• HIGHLIGHTS
• How BAE looked after members of the Saudi royals
• Prince Bandar's role in the Al Yamamah deal
• Maybe there's another explanation for the huge secret money transfers?
• How Britain's Serious Fraud Office probe ultimately was shut down

The story of BAE and the Saudis and the rest of the world in terms of how they operate, how did this all start?

There had always been rumors about the Saudi arms deal for maybe 20 years, but nobody could ever stand it up. Around 2003, things started to change, because two things happened. First of all, the British tightened up their legislation. They passed an anti-corruption act explicitly criminalizing overseas bribery.

This is because of the OECD [Organisation for Economic Co-operation and Development Anti-bribery] Convention, and because of 9/11?

Exactly, exactly. ... A massive turn made the company sort of reorganize what they were doing, and [that] made us take an interest in the story. The other thing that happened was that a few stories started to come to light. It came to light, for example, that there had been a very mysterious $15 million payment into an offshore account in the Channel Islands, which turned out to belong to the foreign minister of Qatar, a little Middle Eastern state which had bought weapons from BAE. And it turned out the money came from BAE.

So there were all these little things in the air that there was something very smelly going on in the arms industry. ...

So there's suspicions. What turns your suspicions into direct action in your case?

We had a whistleblower with a pile of documents. His name was Peter Gardiner. He ran a travel company. He came to us because we'd been writing about the subject. ...

Tell me when you first met him and how.

Well, you know, people call you up. The phone rings. They say, "I know something about this story you're writing about." ... You try and evaluate the person, don't you? You try and sum them up, see where they're coming from, see whether they're genuine, try and understand what their motives are. Above all, ask them if they've got any documents. ... He had something which proved something. What he had turned out to be the tip of an iceberg.

This man ran a travel company. He only had one client. His client was BAE, and they employed him to look after members of the Saudi royal family. ... BAE and the Saudis, they had this huge arms deal. It had been running for 20 years. BAE sold them planes; in fact, they virtually ran the Saudi air force for them. They had thousands of technicians and pilots and engineers out there.

It made an incredible amount of money for BAE. The company says they took $100 billion of revenue over the 20-year lifetime of the contract and made a lot of work for British employees in factories up and down the country. ...

Officially, he was providing transport and accommodation for these visitors when they came: the head of the Saudi air force, for example, Prince Turki bin Nasser, who was a relative of the ruling family, like they all were. ...

He didn't just stop at providing them with hotels, it seemed. He provided them with expensive holidays. They would go to Hawaii, an entire entourage of 30 people -- his wives, his daughters, his sons, his fixers, his stewards, his assistants. And they would spend literally hundreds of thousands of dollars at a time.

They'd buy them Rolls-Royces. They'd buy them Lotus sports cars. They'd go and empty the department stores with shopping for their wives. He'd be chartering a jumbo cargo jet to carry their shopping back to Riyadh for them and sending the bills to BAE.

But the mysterious thing was, by the time the invoices went to BAE, they didn't tell the truth. They didn't say, "Purchased a Rolls-Royce for Saudis," or, "Payment of flat for girlfriend for official in the Saudi air force." They said, "Providing support and accommodation services under the Al Yamamah contract." ...

The Al Yamamah contract was?

This was the Saudi name for the BAE-Saudi arms contract, Al Yamamah. It means "The Dove." ...

And billed against it are incidentals for the life and times of the rich and not necessarily so famous?

Exactly, exactly. ... It was clear that BAE had a pretty big slush fund out of which they were paying off the books, using this travel company as a cutout, ... in effect giving bribes, treats to Saudi officials, because these people were representing their customers.

It was obviously corrupt and corrupting -- ... juicy, exciting. And we wrote some stories about this with "Lifestyles of the Rich and Famous" [as] basically the theme. BAE made very little response, and we were surprised, because normally these global companies, they're pretty litigious; they're pretty aggressive. They've got enormous PR departments, and they've got fleets of lawyers. They didn't say anything.

Nothing?

They would say, "We deny all wrongdoing," and they'd refuse to say anything else. ... We'd say: "What about this invoice? What about that invoice?" Refused to say. ...

We thought we were clever; we had exposed this slush fund. They were obviously sitting there thinking, well, thank goodness they don't know the real story, because all we had was a tiny little corner of what in the end proved to be an enormous worldwide network of secret cash payments amounting to literally billions of dollars that had gone on for years with the connivance of the British government.

Much bigger story than we realized when we started, and it took us quite a long time to unravel that surprising truth.

Let me go back to Peter Gardiner. He shows up at your office. You go out for tea or for coffee, and he's got documents -- documents that surprised you?

They did surprise me. The documents surprised me for two reasons. One, what they showed was really astonishing amounts of money being thrown around in what appeared to be ludicrously extravagant ways. ... The other thing that surprised me was the existence of documents, because normally it's very rare to get documents about this kind of thing because this kind of thing is concealed, and the companies take a lot of trouble to conceal it. ...

What was his motivation for [coming forward]?

It's interesting the way these things start to unravel. It was all because of 9/11 that the British passed anti-terrorism legislation, which included criminalizing overseas corruption, because it led to money laundering, and everybody was very unhappy about these money-laundering networks that had been revealed in the Al Qaeda attacks.

The result of this was that companies like BAE decided they would have to change their operations; they would have to distance themselves further from what was going on, because the situation might become legally dangerous. ...

... And was he afraid of retribution?

From BAE he was a bit scared, yes, because they're very powerful people, and they can turn quite ugly if they're crossed. That was his fear. And I think he was a bit scared about the Saudis as well.

But he went forward?

He came to us originally as a confidential source. ... Now he's a witness for the various police bodies that have tried to investigate BAE. But when it started, he was a scared person. He didn't want his name to come out; he didn't want anybody to know he'd been talking to us. But he did have these documents. With the documents, you can write the story.

Then at some point you made a decision to go to the authorities. ... What happened?

Well, we started to get more and more whistleblowers coming forward, and we started to develop more and more sources. And as we did, this whole network started to be slowly revealed. ...

I remember I had to fly over to Ireland, an obscure spot on the west coast of Ireland, which was the only place my source would agree to meet me. We sat there at some little restaurant eating oysters with the Atlantic waves beating against the rocks, and he explained to me that he had been one of BAE's confidential agents, these hundreds of middlemen they had throughout the world who were employed to help them get arms deals all over the world -- not just in Saudi Arabia, dozens and dozens of countries. ...

And he showed me that when he got commission payments from BAE, ... they didn't come from BAE. Instead, they came from a mysterious company called Red Diamond. ... It turned out Red Diamond was registered in the British Virgin Islands -- offshore, where ownership is secret.

It turned out that BAE had covertly set up Red Diamond off the books -- never appeared in any of the company accounts that they had this secret subsidiary -- and that they were making payments all [over] the world to their agents via this weird Red Diamond company.

Did he tell you why they would do it this way?

He said that there was a system for employing these agents, and it was a pretty secret system. ... When they wanted you to work for them, you signed a deal with them that maybe they paid you a small commission -- 1 percent, 2 percent, 3 percent, something like that -- which was respectable and normal. And then you would sign a second secret contract under which you got a second commission of maybe 10 percent or something enormous. ...

And when the time came to sign all these contracts, they had a secret organization in Switzerland where you went to. And you physically signed these undercover contracts, and they were then kept in Switzerland. And if you wanted to see your contract ever because there was some dispute, you were allowed to do that, but you had to go to Switzerland. You had to see it [there]; you couldn't take a copy away.

And the whole thing was administered by discreet, anonymous Swiss lawyers. This was starting to look more like a ... money-laundering kind of operation than the kind of business you would expect a reputable world-class, transnational company to be engaged in.

So you decided to take all of this to the authorities?

... We could establish the existence of Red Diamond. We could establish the existence of this mysterious Swiss office that they were running, which also was in the name of an offshore company. We could establish a few payments here and there. But it seemed to us that the whole thing was much bigger than we'd realized, and much bigger than we could ever crack open. So the logical thing to do is we take this to the authorities. ...

I'm a journalist; my guiding star is information. Anything I can think of that's going to increase the store of information and that's going to enable me to find out more information, publish it to the world, to our readers, then that's good. That's my professional objective is to find things out, make them public. ...

And it's this point you meet Robert Wardle.

Yeah, I go and see Robert Wardle, the head of the SFO [Serious Fraud Office]. I give him our evidence. I don't give him anything which is going to implicate confidential sources, naturally, but I have Gardiner's consent, for example, to give him the documents that Gardiner had given us. And I introduced him to Gardiner, who goes to see them, and he becomes their witness. He cooperates with them. He gives them more documents. ...

... Gardiner's evidence showed that Prince Turki bin Nasser and his clan were major beneficiaries. Any other part of the Saudi royal family?

Well, the Saudi royal family is a big clan, and there were many of them that got these benefits when they came over. One of the surprising ones, for example, was the daughter of Prince Bandar [bin Sultan], who was a very influential person, the ambassador to the United States at the time, his daughter's around-the-world trip for her honeymoon was all organized by Gardiner and paid for by BAE.

Who is Prince Bandar, and is he really important?

Prince Bandar seemed to be one of the most important members of the Saudi royal family who came into this story. What transpired in the end was that it was Prince Bandar who was the architect of the original Saudi-U.K. arms deal. ... This was not something that was publicized at the time; in fact, it was pretty much a secret at the time. But what came out was that the then-British prime minister, Mrs. [Margaret] Thatcher, and then-U.S. President Ronald Reagan had been involved with Bandar in organizing this arms deal. And Bandar said, "Leave it with me; I will make it happen." ...

This is the same Prince Bandar who at times calls himself Bandar Bush?

This is the one that everyone now calls Bandar Bush because he's so close to President Bush and the Bush family. I mean, you couldn't be better connected than this man.

You just said that Ronald Reagan and Margaret Thatcher got together with Prince Bandar to do this deal. Why would the United States give ... [an] $80 to $100 billion arms deal to another country?

Well, there's some politics about this. The kind of weaponry that Saudi Arabia wants to buy they couldn't easily buy direct from the U.S. because there would be problems with Congress because of the Israel lobby. It was easier politically to buy this equipment from the British, but to do that, the British had to have the acquiescence from the Reagan United States. They weren't going to do anything that was going to upset the United States. So you had to bring President Reagan into the loop. ...

It occurs to me that if part of the deal is Peter Gardiner's travel agency providing perks and possibly other payments, off-the-books payments for money moving around, and in Britain it was not illegal, necessarily, to pay bribes or move money around in this way, at least prior to 2001 or so, is that another reason for the deal, because in the U.S. this would have been illegal?

Certainly true -- much easier to do these corrupt deals with Britain than with the United States because of the existence of the Foreign Corrupt Practices Act in the United States. I don't think the FCPA prevents U.S. companies from bribing overseas, human nature being what it is. What it does is it makes it much more difficult and complicated and awkward to organize bribes to get around the FCPA, whereas in Britain in those days it wasn't complicated or awkward at all. It was just easy. It wasn't, apparently, against the law. The British government was perfectly happy if you did it. They turned a blind eye.

So they said it was just good for business?

They said it was good for business, exactly, and they were trying to take the business away from the Americans, basically. When the Americans passed the FCPA, there's a lot of evidence in the British government archives that the British government didn't want to have a similar act despite the American pressure to join in and have their own FCPA, because they thought this way they could steal [business] from the Americans. ...

So in Britain, you don't hold corporations to maybe the same standard that we do in the United States.

That's absolutely correct. That's why corporations set up in London rather than in New York. ... They're like a slightly more respectable version of the offshore tax havens. ...

... Sources at BAE say there was no crime here with the Gardiner payments. All they did was provide this travel agent and this service, but they in the end billed the Saudis for all these expenses and were reimbursed. What's the crime?

Well, it's certainly true that all the bribes that were paid and all the perks that were handed out were eventually billed back to the Saudis, so they were made to pay for all the under-the-counter money that went to Saudi officials and members of the Saudi royal family.

It is, in fact, illegal under Saudi law to take commissions out of the contracts of the kind that they did. Arms contracts, according to Saudi law, you are not allowed to have agents; you are not allowed to pay commissions. One of the reasons why the Saudi royal family has been so uptight and embarrassed about the BAE disclosures is they're revealed to be breaking their own laws.

How important was the signing of the OECD Convention in terms of both forcing some of this out and creating the initial investigations?

It's very interesting. ... Until this scandal broke, really, nobody had really heard very much of the OECD Convention. Looking back, it seems that what it did was set in train a very slow process of change, of adjustment. Because of the existence of the convention, eventually countries came under pressure to ratify it, which they did, like Britain, and came under pressure to pass domestic legislation to conform with the convention. And eventually, Britain, for example, was made to do that. ...

... When they passed the law criminalizing overseas bribery, companies like BAE, it seems, didn't say, "We'd better stop doing it." They said, "We'd better find a safer way of doing it so we don't get into trouble." And they just moved it all offshore. ...

And BAE reacts by moving these operations to Switzerland.

That's how they react. They move everything to Switzerland, yes.

Let me just be clear here. The money that's going through Switzerland includes now payments overseas, the travel-agency type of activity that Peter Gardiner was doing, or do we know yet?

There were different levels of payments going on; that's what came out in the end. There was this relatively minor level of payments -- I mean, I say minor, but it was like $100 million we're talking about -- which was the trips and treats for the Saudi royals when they came over here, just to keep them sweet, just to keep the contract going and everybody happy. That slush fund turned out to be the small part.

The big part was, every time there was one of these arms deals, they employed an intermediary, an agent, a fixer. And the fixer was given huge amounts of secret money. It was a percentage, maybe 10 percent, 15 percent, 20 percent, 25 percent, as much as 30 percent of the contract. ... They'd take some for themselves, but their main job was to distribute it. ... That was the source of billions and billions of dollars of secret payments. ...

They say that the payments you say were paid to Prince Bandar were made to the Ministry of Defense and the air force of Saudi Arabia in accounts in the United States.

It is certainly true that they paid the money to a Ministry of Defense account in Washington belonging to Saudi Arabia, at Riggs Bank in Washington. The signatory on that account, who had control over that account, was Prince Bandar.

The discovery of these billion-dollar flows of money came through the Serious Fraud Office investigation?

They issued subpoenas to BAE's bankers, Lloyds Bank, who were the people who were organizing all these money flows, to hand over the banking records. They issued subpoenas to BAE then to identify the agents and the intermediaries and the individuals who were behind the mysterious Panama Companies and so forth that all the money was going to.

BAE, as I understand it, disclosed millions and millions of pages of files. What happens when you get these subpoenas at big companies is their lawyers say, "Snow them" -- you know, you provide them with a snowstorm of documents. I think SFO then spent, like, two years picking through these millions of documents, and eventually they appear to have found some that meant something, and they identified all these agents, all these payments.

They discovered not only a Red Diamond network, which was making payments all over the world to Chile, Romania, the Czech Republic, as well [as] Qatar; they also discovered there was a special, separate offshore arrangement, a company called Poseidon registered in the British Virgin Islands, which was paying billions of dollars ... to Swiss bank accounts of intermediaries who were acting for Saudi Arabia on the Saudi deal. It was through their subpoena powers that all this stuff came out.

And what happened then was they then went to all these different jurisdictions. ... They went to the Swiss authorities and asked for assistance. They went to the South African authorities; there was a very big arms deal in South Africa. [They] went to Tanzania, where there was a big arms deal, and so on, all around the world. And those authorities, in turn, subpoenaed their own bank records and whatever, and identified agents and so on.

So after a while, there was a considerable pile of documents from all over the world which documented what appeared to be a huge, worldwide, effectively money-laundering system of secret payments of billions and billions of dollars by BAE.

The Saudi government has said: "We knew all about this. It is the British government and the Saudi government. This was a country-to-country deal here. There's no problem here. You're making this into a problem that didn't exist."

Well, the British government did know all about it, that's true. They were fellow conspirators in all this. In fact, they arranged for the mechanism of some of the payments. The money that went to Prince Bandar -- it used to come in from Saudi Arabia to pay for the weapons contract -- was put in a bank account in the Bank of England. Then Prince Bandar would send in an invoice, I understand it, to BAE. BAE would go to the Bank of England account, draw out the money, send it to Bandar. ...

So certainly the British government were fellow conspirators in all this. As to the Saudi government, it's a sort of joke to talk about the Saudi government, because there is no Saudi government; there is the Saudi royal family, who basically owns Saudi Arabia. It's a family business, and it's an enormous clan of about 2,000 princes, all of whom are sort of plundering the country, if you like. You can't compare it to a democracy like the United States or Britain.

So you have to ask, why is it that they would be worried? If it was all fine and aboveboard, and nobody minded in Saudi Arabia that they were having all this money, why is it such a big secret? The Saudis have been obsessionally [sic] secret about this. They have been petrified for 20 years, it seems, about the truth coming out about these payments.

And when the truth looked as if it was about to come out -- because the SFO finally issued subpoenas in Switzerland; with the cooperation of the Swiss authorities, they got the Swiss banks to say, "We will disclose what happened to all the money that was paid by BAE to a Saudi intermediary, where it all went" -- when that was about to come out, Saudi Arabia and the regime threw into a panic and exerted tremendous political power on Britain to get the investigation blocked before those Swiss accounts and their contents [were] reviewed.

Now, if what they were doing was all legal and aboveboard, why the panic? ...

Let me read to you what Prince Bandar['s lawyer] wrote to you: "All payments made through Riggs Bank" -- this is the $2 billion you were talking about -- "were not our clients' private accounts, but accounts of the Saudi Arabian government. ... All of those payments were made through normal banking channels with funds originating at the Bank of England in London." As to some of the other payments related to the aircraft that he uses, he says, "Your suggestion that it was a corrupt gift to our client is, therefore, inaccurate and defamatory."

BAE admit that they made a gift of a brand-new Airbus to Prince Bandar, which he had painted in the blue and silver colors of the Dallas Cowboys, his favorite team, and has used ever since to fly around the world. ...

Those are the facts. As to the MODA [Saudi Arabian Ministry of Defense and Aviation] account, Riggs Bank came under investigation for other reasons, and those accounts at Riggs were examined, and the documents show that payments out of the MODA account, controlled by Prince Bandar, went [to] such matters as the refurbishment of his palace in Riyadh, which I should think is rather a private activity.

Prince Bandar also says that all the payments were approved by the minister of defense in Saudi Arabia. Well, I expect they were, because the minister of defense at that time was his father.

There seems to be a contradiction here. You yourself say there's very little difference between the Saudi royal family, the Saudi Arabia government and the Saudi Arabia country as a whole. They own it. So what's the problem with the payments? They can do what they want. It's not a democracy. They don't claim to be a democracy.

Well, let's not talk the language of law; let's talk the language of politics here. The Saudi royal family is very big. If one part of it is discovered to be pocketing billions of dollars, other parts of the Saudi royal family may get pretty resentful. That may be politically destabilizing.

Also, people sometimes forget Saudi Arabia also consists of a lot of ordinary Saudi Arabians who live there, who are Saudi Arabia as far as you and me are concerned. They may well get pretty upset if they discover that their rulers are pocketing these billions. And indeed, it was Osama bin Laden who used to spend his time accusing the leaders of Saudi Arabia of being corrupt, thieves, pocketing billions, exploiting the others. So it encourages Al Qaeda and those people if it emerges how much money these [royals] are, as their opponents would say, stealing. ...

... They implied -- they haven't said this publicly -- that much of this money was part of a basically Cold War deal. ... Is it possible that the extra money that appeared to have been moved in different clandestine ways to accounts under Prince Bandar's control ... was done to facilitate clandestine missions, and actually in the end saved money for taxpayers in the United States and Britain, and may have been beneficial to our national security?

Let's think about that for a moment. What we're trying to say is that the way it worked was that Britain sold overpriced planes to Saudi Arabia; Saudi Arabia paid too much money for them, through a complicated oil deal; gave the money to Britain, which then secretly transferred a big chunk of it to the personally controlled Washington account of Prince Bandar, so that he could do secret things with it to help prosecute the Cold War. Well, I think that's an overly complex explanation.

It's true that Saudi Arabia has been called in by the United States to help the Contra activities, or to help fund the Mujahedeen in the '80s, but they did it in much simpler ways. I think that's a fantastically overcomplicated idea. It doesn't make a lot of sense. If you go and look at the British government archives, they describe, in great detail, how the Saudi Arabian system works. And there's a dispatch of one British ambassador who says Sultan -- that's the crown prince now -- has a corrupt interest in all contracts. That's the explanation they gave. It's a very simple explanation. It's an official government document. That's how Saudi Arabia works.

But we're talking about, potentially, tens of billions of dollars here, unaccounted for, over a 20-year period or more. Is it possible that some of it was used for these clandestine purposes? Then you don't have to account for it. It's already out of the country, there's no way for it to be disclosed, as long as the British maintain discretion, which they did until you came along, and it accomplished various things, on behalf of, let's say, the Western alliance.

Look, this is black money. The thing about black money is you can claim it's being used for all kinds of good things, like prosecuting the Cold War. Or you can steal the money, or the people responsible for transmitting the black money can skim some of it off; that kind of thing has happened

These are the evils of black money. These are the evils of money laundering. You get pots of black money that nobody sees, nobody has to account for, you can do anything you like with. Mainly what happens with black money is people steal it, because they can. ...

... You've already told us that the investigation by the government in Saudi Arabia, you've already told us that the investigation by the U.K. government, begin in essence when you go to see Robert Wardle.

Yes.

How does it end?

It ends when the British prime minister, Tony Blair, ,a href="http://www.guardian.co.uk/world/2007/dec/21/bae.tonyblair" target="links">bullies Robert Wardle into dropping the investigation. That's exactly what happened.

And how did Blair come to this conclusion, that that's what he should do?

Well, it appears that he told -- personally, he wrote letters -- Wardle, head of the SFO, that he had to stop the investigation because it was upsetting the Saudi royal family. And the Saudi royal family were threatening -- and it turned out that what he meant by that was Bandar was threatening ... that if this investigation didn't stop, and if these Swiss bank accounts weren't left alone, then a, Saudi Arabia would stop buying weapons from Britain, and there was a new big arms deal in the offing; b, Saudi Arabia would cut intelligence links with Britain, stop telling them what they knew about Al Qaeda, and then Britons would be blown up on British streets. And this is what Wardle was told, this terrible farrago of threats.

Editor's Note: Read the memo Blair sent to Attorney General Lord Peter Goldsmith, urging him to drop the investigation. (PDF file)

Wasn't there some suspicion at the SFO that we have a person who may be involved in the bribery scheme, Prince Bandar, ... coming to 10 Downing Street, threatening the government of Britain about a possible revelation about what he and his family have been doing?

The top officials at the SFO tried to save us. I believe they wrote a memo saying: "Look here, all these threats are coming from the person who is under suspicion as being involved in the whole affair. How can you take this seriously?" But they were overruled. ...

... Initially the decision by Prime Minister Blair, within his office, is brought to court by some of the non-governmental organizations in Britain. ... What does the High Court say?

... The British High Court issued a ringing judgment saying in effect that what had happened was a betrayal of the British constitution and a betrayal of the rule of law. They said that the head of the SFO had no right to roll over under these threats from Saudi Arabia, and that if the suspect in an ordinary criminal case threatened he was going to shoot the prosecutor's wife if he didn't drop the case, did that kind of blackmail, they'd go to jail, and that this kind of thing was just as disgraceful. And they overturned the decision.

By the prime minister?

Yes.

... So they appealed?

They appealed to the House of Lords, which is the highest court in the land. They took a conservative approach. They said unfortunately the High Court didn't have the power to intervene in this decision; that really the prosecutor -- that's Wardle -- had complete discretion. If he decided British lives were at risk in British streets, he was entitled to do so; the courts don't really have the power to step in. ...

... No one seemed to have mentioned that Britain has signed the OECD Convention and that it has a section that says you cannot take into consideration either the national economic interests of the country or its relationship with another country when you decide to prosecute or not.

... The truth was both BAE and Prince Bandar and the Saudis were looking for a way ... to get around the OECD Convention. They spent a year -- the documents that emerged revealed this -- trying to bully Robert Wardle into dropping the case. BAE did, the Ministry of Defense did, and the Saudis did.

The arguments they were using at that time, for about a year, were, if you don't drop this case, we're not going to give you another arms deal, and you won't like that. And Wardle fended them all off. He said, under the OECD Anti-Bribery convention, I'm not allowed to take into account in my decision the economic effect of what I do. ... And then they said national security trumps everything; of course it does. And poor Wardle and his people, they were put in an impossible position. ...

And the intelligence agencies in Britain, what did they say?

They certainly didn't say people will die because of this. When all this happened, there was a huge uproar, of course, and the British government tried to make out that they had had this advice from MI6, the British intelligence agency. And inside Whitehall, they drafted an ex parte memo saying they've done all this on the recommendations of MI6. But when this was sent to MI6 to sign off on, they refused to do so. They said, "This wasn't us." ...

... So they have never said, "We agree with what Prime Minister Blair said"?

In the end, they issued some kind of statement which said, "We agree that if Saudi Arabia withdrew its intelligence cooperation, that would be bad." But that's a sort of truism; it's sort of obvious. What they didn't say, and what they have refused to this day to say, is we believe that Saudi Arabia really would have withdrawn its cooperation and British citizens really would have died. In other words, they won't sign up to this charade.

And Britain got the new arms deal?

Britain got the new arms deal. Very valuable. ... This is for the new Eurofighter, which is the next generation of warplane.

And what happened to the SFO? And Robert Wardle?

Well, Robert Wardle's time has run out. He's had to step down as head of the SFO. [SFO Assistant Director] Helen Garlick, who was running the investigation into BAE for him, has decided to resign, and I don't blame her. And all the elements are that the future for the SFO itself as an agency is bleak. It may well be disbanded or merged with somebody else. I think the whole case has demonstrated that the SFO is a weak organization that is vulnerable to political pressure. It's destroyed their credibility.

And the investigations of BAE? Are any still going on?

Yes. The Department of Justice in Washington opened an investigation just as the Serious Fraud Office was forced to close down its own investigation. There are other investigations going on all over the world, but I think they're all pretty formal; none of them are getting any further than the SFO investigation. There's only the investigation in Washington and another money-laundering investigation in Switzerland that are still really live.

As you say, the Department of Justice is investigating. But BAE, just like in the United Kingdom, is a big company, with 40,000 employees in the United States. Half its business is in the United States. And Prince Bandar, his nickname is Bandar Bush. What future does that case have?

I'm sure observers around the world are waiting to see whether the Department of Justice is also vulnerable to political pressure. We shall have to see.

Our understanding is that Britain is not cooperating in this case with the Department of Justice. Neither was BAE. And so the Department of Justice did a coordinated operation in early May of 2008. It literally confronted BAE's CEO at the Houston International Airport, seized his computer and his laptop and gave him a subpoena. Doesn't sound like friends.

That was very impressive. We shall have to see whether the piece of theater there ... is followed up by an actual outcome.