‘Crown Jewel of Manhattan’s Fifth Avenue’ – is alleged to have cost BAE no less than £195,000. Her transit via Paris’s Hôtel Le Bristol took another £102,000 and a brief autumn stopover in Egypt, at the Cairo Marriott, added a final £35,000 to BAE’s recorded bill for Princess Nura for 2001. Throughout the family’s itinerant summer the company also paid more than £400,000 for squads of twenty-four-hour bodyguards at their residential mansion in Beverly Hills.53

BAE also secretly paid nearly £250,000 out of the slush fund for a honeymoon for the daughter of Prince Bandar, Princess Reema bint Bandar, who had married Prince Turki’s son, the ski-loving, jet-setting Prince Faisal. After a trip to the Great Barrier Reef in Australia in a private jet, Prince Faisal, who like his new father-in-law is a fan of the Dallas Cowboys, was keen to watch an important game. The whole of a private club sixty miles away was hired in the middle of the night so that Bandar’s daughter and her husband could watch the match live. The three-hour stay cost £6,000.54

By the time the slush fund was shut down in 2002 the bills sometimes exceeded a million pounds a month and averaged around £7m per year. Peter Gardiner explained that all the individual items were paid for by his company, which would then bill BAE for the lump sum at the end of the month, under the accounting title of ‘Accommodation, services and support for overseas visitors’. All monies were reimbursed by BAE, and every item was authorized by the company.55 Those who had knowledge of the payments included the former chief operating officer, Steven Mogford, Tony Winship and his close friend Dick Evans, the chairman.56 The UK’s Ministry of Defence was unwittingly complicit in the affair, as the ministry paid BAE for the fraudulent invoices and then endorsed them for repayment by the Saudi government.57

As a consequence of the Guardian revelations, at dawn on 3 November 2004 eighty police and investigators from the SFO and the Economic Crimes Unit of the City of London Police raided a warehouse in Hertfordshire, north of London. They uncovered 386 boxes of slush fund accounts which revealed the names of all the Saudi officials who received benefits from BAE as part of the fund, including a number of Saudi military attachés at the London embassy who were given luxury homes by BAE, as well as Prince Turki’s family.58

The raids resulted in the arrests of Tony Winship and John Sharp.59 In addition to the payments and benefits to the Saudis, Winship was also accused of giving lavish gifts to an official of the MoD, Deso and the Ministry of Defence Saudi Armed Forces Project.60

None of these individuals were convicted, and where arrested were released without charge.

David Leigh and Rob Evans thought they had unearthed a massive story but were puzzled as to BAE’s relative silence. ‘The reason why BAE never said anything to us – we thought we were clever. We had exposed this slush fund. They were obviously sitting there, thinking, “Well, thank goodness they don’t know the real story.”’61

After exposing the massive slush fund the reporters were contacted by a former BAE agent who had fallen out with the company. David Leigh met him outside the UK, where he revealed the existence of a labyrinthine network of companies through which he was paid and which he, in turn, used to pay key decision-makers. The whistle-blower handed over bank records, ‘which were the key to revealing an entire global money laundering system, an enormous worldwide network of secret cash payments amounting to literally billions of dollars that had gone on for years with the connivance of the British government’.62

At the centre of the system lay two companies, Poseidon Trading Investments Ltd and Red Diamond Trading Ltd in the obscure British Virgin Islands (BVI). This Caribbean idyll, sighted by Christopher Columbus in 1493 on his second voyage to the Americas, is an archipelago of sixty islands. He named them Saint Ursula and her 11,000 Virgins, later shortened to the Virgin Islands. There is nothing innocent about the British Virgin Islands, which are home to over 820,000 offshore companies, 41 per cent of the world’s total in 2000.63 It is, therefore, unsurprising that when BAE set about establishing a maze of companies to conceal its slush fund and massive illicit payments to agents and Saudi royals, it should choose the BVI.

The Guardian reporters wrote up their story as soon as David Leigh returned home. The news desk initially planned to print it on page seven of the next day’s edition, believing it was only of interest to arms trade or offshore financing anoraks. Leigh and Evans, who realized the enormity of what they had uncovered, took their information to the SFO and collaborated with journalists in the UK and around the world in the hope of revealing the full extent of BAE’s criminal conduct. The SFO, which was now compelled to investigate the allegations, ordered Lloyds Bank and others to turn over their records relating to BAE. These proved a treasure trove.

They established that Red Diamond had been set up in the BVI in February 199864 and used accounts in London, Switzerland and New York with Lloyds Bank, UBS and Chase Manhattan. Red Diamond payments were made to agents in South America, Tanzania, Romania, South Africa, Qatar, Chile and the Czech Republic, as well as the UK. BAE used an online Lloyds banking service which automatically transferred cash through Red Diamond and on to the final destination.65 BAE has never mentioned the existence of Red Diamond in its published company accounts and has never explained why it was set up.

Red Diamond though was only one part of the elaborate global network that BAE had set up to hide bribery and corruption. Already in 1995 BAe had around 700 agency agreements, in addition to those linked to its subsidiaries Royal Ordnance and Heckler and Koch. The company had at least 300 agents, to whom it was paying out nearly £50m a year. There were so many agency agreements that it found it ‘impossible to remember them all’.66 A company called Novelmight was created to ‘provide services to other group companies through a branch in Switzerland’. Its original registered address was BAE’s Farnborough base,67 but in 1999 Novelmight’s UK registration was terminated and shifted to the BVI.68 The operation was actually run out of HQ Marketing Services, which was initially headed by Hugh Dickinson, also the BAE liaison with MI6, and his long-serving deputy, Julia Aldridge.69 Documents indicate that a board-level committee met to approve each agency agreement.70

To further conceal illegal activity, contracts would sometimes be signed outside UK jurisdiction. One source recalled having to fly to Switzerland in the 1980s to sign secret deals on arms contracts to India.71 When secret payments were organized, a single copy of an agency agreement was made and BAE representatives would fly to Geneva to deposit the document. The signings would sometimes take place at Lombard Odier, a Swiss private bank well known for sheltering funds for the notoriously corrupt late President Marcos of the Philippines. The bank would keep the single copy and only allow it to be viewed in the presence of both parties to the contract.72 In 1997, the custodial relationship was shifted to Swiss lawyers Rene Merkt and Cyril Abecassis, who also set up offshore companies for arms agents.73

When bribery of foreign public officials became entirely illegal in the UK after the OECD Anti-Bribery Convention was incorporated into British law in early 2002, BAE, with the help of the Swiss branch of its bankers, Lloyds TSB, discreetly rented a high-security office in Geneva on the sixth floor of a block at 48 Route des Acacias. CCTV cameras, an encrypted fax and a phone system were installed and a trusted UK specialist was flown in to sweep for bugs. One night, shortly before the OECD Anti-Bribery Convention was signed, BAE loaded its filing cabinets and safes containing its contracts and agent agreements into a nondescript van and then had it driven by trusted staff to Geneva, beyond the prying eyes of British authorities.74 Thereafter, if documents needed signing or renewing, key BAE personnel flew to Geneva and unlocked the office at Route des Acacias. On some occasions an agent would sign a contract in London for straightforward, honest payments and possibly a reasonable rate of commission. But then a second parallel contract would be signed in Switzerland, offering much higher and more corrupting sums.75

Specifically for Al Yamamah, BAE had set up Poseidon Trading Investments Ltd, incorporated in the BVI on 25 June 1999. Over £1bn moved through Poseidon accounts to Saudi agents using Lloyds bank.76

An agent who has spent his career concealing and laundering commissions paid on weapons transactions told David Leigh and Rob Evans, with a hint of awe in his voice: ‘I’ve worked for a lot of aircraft companies, but BAE is the only one with such an institutionalised system.’77 Although at the time the system wasn’t illegal, a big multinational company setting up a secretive shadow finance system to pay agents and middlemen certainly gives rise to suspicion. The SFO would later conclude that ‘The whole system is maintained in such conditions of secrecy that there is a legitimate suspicion concerning the real purpose of the payments.’78

A billion pounds was directed through companies in the BVI, which was then moved into Swiss bank accounts thought to be linked to agents and to Prince Sultan, Prince Bandar’s father and the Defence Minister who signed the deal. Some of these commissions were offset by massive overcharging, up to 32 per cent in the case of the Tornado jets.79 As mentioned, total corruption in the deal, utilizing all three of the usual methods, amounted to over £6bn.80

Prince Bandar’s accounts had meanwhile been credited with more than £100m a year, paid quarterly into Riggs Bank and authorized by Deso, ultimately totalling in excess of £1bn. Part of these funds had been used for ‘the gift’ of the brand-new widebody Airbus 340 jet. The fuel, maintenance and crew of the aircraft were paid for from the same source at least until 2007.81

While significant amounts of Prince Bandar and Prince Sultan’s money went directly to their accounts, some payments on the deal were thought to be made through facilitators, primarily Wafic Said and Mohammad Safadi.

Said, a suave Syrian anglophile, is thought to be one of the richest people in the United Kingdom. With a fortune estimated at £1bn, he was placed 40th in the Sunday Times Rich List of 2009.82 Always dressed in beautifully tailored Parisian suits, he owns palatial homes around the world.83 His country mansion in Oxfordshire is valued at £35m.84 Said is thought to have kept a Boeing 737 jet, a stable of racehorses,85 and art works by Monet, Modigliani,86 Picasso and Matisse, among others.87

Born in Syria in 1939, Said was the son of an eye surgeon who served as the country’s Minister of Education. Wafic began his career in investment banking in 1963 with UBS in Geneva, where he met his British wife, Rosemary, a businessman’s daughter.88 The couple moved to London in the late 1960s to help Wafic’s brother run a restaurant in the city’s fashionable Kensington High Street. One evening two young fun-loving Saudi princes, Bandar and Khalid, ate at the restaurant. Said introduced himself and over several weeks the group became friends.89 Wafic and Rosemary relocated to Saudi Arabia in 1969, where he worked briefly for the Saudi government and then started to prosper in the construction business.

In 1969, Said linked up with Akram Ojjeh, a Saudi arms dealer and financier. Ojjeh’s son Mansour would become a friend of Mark Thatcher while involved in their mutual passion, motor racing. In 1973, through Ojjeh, Said became president of TAG Construction in Paris, where he brokered building deals for defence-related projects. He was also the agent for Raytheon, the US company best known for the production of missiles and bombs, and was involved in the sale of Hawk missiles to Saudi Arabia.90 Said and Ojjeh set up Sifcorp in 1980, an investment and finance company supposedly based in Bermuda but controlled in Luxembourg by the Said Trust.91

Wafic displayed his considerable charm to befriend the rich and powerful in Saudi Arabia, specifically renewing his acquaintance with the two princes he’d met in the restaurant, and their father, Prince Sultan. He would later become a financial and personal adviser to the princes, managing their properties and making investments on their behalf. He gained Saudi citizenship in 1981 by royal decree, the same year his eldest child, Karim, drowned in the swimming pool at the home of Prince Sultan at the age of ten.92

His involvement in the Al Yamamah contract was originally kept secret. He now openly admits his role as an adviser on the deal but denies taking commissions. He told the Daily Telegraph in 2001:

This is a deal which brought a huge boost to British industry: you are talking about thousands of jobs. But for some reason, which I cannot understand, the press want to portray this as a shady, mysterious deal. Due to my extensive contacts in Saudi Arabia, I played a very small role: the big role was played by Lady Thatcher.

Quite honestly, I thought I was doing this country a favour. I have never even sold a penknife. I was not paid a penny [for advising British Aerospace] but I benefited because the project led to construction in Saudi Arabia that involved my companies.

But it [the Al Yamamah deal] has led me to being portrayed as an arms dealer: as if I had a catalogue of weapons. Even now I get letters from people inquiring whether I can help them sell second-hand tanks or ammunition.93

On another occasion he opined: ‘if I am an arms dealer then the chairman of British Aerospace is an arms dealer, and the Prime Minister is an arms dealer’.94 However he chooses to describe his role, there is little doubt that Said was a facilitator of benefit to the Saudis on the Al Yamamah deal.

It is also alleged that Said was the source of the reported multimillion-pound payment to Mark Thatcher, in order to gain access to Number 10.95 He dismisses the claim, defending his political idol: ‘It’s such an injustice to Lady Thatcher and her son to suggest this.’96 Adnan Khashoggi, a notorious arms dealer (see Chapter 13), claimed that ‘Wafic was using Mark’s intelligence. His value to Wafic was his name, of course, and whenever Wafic needed a question answered Mark would go directly to his mother for the answer.’97 Khashoggi later recanted, saying: ‘I deny having any knowledge of … Mr. Thatcher’s involvement in (the) transaction.’98

Mark Thatcher has repeatedly denied the allegation that he received £12m in relation to the deal.99 The figure is derived from transcripts of conversations between Saudi princes and agents recorded by Saudi Intelligence while monitoring rival bids by the British, French and Americans for the deal. The transcripts were leaked by Mohammed Khiweli, the Saudi First Secretary to the United Nations, who defected in May 1994 and was granted asylum by the United States.100

Howard Teicher, a Middle East expert on Ronald Reagan’s National Security Council in the 1980s, claimed:

I read of Mark Thatcher’s involvement in this arms deal in dispatches from our embassy in Saudi Arabia, from intelligence reports that were gleaned in Saudi Arabia and Europe and in diplomatic dispatches from other European capitals. I considered these dispatches totally reliable, totally accurate … I did not think that people would loosely accuse the son of the Prime Minister of being involved in such a transaction unless they were certain it was the case, and the fact that I saw his name appear in a number of different sourced documents convinced me of the authenticity of at least the basic involvement on Mark Thatcher’s part. He was clearly playing some kind of role to help facilitate the completion of a transaction between the two governments.101

Teicher reaffirmed his view years later: ‘He was playing an active role in the arms transaction and it was unambiguous that he was involved in a business capacity.’102 Teicher’s view was based on Khiweli’s transcripts, which confirmed that the Saudis paid Mark to utilize his ‘excellent connections with the government … regarding the military equipment’.103

Thatcher’s closest associates confirmed his role: ‘I know for a fact that on one occasion Wafic rang Mark, who then arranged for him to fly by helicopter to Chequers to see Margaret,’ said Rodney Tyler, a friend of the Thatchers.104 BAE executives at the time also confirmed Mark’s involvement and the alleged £12m commission he received.105 ‘Mark was useful to ensure his mother was onside’, according to a former BAE consultant and friend of Said.106 A British MP was sent a document anonymously that claimed: ‘The additional financial benefits to Mark T. and his friend Wafiq Said [sic] and other middlemen, all non-tax paying residents of the UK and to the Conservative Party are absolutely enormous, according to the BAE executive.’107

The authors of a book on Mark Thatcher claim that his mother was informed of Mark benefiting from the deal. Given that he was arranging meetings for her with Said and Prince Bandar, she could hardly be unaware of his involvement. And, according to Wafic Said’s former aviation director, Mark’s dealings with Said were ‘at Mrs. Thatcher’s insistence’.108 A former defence industry executive, Gerald James, alleges Mark also benefited from Al Yamamah-2.109

Mark’s benefiting from a deal in which his mother played a crucial role would come as no surprise to those who have followed his career. His personal fortune has been estimated at £60m,110 and his mother’s assistance has not been unhelpful in its accumulation. Mark, who inherited his father’s baronetcy in 2003, pocketed payments in relation to a £300m contract to construct a university in Oman which his mother had clinched for a British construction company in 1981. When asked about it in Parliament, Margaret Thatcher denied any wrongdoing, claiming she was just ‘batting for Britain’.111 It is also alleged he used a handwritten note from his mother to secure a valuable deal in Abu Dhabi.112

The nadir of his career, however, came when he was arrested at his home in the up-market Cape Town suburb of Constantia on 25 August 2004 for his role in an attempted coup d’état in Equatorial Guinea. Thatcher was accused of providing funding and logistical support for the abortive coup planned by a British mercenary, Simon Mann, a close personal friend. After his mother’s intervention secured a plea bargain in terms of South Africa’s anti-mercenary laws, Thatcher pleaded guilty to negligence in investing in an aircraft ‘without taking proper investigations into what it would be used for’, claiming that he thought it would be used as an air ambulance in Africa.113 He received a fine of R3m ($450,000) and a four-year suspended sentence, and was deported. Simon Mann recently reaffirmed that Thatcher was deeply involved in the coup, providing $350,000 and ‘was not just an investor, he came completely on board and became a part of the management team’.114

After the Al Yamamah deal was concluded, Mark Thatcher purchased a luxurious Belgravia flat through a Panamanian company, Formigol, which was registered to Wafic Said’s business address.115 Said would often take Mark shooting or golfing on Prince Bandar’s Oxfordshire estate. Alex Sanson, a former managing director of BAE’s Dynamics Division during the Al Yamamah deal, who told the Observer that Said played a pivotal role in the transaction, commented that ‘He [Mark Thatcher] was very close to Wafic Said and Prince Bandar. A number of people were aware that he was involved. He is bad news. He was a user of people to make connections. That was his technique and with the image of his mother at the time it was a useful asset.’116 Such were the benefits of Al Yamamah to Thatcher fils that some refer to the deal as ‘who’s ya mama’.117

Wafic Said, although in virtual retirement, is still listed as a director of two Panamanian companies, Mitrasur Corporation, formed in 1975, and Al Mulk Holdings SA. Mitrasur’s directors include Nabil Naaman, who is also the chief executive officer of a Libyan tourism development company, Magna.118 Said is reported to be a backer of Magna, which is chaired by Charles Powell, Margaret Thatcher’s former adviser and an adviser to BAE. Charles Powell’s brother, Jonathan, was Chief of Staff to Tony Blair at 10 Downing Street.119 Said is also a former director of AHI plc, formerly known as Aitken Hume Holdings plc, Jonathan Aitken’s bank. He is still a director of the Said Foundation, which ‘works for a brighter future for disadvantaged children and young people in the Middle East’.120 Jonathan Aitken is also a director.121

The Said Business School was established in 1996 at Oxford University, and its new building finished in 2001 after a £20m donation from Wafic Said.122 In 2008, he gave another £25m to the business school. Among the school’s trustees is Charles Powell.123 It was alleged that Downing Street intervened to speed up a planning application for the school.124 Said’s involvement has prompted numerous protests from students, academics125 and local activists.126 A few years ago I gave a lecture to the Desmond Tutu African Leadership Institute at the school. Unaware of its links to Wafic, I made a joke about the irony of giving a lecture on ethics in a school that shares the name of an alleged arms agent. After the lecture my host politely informed me that it was the same Wafic Said who had endowed the school.

Wafic Said was a founding patron of the Centre for Lebanese Studies, as was Said Ayas, Prince Mohammed’s ‘man of business’, who was linked to Jonathan Aitken.127 The holder of a number of titles,128 Said has been the ambassador and head of the delegation of St Vincent and the Grenadines to UNESCO since 1996.129 In his decorations and ennoblement he is continuing the tradition of Sir Basil Zaharoff – ingratiating himself with the establishment and being well rewarded for it. This is reflected in Said’s intimate involvement in British politics. During the Thatcher and Major years of Tory government in the UK, Said donated at least £350,000 to the Conservative Party.130 In 2004 and 2005 his family gave about £550,000 to the party through auctions.131 He or his family are thought to have donated tens of thousands of pounds to the Conservative Party in 2005, despite new laws preventing foreign nationals donating to British political parties.132

While New Labour was in power Said ensured he was close to the party’s ‘Prince of Darkness’, Peter Mandelson. Mandelson met Said in Syria weeks before resigning as Secretary of State for Northern Ireland, claiming that he had not registered the trip with the Foreign Office as required because it was personal.133 Nevertheless, Mandelson met the Syrian President, Bashar al-Assad, for two hours on the visit. A Said company, First Saudi Investment Co., was part of an Arab consortium trying to secure lucrative contracts in Syria at the time.134 Mandelson and Charles Powell, the BAE adviser and brother of Tony Blair’s Chief of Staff, are not only friends of Said, but are also themselves friends. It is relationships such as these that have enabled Wafic Said to remain close to political power of whatever stripe for over three decades.

The second major facilitator in the Al Yamamah deal, Mohammad Safadi, is, like Wafic Said, prodigiously well connected but is also a politician in his own right. The Lebanese billionaire businessman and politician, whose Swiss bank accounts were used as conduits for Al Yamamah commissions, has been close to the Saudis and BAE for decades. He is thought to have represented Prince Turki bin Nasser’s interests in the deal and acted as a business manager for the Prince. A potential witness in the SFO’s case told David Leigh and Rob Evans that ‘I was asked by them [the SFO] about Mr Safadi’s role. I told them that his UK firm, Jones Consultants, had paid bills for Prince Turki bin Nasser, head of the Saudi air force.’135

Safadi was born in Tripoli in 1944 and graduated from the American University of Beirut with a degree in Business Management. He worked in the family business, the well-known Safadi Brothers merchants, until moving to Beirut in 1969 at the time of the Gaddafi coup. In Beirut he started an investment business in housing, aviation, tourism, computing and banking.136 When civil war broke out in Lebanon in 1975, Safadi moved to Riyadh, where he built residential compounds for companies such as BAE and began to act on behalf of relatives of Prince Sultan.

In 1995 he returned to Lebanon, setting up the Safadi Group in the country and entered politics, rising to the position of Minister for Public Works in 2005.137 He was made the Economy and Trade Minister in the new Unity government formed in November 2009 and led by Saad Hariri in coalition with Hezbollah.138 While being in charge of one of the most crucial political portfolios for government contracts, he continued to control the Safadi group of companies. His interests include a property company, Stow Securities, with assets of £200m, and property firms with stakes in office blocks in London worth £120m.139 Stow is largely composed of anonymous offshore entities in Jersey and Gibraltar. One listed investor is General Ahmed Ibrahim Behery, a former senior commander in the Saudi Air Force.140 The company has also invested in TAG Aviation, a private jet company operating partly out of Farnborough airport, BAE’s headquarters. Safadi is a director on the TAG Aviation Holding Board along with Mansour and Abdulaziz Ojjeh,141 while his UK firm, Jones Consultants, and Saudi Arabian company, Allied Maintenance, have both received contracts from BAE.142

Safadi’s close relationship with BAE is further reflected in his making available a luxury penthouse flat at Roseberry Court, Mayfair, to Sir Dick Evans through one of his offshore companies. It adjoins the flat previously made available to Evans by a company belonging to Wafic Said.143 Safadi was also an investor in British Mediterranean Airways, an entity set up in 1994 to fly predominantly to the Middle East.144 Wafic Said invested in the company, which had Charles Powell on the board.145 With links like these it is unsurprising that he played a crucial role in the routing of payments on Al Yamamah.

It should be noted that the use of foreign bank accounts to funnel payments in this way was not strictly illegal until the introduction of anti-bribery and anti-money laundering legislation in the UK in 2002.

* * *

Like Wafic Said, most of those involved in Al Yamamah have claimed their roles were negligible or non-existent. This was not an option open to Prince Bandar. Instead he argued that the money which accumulated in the Bank of England Deso account from the 2 per cent commission taken on oil sales was used by BAE and Deso to purchase weapons on behalf of the Saudis that the US would not sell directly to them. Sources close to Prince Bandar have said: ‘if the Saudis wanted to buy ten Super Puma helicopters, and the Ministry of Defence budget is X amount, the Ministry of Finance will say this is what you’ve been allocated this year. It means that you have to defer this purchase until next year.’ A deferral, it is argued, would give AIPAC in the US time to mobilize against the arms sale. The source continues:

What Al Yamamah did, because it is oil for services, is to say: Okay. Al Yamamah picks up the tab; Saudi Arabia will sign with the French or whoever and Britain pays them on their behalf. So suddenly now the Saudis have an operational weapons system complete with its support that doesn’t reflect on Al Yamamah as a project. Therefore, if Saudi Arabia wants some services from the Americans, or some weapons systems that they have to buy now, otherwise Congress will object to it later, and they can’t get it from their current defense budget, then they simply tell Al Yamamah, ‘You divert that money.’146

There is some evidence to support Bandar’s contention. For instance, a State Department cable from 2004 states that a Saudi deal to buy twelve Cougar helicopters for $600m and forty-four Bell 412 helicopters for $400m would be financed through Al Yamamah. BAE would pay the French firm Eurocopter and Canadian firm Bell on behalf of the Saudis after receiving funds from oil sales through the Al Yamamah deal. The State Department raised questions about the steep price of the helicopters, noting, however, that the department was ‘not aware of any financial inducements, incentives, commissions, offsets, or investments associated with either transaction’.147

The cable went on to say: ‘Inquiry with local sources into the general subject of financial inducements drew raised eyebrows, smirks and comments like, “You can buy a large chateau with a lot of acreage in southern France at that price.” We can only speculate that commissions will be included in the Cougar purchase, although post is not aware of in what amounts and for whom.’148 It was also mentioned that ‘the driving force behind the acquisition of combat search and rescue aircraft for the RSAF has been Maj Gen Prince Turki bin Nasser bin Abd Al-Aziz Al Saud, RSAF director of operations.… Turki bin Nasser apparently has hit upon a means to purchase helicopters he badly wants but cannot afford: Oil, employing the Al Yamamah vehicle for payment (needless to say, BAE is outraged over the encroachment).’149

The use of Al Yamamah money to buy arms for Saudi Arabia was a defence repeated by Louis Freeh, Prince Bandar’s lawyer and a former Director of the FBI (1993–2001), despite the fact that it would undermine the oversight role of the US Congress in relation to arms exports and frustrate any attempt at accountable budgeting.

Even if one accepts this rather dubious defence, it still does not answer any of the questions about the personal use of vast amounts of the money, despite Prince Bandar denying any wrongdoing. Asked specifically about the $17m from the accounts spent on a palace for Prince Bandar, Louis Freeh offered the following explanation on PBS:

Narrator: According to these Suspicious Activity Reports, there were transactions that appear to be personal, for example, payments to an architect in Saudi Arabia for work on a new palace for Prince Bandar totaling $17m.

Dennis Lormel: That’s something you don’t see in the normal course of business, an individual moving $17m from an account, a business account, to what appears to be personal.

Louis Freeh: The $17m for his ‘residence’ – quote, unquote – was not his residence. It’s a government-owned property in the kingdom of Saudi Arabia which they make available to senior members of the royal family to live.

He went on:

LF: Allegations that my client received $2 billion in bribes, received for free as a bribe an Airbus 340, those allegations are totally false.

Lowell Bergman: In U.S. government documents, the al Yamamah contract is described as off the books of the regular budget of the Saudi Ministry of Defense. Is that correct?

LF: It’s an off-balance barter deal, oil for planes.

LB: But it was a pile of money, if you will, large amounts of money that didn’t go through the regular budgetary process of the government of Saudi Arabia.

LF: That’s correct.

Narrator: Freeh has an explanation for the $2 billion that was sent to Washington.

LF: Look at it this way, Lowell. This was a treaty that was set up to ensure maximum flexibility for the purchase of arms. If the Ministry of Defense and Aviation wanted to purchase U.S. arms, U.S. arms could be purchased through BAE and the U.K. ministry in a way that did not deal with the objection of the U.S. Congress to the selling of American equipment to the Saudis.

LB: So proceeds from the oil could be used under this contract to purchase arms from other countries, including the United States?

LF: Of course.

Narrator: Following this interview, FRONTLINE asked Louis Freeh for a specific example of an arms deal with the U.S. paid for from the $2 billion. He did not provide one. Freeh had responded to our questions about that Airbus 340.

LB: Can’t you even see that as an indication there’s something funny going on here?

LF: No. Absolutely not. Absolutely not. The plane was assigned to him. It was owned by the Royal Saudi Air Force, operated by them principally for my client because he travelled the most, and was never a gift or a bribe to my client.

LB: Do you know of any other military aircraft that’s painted in the colours of the Dallas Cowboys?

LF: Don’t know of any.

LB: Sound like a private plane?

LF: No, it doesn’t sound like a private plane.

LB: But when is something a government expenditure and when is something a personal expenditure when it’s a prince like Bandar in the Saudi government?

LF: Let’s look at it from their perspective. If his majesty, the king of Saudi Arabia, and the Minister of Defense and Aviation –

LB: Who’s his father.

LF: Who’s his father, and the minister of oil and the minister of finance – if they all agree and are aware of what’s being expended by whom, how they disbursed it or how they distributed it, including dividing what was personal or not personal, is really none of the business of the United States.150

That a former Director of the FBI would defend these actions is surprising. But it reflects the nature of the relationship between the American political elite and the Saudi royal family, whose attitude to corruption was best encapsulated by Prince Bandar himself:

Prince Bandar: You know what? I would be offended if I thought we had a monopoly on corruption.

Narrator: Prince Bandar would not give us an interview today, but he did in 2001 when FRONTLINE asked him about corruption and the Saudi Royal Family.

PB: But the way I answer the corruption charges is this. In the last 30 years, we have made, we have implemented a development program that was approximately, close to $400 billion worth. You could not have done all of that for less than, let’s say, $350 billion. Now, if you tell me that building this whole country and spending $350 billion out of $400 billion, that we had misused or got corrupted with $50 billion, I’ll tell you, ‘Yes.’ But I’ll take that any time.

But more important, who are you to tell me this? I mean, I see every time all the scandals here, or in England, or in Europe. What I’m trying to tell you is, so what? We did not invent corruption. This happened since – since Adam and Eve. I mean, Adam and Eve were in heaven and they had hanky-panky and they had to go down to earth. So I mean this is – this is human nature. But we are not as bad as you think!151