BAE corruption investigation switches to Tanzania
· Focus on £28m radar deal with East African state
· SFO's new director due to take over this month
Following the uproar over its halted Saudi investigation, the Serious Fraud Office is expected to decide whether to bring fresh corruption charges against arms manufacturer BAE within six weeks, over a second arms deal, this time with Tanzania.
A minister from the east African state has denied that more than $1m (£507,500) in his offshore accounts came from BAE.
Investigators involved in a three-year inquiry after the controversial deal to sell Tanzania a £28m radar system identified the money in Jersey accounts controlled by the poverty-striken country's infrastructure minister, Andrew Chenge.
Tanzania's anti-corruption bureau, which has been working with authorities in the UK, Switzerland and Jersey, wants to establish if the money is linked to multi-million pound secret commission payments made by BAE.
Chenge does not dispute the money in his Jersey accounts. But he told the Guardian: "The obvious inference [of the investigations] is that I have received for my benefit 'corrupt payments' from BAE. This is untrue."
He said he was only involved in minor aspects of the radar deal, which was promoted by other ministries and approved by the Tanzanian cabinet. His bank records, he said, would show investigators that "there is no connection to the BAE Tanzanian radar deal".
His US lawyer from Cleveland, Ohio, J Lewis Madorsky, added: "While the matters in question took place a number of years ago, we can state ... that any and all allegations of illegality, impropriety, misconduct and unethical behaviour made against our client are categorically and vigorously denied".
Investigators say Chenge could be a valuable witness. The target of their investigation is not him but BAE. The arms company made the commission payments to a local agent in Tanzania to promote the £28m radar sale, through an elaborate chain of offshore companies and a Swiss bank.
The agent has now left the country and is wanted by Interpol.
These developments come at a key moment in the BAE saga. A landmark high court ruling on Thursday said that the decision to drop the SFO's Saudi inquiry was wrong.
In a huge embarrassment for the British and Saudi governments, the court rejected the claims that the inquiry had to be closed down for reasons of national security and because lives would be at risk.
And it took the extraordinary step of naming Prince Bandar, the crown prince's son, as the man behind what it said could be characterised as an attempt to pervert the course of justice.
Former prime minister Tony Blair caused uproar by personally forcing a halt to investigations into the Saudi deal. The Guardian subsequently disclosed that £1bn had been paid into accounts controlled by Prince Bandar during the deal. Bandar says the payments were not improper.
Inspectors from the Organisation for Economic Co-operation and Development (OECD) grilled British officials in London last week about their failure to get results from any of their BAE investigations. Britain signed up to an international treaty to outlaw bribery, but there have never been any prosecutions.
The Tanzania deal, although smaller in cash terms than the Saudi deals, is equally controversial: Tanzania is one of the world's poorest countries, and the UK government is paying more than £100m this year to help the heavily-indebted country's budget.
It was Blair again who forced the radar deal through the British cabinet, despite protests from the then international development secretary, Clare Short. She said the sale, for which Tanzania had to borrow yet more from a commercial bank, was corrupt and "stank".
A lengthy SFO investigation in the UK subsequently discovered that 31% of the deal's contract price had been diverted via Switzerland.
BAE transferred the money to a subsidiary, Red Diamond Trading, registered anonymously in the British Virgin Islands.
Red Diamond then moved the cash to a Swiss account in the name of a Panama company, Envers Trading Corporation. This entity had two Panamanian nominee directors. But it was secretly controlled by a Tanzanian middleman, Shailesh Vithlani, according to Dar es Salaam court papers.
Investigators are now checking whether Vithlani arranged to pass any money in turn to Tanzanian politicians and officials.
Sources said the bank in Jersey had promptly frozen transactions and filed a suspicious activity report when the Tanzanian inquiries began.
Vithlani, who is of Indian extraction but holds a British passport, is listed as wanted by Interpol.
He has been charged by the Tanzanian anti-corruption bureau with lying to investigators, but has left the country. His whereabouts are unknown.
According to the charges, Vithlani falsely denied he was the owner of the Panama company, and falsely claimed he had only handled a separate commission of 1% on the deal.
The SFO's new director, Richard Alderman, former head of UK tax investigations, is due to take over this month. The SFO refused to comment yesterday.
BAE, which has previously denied wrongdoing, also declined to comment, or to explain its chain of offshore payments, other than to say "BAE Systems continues to fully co-operate with the SFO investigation".
The company has recently launched an extensive public relations campaign and last week unveiled a report commissioned from a commercial consultancy, Oxford Economics, which claimed BAE was of key value to the UK economy