BVI Offshore Business: Grey Area

BAE Systems, the British defence company that was alleged of using a secret payments system and channeling the funds through the BVI offshore companies, now is again in the spotlight in connection with Tanzania radar deal, after Tanzania’s top corruption investigator said he expects to seek criminal charges in relation to the country’s purchase in 2202 of a £28m radar system from the company.

The sale is investigated simultaneously by the UK’s Serious Fraud Office and the institution of Tanzania, the Prevention of Corruption Bureau. The UK SFO already has six continuing investigations into BAE, concerning hundreds of millions of pounds transferred to agents in different countries through the BVI companies Red Diamond Trading and Poseidon Trading Investments. The subject for the last two investigations are payments in the amount of about 30% of the contract’s value, allegedly made by Europe’s largest defence company to a Tanzanian agent.

Also, UK SFO assistant director Helen Garlick said that her agency was co-operating with Tanzanian Bureau to complete investigations into why BAE used a BVI company in connection with the Tanzanian radar deal, to enter into an agreement with a Panamanian company to provide “advice and various services”. By her words, under this agreement BAE made payments in excess of $11 million to Shailesh Vithlani, whose company Merlin International was the agent on the radar deal. Last year SFO investigators visited Dar es Salaam, Tanzania’s capital, and asked some questions to Mr Vithlani and his former business partners.

The Tanzanian radar deal was criticized a lot, arguing that such a sophisticated piece of equipment was too expensive for one of the poorest countries in the world; the World Bank objected to the sale, which came as Tanzania was granted debt relief of $2billion.