ARMS DEAL-FRAUD INVESTIGATION: Saab's agent in South Africa under investigation by British Serious Fraud Office

subscriber | 09 January, 2007

JOHANNESBURG. The British Serious Fraud Office is investigating alleged “substantial payments” from BAE Systems to Fana Hlongwane, a former arms middleman for BAE Systems and Saab, according to an article in the British newspaper The Guardian.

The investigation of Mr. Hlongwane is, says sources to Africascan, the most significant “catch” so far in the six-year arms investigation saga that has so far failed to link any of the successful bidders with corrupt practices.

An SFO spokesperson has confirmed the investigation, which is said to be “a few years old” and the South African counterpart says that it cannot comment on ongoing investigations.

“BAE Systems continues to co-operate fully with the SFO investigation. As this is a continuing criminal investigation, it would be inappropriate for us to comment on the substance of the investigation. Consistent with this, we will not be commenting on any point of substance. This cannot of course be taken as any kind of admission”, said Lisa Hillary-Tee in a BAE Systems statement.

The significance of Fana Hlongwane, from a BAE Systems and Saab point of view, was that he was either a Director of Osprey Aviation, or at the least the Chairman of an Osprey shareholder, Tsebe Properties. The now deceased arms agent Richard Charter, a former BAE employee with offices in Pretoria, controlled Osprey Aviation.

Osprey, which for obscure reasons has not had the search light on it in any serious way, was the main intermediate beneficiary of the arms deal. Under normal circumstances the company should have received about US $ 90 million (SEK 600 million) in commissions from successfully secure the sale of 28 JAS 39 Gripen and 24 Hawk 100 to South Africa – though BAE and Saab have said that the commission paid was significantly less.

A Saab source says that Fana Hlongwane was a well known entity who the company courted and saw as reliable as he was an advisor to the Defence minister and a Director of Denel. But the source is adamant that Saab did not have any knowledge that Mr. Hlongwane acted as an agent.

An industry source, who was an operative during the arms deal, explains to Africascan that the possibility that Fana Hlongwane received illicit commissions, is “10 out of 10”.

“We were told that Fana Hlongwane was a person one should show respect. He had no particular competence in the deal, except being the guy to bribe. When the deal was concluded he went into voluntary exile for a year in London and Geneva. He only came back when he saw that nothing happened”, says the source.

Mr. Hlongwane, alledgedly, was only one of many who benefited illicitly from the arms deal.

“It is an open secret in the arms industry that the South African deal in many ways was the largest bribe bonanza ever. Never before had an arms deal had so many kickbacks”, said one source with inside access.

According to The Guardian the SFO is cooperating with South Africa’s serious crimes unit, The Scorpions, in investigating movements on Mr. Hlongwane's bank accounts. Whether that also includes cooperation with other foreign bank accounts, e.g. in Switzerland, where Mr. Hlongwane stayed for some time, is not clear.

The SFO is also looking into Osprey’s accounts. A complicating factor there is that Richard Carter died in a canoe accident together with his son in the Orange River in 2003.

Neither BAE Systems nor Saab have come clean on the exact amounts paid to Osprey for the successful conclusion of the arms contracts.

An intelligence source, and even the South African attorney general, has expressed surprise that it took so long to look into the dealings of the agent in the South African arms deal.

Fana Hlongwane was, besides being a Director of Osprey, also an advisor and seen as a front man for Joe Modise, South Africa’s deceased former Minister of Defense. Modise resigned in 1999 and died of cancer in 2002.

Mr. Hlongwane is also a former director of the State owned arms company Denel – Saab has entered a joint venture with one of Denel’s divisions.

According to South Africa’s Sunday Times Fana Hlongwane has kept up his interest in arms trade. He is presently chairman of the Ngwane Defence Group.

The arms deal, a ZAR 43 billion deal a the time, where the purchase of the Gripen’s and the Hawk’s was the largest piece by far, continues to overshadow South African politics on the highest level. Last year the then Deputy President, Jacob Zuma, was fired after his former financial advisor was sentenced to a 15-year imprisonment for accepting money from French arms manufacturer Thompson-CSF (Thales) on behalf of Jacob Zuma. The ZAR 500 000 transaction was, according the Judge Squires, a payment to secure that Zuma facilitated Thompson-CSF’s interests in the arms deal. As it where the French company only benefited as a sub-contractor in the deal.

The Guardian reported back in 2003 that BAE paid a commission of £150 million (ZAR 1.8 billion) to secure the Hawk contract. This amount has been strongly repudiated.

The British Serious Fraud Office is investing the South African arms deal as part of a larger investigation into BAE System. Last month the British Attorney General Lord Peter Goldsmith, the government's chief legal adviser, announced that the SFO had halted its investigation into claims BAE Systems had set up a slush fund for
some Saudi royal family members relating to an arms deal back in 1980.

Illicit BAE Systems payments to politicians and officials in Tanzania, Chile, the Czech Republic and Romania are also probed according to The Guardian.

BAE’s and Saab’s spokes persons declined to comment on the matter. BAE’s London spokes person Lisa Hillary-Tee was contacted as well as Fana Hlongwane, for a comment.

Africascan Comment
The rumour mill surrounding the South African arms deal continues.

The British SFO investigation seem to do exactly what should have been done long ago, namely what is obvious in any fraud investigation, to “follow the money”, to paraphrase Deep Troat in the Watergate investigation.

It should be said that the Swedish Government and serious fraud units have been extremely passive over the years and they have mostly accepted Saab’s promises that it has not done anything illegal during the South African arms deal’s process.

Saab may not have done anything illicit, but, as it says, have followed the rule book. It is a valid point, as a Saab director put it, that it would be way too high a risk to bribe people and risk a deal that’s taken some 10-20 years to execute. A bribe that indeed could sink the whole Swedish arms industry.

This story reads like a John le Carre novel. We have probably not seen the end of it yet.