Dec 06. The FT reported that the government’s decision to end a fraud probe into Saudi arms deals is in danger of undermining the integrity of London’s capital markets, a shareholder in BAE Systems, the defence company at the centre of the investigation, has claimed. In a letter to Lord Drayson, the defence procurement minister, F&C Asset Management said the decision to drop the probe had been greeted with relief by the defence industry. It had also led to a boost in the defence group’s share price. But F&C, one of Britain’s leading shareholder groups, said it wished to express its “serious concern at the broader implications this decision could have for the efficient functioning of financial markets as a whole”. The letter, sent yesterday, said the government needed to ensure an investment climate “marked by clear, predictable standards and independent enforcement of the rule of law”. Some other large UK investors in BAE Systems, such as Morley Fund Management, share F&C’s concerns. The criticism is likely to come as a surprise for the government as the shareholders stand to benefit from the decision to drop the inquiry. The Serious Fraud Office had been investigating claims of alleged corrupt practices related to the 20-year-old Al Yamamah oil-for-arms deal, Britain’s biggest export agreement. No charges have been brought against BAE Systems. It has consistently protested its innocence. The probe was dropped last week after Lord Goldsmith, the attorney general, said it threatened British national security. After the SFO sought access to Swiss bank accounts, the Saudis threatened to pull out of a new deal to buy Eurofighter Typhoons from the UK, worth £40bn to BAE Systems. They also threatened to withdraw all co-operation on security with the UK, including intelligence sharing on al-Qaeda. Karina Litvack, head of governance and sustainable investment at F&C and author of the letter, told the Financial Times yesterday that the boost to BAE’s share price was secondary to the “wider public governance issue”. “The broader implications [of suspending the SFO investigation] is that it could undermine the integrity of capital markets.” In the letter to the minister, she said: “There is a danger that the government’s recent action will be perceived as undermining the consistent application of the UK’s national legislation governing corrupt practices, precisely at a time when wider take-up of the OECD [anti-bribery] convention is beginning to take root.” The OECD has criticised the decision to abandon the probe, arguing that it contravened a key international anti-corruption agreement. On December 22nd the UK’s biggest pension fund on Friday added its voice to criticisms in the City of London of the UK government’s decision to halt the Serious Fraud Office’s inquiry into Saudi arms deals. Mark Anson, chief executive of Hermes, which manages the BT Pension Scheme, on Friday wrote to Tony Blair, the British prime minister, saying the decision had threatened the UK’s reputation as a leading financial centre and would have a high long-term cost for business and markets. Hermes is the second big institutional investor this week to write to the government about concerns that halting the probe risked undermining the integrity of London’s capital markets. (Source: FT.com)
21 Dec 06. Raytheon Co. plans to sell its aircraft business for $3.3bn to Hawker Beechcraft Corp., a new company formed by an affiliate of Goldman Sachs and Onex Partners. The world’s fifth-largest defense contractor said Thursday it expects to pocket $2.5bn after taxes from the sale of the Wichita, Kan.-based unit that makes Hawker and Beechcraft planes for commercial and military markets. The business has more than 8,500 employees and about 100 centers worldwide. The deal included facilities and other assets in Little Rock, Ark., Dallas and two sites in Kansas, and the company’s maintenance, service and support network across the United States, United Kingdom and Mexico