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BAE UNDER SCRUTINY FOR CHILEAN DEALS

Sep 05. Peter Spiegel of the FT that, BAE Systems, Europe’s largest defence company, has insisted it has strict rules governing its dealings with foreign consultants following published allegations that some of its Chilean advisers made payments to former dictator Augusto Pinochet.

The Guardian newspaper reported that US banking records obtained by Chilean officials show that between 1997 and 2004, the company paid almost $2.1m to Chilean consultants, which the report said were “front companies and middlemen” for Gen Pinochet.

According to a list published by the newspaper, most of the payments went to an offshore group called Cornwall; other payments went to an offshore entity called Tasker. The newspaper said its documents show the entities were controlled by Oscar Aitkin, Gen Pinochet’s former financial advisor.

The newspaper said that while some of the payments were made directly in BAE’s name, many were made through an entity created by the company called Red Diamond Trading. The Guardian said documents it obtained show that Red Diamond is not listed as a subsidiary in BAE’s accounts, but was used by the company’s marketing department to pay so-called “commissions” to South American advisers.

The hiring of such advisers and lobbyists is common in the defence industry, but the behaviour of such consultants are tightly regulated by UK and US law in an effort to ensure such advisers are used only for legitimate lobbying.

The payments alleged by the Guardian cover a period when Gen Pinochet was already largely out of power. The Chilean government returned to civilian rule in 1990, and Gen Pinochet lost his position as commander-in-chief of the armed forces in 1998. Still, the Guardian said BAE was seeking two contracts in Chile during the time period: a long-range missile system and advanced systems for navy warships.

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