The Prince and the Prime Minister

A scathing British court ruling could create more legal problems for Prince Bandar, head of Saudi Arabia's National Security Council and the former Saudi ambassador in Washington, over his alleged role in a massive multimillion-dollar bribery scheme involving a major British aerospace firm.

The Justice Department is investigating allegations that U.K.-based British Aerospace Systems (BAE) paid millions of dollars in bribes to Bandar and other Saudi officials—in possible violation of the Foreign Corrupt Practices Act. Bandar, whose close ties to the Bush family earned him the nickname "Bandar Bush," has retained former FBI Director Louis Freeh to represent him in connection with the Justice Department probe. A spokesman said Freeh was traveling overseas and could not be reached for comment.

Last week the British High Court ruled that then-Prime Minister Tony Blair's government may have interfered with the rule of law in December 2006, when it ordered the British government's Serious Fraud Office to shut down its own bribery investigation, allegedly after Bandar threatened to cut off Saudi cooperation with U.K. terrorism investigations if the inquiry continued. The ruling could pressure the fraud office to reopen its own shuttered investigation into the alleged scandal. (Bandar's representatives have repeatedly denied that he engaged in any wrongdoing).

A U.S. court recently froze Bandar's American assets after a Michigan pension fund with holdings in BAE sued to recover $2 billion in bribes the company had allegedly paid Bandar since 1986. Noting that Bandar had recently sold at least three U.S. properties that it claimed were purchased with BAE bribe money, the pension fund earlier this year persuaded U.S. District Court Judge Rosemary Collyer to issue a temporary injunction banning Bandar from selling any more U.S.-based property while the order is in force. (Bandar allegedly sold two residences in Aspen, Colo., one for $8.6 million and another for $3.925 million, according to court papers filed by the pension fund's lawyers. According to the court documents, Bandar still owns his sprawling Hala Ranch, a 95-acre property in Aspen said to feature 15 bedrooms, 16 bathrooms, a private barbershop and beauty salon, its own sewage treatment plant, sculpture gardens, fish ponds, ski trails, a massive hot tub and a barbecue pit large enough to roast goats. The property was valued at $135 million in 2006.)

Bandar is represented in the pension fund lawsuit by William Bradford Reynolds, the chief of the Justice Department's civil rights division during the Reagan administration. Reynolds did not respond immediately to a message from NEWSWEEK requesting comment.

Although Bandar has been rarely seen in the United States over the past year, a senior U.S. official who met with him last year said he has occasionally resurfaced to express his pique over the inquiries into the BAE matter. "He was mad, he was angry, he was in a snit," said one U.S. official who met with Bandar last year after the Justice Department had begun its probe. "He felt he was being treated unfairly."

The British court ruling strongly criticized the actions of both Bandar and senior members of the British government, including former prime minister Tony Blair. The court said that if a person subject to British criminal law—which Bandar, as a foreign government official and diplomat, is not—had made the kind of threats to U.K. officials that the Saudi prince allegedly did, he would "risk being charged with an attempt to pervert the course of justice." In Britain "perverting the course of justice" is the equivalent of obstruction of justice in the United States.

In the ruling, British judges Sir Alan Moses and Sir Jeremy Sullivan said that Blair and his administration were wrong to pressure prosecutors at the government's Serious Fraud Office to shut down a long-running bribery investigation. Blair's government announced in December 2006 that it had ordered the investigation stopped on national security grounds, indicating that representatives of the Saudi government had threatened to cut off cooperation with U.K. authorities on antiterrorist operations if the corruption inquiry was not quashed. Justices Moses and Sullivan said that both Bandar's threats and the fact that Blair's government gave into them were an affront to the British judicial system and the rule of law. "No one, whether within this country or outside, is entitled to interfere with the course of our justice," the judges declared. But the judges did not directly order the British government, now headed by Blair's successor, Gordon Brown, to reopen its investigation of British Aerospace's dealings with Bandar and the Saudis—indicating instead that they expected to hear further arguments on the subject.

Brown is scheduled to pay a visit to the United States this week and will meet with President Bush as well as all three of the major candidates to succeed him. A U.K. government official said that there are no plans to discuss the British Aerospace investigation with U.S. officials.

A spokeswoman for the Home Office, the British government department responsible for internal security, confirmed Wednesday that the U.S. Justice Department had asked for help with its investigation. Some British commentators have suggested that the Home Office, at the direction of top British government ministers, is sitting on the Justice Department's request in an effort to kill or stall the American inquiry. The Home Office spokeswoman denied that her agency was in any way trying to hamper the U.S. investigation. Instead, she said the U.S. request for assistance was "receiving due consideration." A Justice Department spokesmen declined to comment. But a U.S. law enforcement official acknowledged that the U.S. probe of British Aerospace was still in progress.

The British Aerospace investigations in Europe and in the United States remain a major embarrassment for the Saudi government, and in particular for Prince Bandar. For many years he was a close confidant of American presidents, including both the current President Bush and his father. As NEWSWEEK reported last year, hundreds of pages of confidential U.S. bank records may help illuminate the allegations that British Aerospace funneled up to $2 billion in questionable payments to Bandar. The BBC and the Guardian newspaper reported last year that the company made "secret" payments to a Washington, D.C., bank account controlled by Bandar. The payments are alleged to be part of an $80 billion military aircraft deal between London and Riyadh.

The Riggs Bank records, obtained by NEWSWEEK, include a November 2003 "suspicious activity report" that the bank filed with the Treasury Department. It disclosed that over a four-month period $17.4 million had been disbursed from the Saudi defense account to a single individual in Saudi Arabia. When Riggs officials asked the Saudis who the person was and why he was receiving the funds, they were told the individual "coordinates home improvement/construction projects for Prince Bandar in Saudi Arabia," and the payments were for a "new Saudi palace," one document shows. In another instance Bandar wired $400,000 from a Riggs account to a luxury car dealer overseas.

When NEWSWEEK reported on these documents, Tom Rose, a British lawyer for Bandar, denied that the Saudi prince had received "improper secret" commissions. He said the BAE funds were actually being paid into a Saudi Defense Ministry account over which Bandar had signature authority, but any payouts from those accounts "were exclusively for purposes approved" by the ministry. A BAE spokesman said, "We deny all allegations of wrongdoing."

In recent months Bandar's role inside Saudi Arabia has been substantially reduced. When Bush visited Saudi Arabia in mid-January he asked after the former ambassador. "Where's my pal Bandar?" Bush said at one high-level meeting, according to a source close to the Saudis who requested anonymity discussing sensitive matters. The president was told that Bandar was unavailable. When Vice President Dick Cheney visited Saudi Arabia last month, Bandar "was nowhere to be seen," said the source. "He is no longer the central actor in U.S.-Saudi relations that he was for 20 years," said Nat Kerns, the editor of Foreign Reports, who closely tracks developments in the kingdom.

Last week's British High Court ruling is scathing in its description of both Bandar's behavior and the Blair government's alleged capitulation to the prince's threats. Quoting from internal British government documents, the judges said that professional investigators at the Serious Fraud Office initially resisted pressure from elected members of Blair's government to curb its Bandar-related investigation, suggesting it would be inappropriate for the British government to take seriously threats from a person who, like Bandar, was himself under investigation.

Though it turned over a considerable amount of internal documentation to the courts, the judges said the British government refused to make public precise details of the threats Bandar and other Saudi officials allegedly made to British authorities. Last June the London Sunday Times reported that Bandar allegedly told Jonathan Powell, a top adviser to Blair, that a big Saudi-U.K. arms deal could be stopped and "intelligence and diplomatic relations would be pulled" if the British didn't pull the plug on the investigation. According to a witness statement submitted to the court, Robert Wardle, the prosecutor in charge of the British Aerospace probe, was told in a September 2006 letter that the Saudi ambassador to Britain had warned a U.K. official that "British lives on British streets were at risk" if the investigation was allowed to continue.