Switzerland Investigating BAE Arms Deals

BERN, Switzerland - Swiss prosecutors have begun an investigation into corruption allegations surrounding arms deals by the British aerospace company BAE Systems PLC, an official said.

Jeannette Balmer, a spokeswoman for the Swiss federal prosecutor's office, told The Associated Press late Friday that a criminal investigation was under way into suspicions of money laundering involving the company. She declined to give further details - including the identity of any parties apart from BAE - to avoid undermining the probe.

In December, the British government called off an inquiry into a multibillion dollar arms deal between BAE Systems and Saudi Arabia, saying it was acting to protect national security and British jobs. Prime Minister Tony Blair told lawmakers that continuing the investigation could harm Britain's strategically important relationship with Saudi Arabia.

Britain's Defense Ministry said it was not aware of the Swiss investigation and could not comment until they had further details.

The British Serious Fraud Office had been investigating allegations that BAE ran a $120 million "slush fund" offering sweeteners to Saudi officials - reportedly via Swiss bank accounts - in return for lucrative contracts as part of an arms deal in the 1980s.

Under the agreement, BAE supplied Tornado fighter jets and other military equipment to Saudi Arabia, which paid by supplying the British government with oil. The deal's full extent was never revealed, but it was widely believed to be Britain's largest-ever export agreement. The British government sold its majority BAE stake in 1981 when it became a public limited company.

Blair's decision to call off the probe drew a complaint from the U.S. government and a strong rebuke from the 30-nation Organization for Economic Cooperation and Development, which questioned whether Britain was committed to working against corruption.

Balmer said the Swiss investigation was the result of a report prosecutors received from the country's money-laundering authority.

In June 2006, the British Serious Fraud Office asked Switzerland for legal assistance in its investigation of the Saudi deal. The request was put on hold after the British government called off the probe, but never formally withdrawn.

Balmer said separate requests from the British office for legal assistance into possible BAE bribes to Tanzania, Romania, Chile and the Czech Republic were also still being considered. She said prosecutors had yet to decide whether to pass on bank documents relating to these cases to British authorities.