Case Study Of BAE Systems

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BAE Systems Case Summary
Background
Facts and Issues In November 2000, BAE Systems plc (BAES) assured the U.S. government that both U.S. and Non-U.S. entities would function as if they were subject to the Foreign Corrupt Practices Act (FPCA), Title 15 U.S.C. Section 78dd-1, anti-bribery provisions. BAES assured, in writing, that adequate compliance mechanisms would be created to combat bribery or corruption by November 2001. In 2002, rumors began to swarm that BAES was awarded Eastern European contracts to supply fighter jets using bribery tactics on its public officials. As a result of the rumors, the U.S. Department of Defense (DOD) requested BAES to affirm that it has complied with its anti-corruption commitment to the U.S. government. In June 2002, BAES again represented to the DOD that mechanisms were in place to have all its businesses operate subject to or in compliance with the FPCA anti-bribery provisions. BAES statements were later found to be false. In addition to false statements, violations of the Arms Export Control Act (AECA) came to the forefront.The AECA gives the Department of State the authority to regulate the distribution of U.S. military technology through export licensing of the applicant. The Department of State has the power to approve or deny applications to transfer controlled U.S. technology identified on the U.S. Munitions List (USML)(United States V. BAE Systems Plc, 2015). As part of the requirements of the AECA, the license applicant must identify all commissions paid to anyone in reference to assisting with defense articles and service sales. The identity of the person and fees or commissions paid is required to be documented the ITAR Part 130 filing to the Department of State. Additionally, these filings must be updated on a periodic basis to ensure full disclosure of information. 22 CFR 130.11.
DOJ Investigation and Findings The findings of the investigation of the Department of Justice (DOJ) unveiled that BAES regularly failed to abide by the requirements of the AECA and ITAR. BAES operated with a blatant disregard of its legal disclosure obligations by not identifying commissions paid to marketing advisors assisting with defense articles and service sales and

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