Pulling the Rug Out From Under a Corruption Probe?

Mike Turner's unexpected announcement that he intends to retire as chief executive of BAE Systems next summer could undercut enthusiasm for a federal corruption probe of America's fourth-largest military contractor.

BAE, a British company that supplies armored vehicles and sophisticated avionics to the Pentagon, said on Tuesday that Turner had decided to step down as C.E.O. and leave the board next August.

Under Turner, BAE experienced a dramatic turnaround and significant expansion, particularly into the U.S., where it has joined American contractors in the top ranks of suppliers.

At the same time, however, BAE has come under scrutiny for its relations with Saudi officials. The company acknowledged in June that federal prosecutors have opened a formal investigation into payments it made to a Saudi Arabian prince, allegedly to secure an $80 billion arms deal.

"BAE Systems has been notified by the U.S. Department of Justice that it has commenced a formal investigation relating to the company's compliance with anticorruption laws, including the company's business concerning the Kingdom of Saudi Arabia," the company said at the time.

The Guardian newspaper in London and the British Broadcasting Company have reported that BAE had paid as much as $240 million a year to Prince Bandar bin Sultan, who helped negotiate the sale of more than 100 warplanes to Saudi Arabia in 1985. BAE was the prime contractor in the aircraft sale.

BAE has consistently denied any illegalities, and Prince Bandar has denied receiving improper payments.

More recently, British newspapers have said police there named Turner as a corruption suspect in an investigation involving South Africa. However, the Financial Times noted that "unlike some other BAE officials, he was never arrested or interviewed in Britain."

Loren Thompson, an analyst at the Lexington Institute in Washington, said Turner's departure would "feed a feeling in Washington that the Al Yamamah deal is old news, not worth pursuing." This is particularly true, he told the Financial Times, because the Pentagon relies so heavily on BAE for electronic eavesdropping equipment and light armored vehicles.

by Mark Stein