A Small Town's International Scandal
Harper Woods, Michigan finds itself at the center of a $100 billion scandal.
June 25, 2008 — -- The small town of Harper Woods, Michigan is at the center of an international scandal involving allegations of bribery, the Saudi royal family, and a $100 billion dollar fighter jet contract.
Harper Woods is suing a British defense contracting firm, BAE Systems, alleging that the company engaged in illegal behavior, including paying over $2 billion in bribes and kickbacks to the former Saudi ambassador to the U.S., in connection to a large fighter jet contract BAE had with Saudi Arabia stemming back to the 1980s.
Why is this small town of less than 15,000 residents involved? Because the town invested part of its public employees' retirement fund, about $135,000, in BAE Systems and now the town says it wants to make sure the company is spending shareholder money properly.
In a lawsuit filed in US District Court in Washington DC, Harper Woods alleges that BAE, as part of a deal to secure the multi-billion fighter jet contract with Saudi Arabia, paid bribes and kickbacks to the former Saudi Ambassador to the United States, Prince Bandar bin Sultan bin Abdul-Aziz Al-Saud.
The complaint alleges that because Prince Bandar was the son of the Minister of Defense and the brother-in-law of the head of the Saudi Air Force that he was in a position to influence whether or not BAE was awarded the contract.
The bribes to Prince Bandar, according to the complaint, "have amounted to over $2 billion over the last 20 years". The complaint alleges that Bandar had ready access to the money because a US bank was used, so that he could use the money on expenditures such as a $100 million residence in Aspen, Colorado and for his "fantastically outfitted" personal Airbus airplane, also valued at over $100 million.
BAE Systems Inc. denies the allegations in the complaint saying the claims have no substance. "The company has filed a motion before the courts in Washington, DC, to have this action dismissed in the US and heard in UK courts," said a statement e-mailed to ABCNews.com from BAE.
Attorneys for BAE say the US, and Harper Woods, does not have jurisdiction over the case because the company is based in the UK. "As a UK listed and headquartered company," said the statement, 'we believe this is the convenient forum for the motion to be heard." Lawyers for BAE argued that point in court late last week and judge is expected to rule this summer.
BAE has had its share of scandal lately. The Department of Justice served a number of subpoenas to BAE employees based in the US in connection with an ongoing investigation. That investigation is reportedly into BAE's compliance with anti-bribery laws. US authorities briefly detained the CEO and another BAE director when they arrived in US airports earlier this year to serve them subpoenas.
The British government was also reportedly investigating the fighter jet deal with Saudi Arabia, but that investigation was shut down after Saudi Arabia allegedly threatened to end their intelligence and diplomatic relationship with the British government. The issue of whether or not that investigation was closed unlawfully is on appeal before the House of Lords, according to press reports.
The Saudi embassy in Washington DC did not return phone calls and an email request seeking comment on behalf of the government and Prince Bandar, who now heads the Saudi national security council. Prince Bandar has previously denied the allegations.
Neither the attorney nor the mayor of Harper Woods would comment on the ongoing litigation.
In an earlier radio interview the pro tem mayor of Harper Woods said she didn't expect the case to become such a scandal.
"We don't look at this as sort of an international incident," Mayor Cheryl Constantino told National Public Radio.
"We just look at it as, 'Hey, here's our retirees' pension money and we just want to make sure that everything is right with it.' And then the next thing we know is that, this whole Prince Bandar thing comes up and we're like 'whoa'."
Kenya Chanél is a summer intern at the Brian Ross Investigative Unit. She is in the 2009 class at Howard University.