Gag Order

The United Kingdom's highest court today provided new details of how the Saudis pressured British Prime Minister Tony Blair's government to shut down a politically embarrassing bribery investigation two years ago that implicated the Saudi ambassador to Washington. The ruling, by a House of Lords judicial panel, offers an unusually revealing window into how international power politics is played in the post-9/11 era.

The five-member panel recounts how Blair, faced with Saudi threats to cut off cooperation on counterterrorism operations, personally intervened to scuttle a criminal investigation into billions of dollars in allegedly improper payments made by British Aerospace Systems (BAE) to obtain Saudi contracts.

But the former prime minister, the court found, acted out of good faith: he and his advisers were genuinely worried that, if the Saudis followed through on their threats, it could lead to another "7/7"—British shorthand for the devastating July 7, 2005, terrorist bombings in the London subway system that killed 52 commuters and injured 700.

"The threats to national and international security [are] very grave indeed and ... British lives on British streets would be at risk," the British ambassador to Riyadh warned the Serious Fraud Office, the British unit conducting the probe, according to the court ruling.

Today's decision overrules a lower-court finding that Serious Fraud Office officials had improperly closed the investigation under pressure from Blair and thus effectively ends any chance that the SFO will pursue the BAE bribery allegations. (In a statement, the SFO said it will pursue other allegations against BAE not related to the Saudis. A spokesman for BAE denied wrongdoing but declined comment on the ruling.) The ruling was therefore a vindication of sorts for Blair and his top advisers, as well as a key victory for the Saudis and Prince Bandar bin Sultan, the former Saudi ambassador to the United States who was allegedly the prime recipient of the improper payments by BAE—even if the confirmation of their strong-arm tactics are not likely to win them any new friends in London or Washington.

Bandar, a longtime close personal friend of the Bush family who is now national-security adviser to Saudi King Abdullah, was so worried about investigations into the BAE payments that last year he hired the international legal and security firm Freeh Group International, headed by former FBI director Louis Freeh, to defend him from the charges. Among the Freeh Group's partners is Sir Stephen Mitchell, a prominent British barrister and former High Court judge. In addition, Bandar has hired William Bradford Reynolds, a former top official in the Reagan Justice Department, to represent him in a private shareholder lawsuit relating to the alleged improper payments.

Today's ruling is not likely to end the controversy over the BAE payments, however. The U.S. Justice Department is conducting its own investigation into whether BAE, which operates widely in the United States and has a growing portfolio of Pentagon contracts, violated the Foreign Corrupt Practices Act in making payments to Bandar and other Saudi officials.

The ruling is also likely to fuel criticism that the Saudi government—which portrays itself as a key ally of the United States and Great Britain in the War on Terror—is far less cooperative than it publicly claims. "This shows how the Saudis can get foreign governments to disregard their own justice system," said Ali Al-Ahmed, the director of the Gulf Institute, a Washington-based think tank that is critical of the Saudi government. "Terrorism is being used to blackmail the West. You watch, it is only a matter of time before they do this in the U.S."

As a sign of how the Saudis frequently forge alliances with Western leaders who help them, Ahmed pointed out that just two weeks ago Blair was among the most prominent guests to show up at a worldwide conference of religions hosted by Saudi King Abdullah in Madrid. At the conference, Blair—who recently set up his own private foundation—lavished praise upon Abdullah. "The king has made a lot of reforms," said Blair. NEWSWEEK was unable to obtain comment from the Saudi Embassy on the new ruling.

The British investigation into the BAE payments to Bandar was triggered in part by "suspicious activity reports" filed with the U.S. government by the now-defunct Riggs Bank. The reports, first reported by NEWSWEEK, showed that a Saudi Embassy account in D.C. had received $17.4 million in unexplained payments during a four-month period in late 2003 from an overseas source. When Riggs officials inquired about the payments, they were told they were being used to coordinate "home improvement/construction projects for Prince Bandar in Saudi Arabia." The British media later reported that the payments had come from BAE as part of a secret agreement connected to an $80 billion military aircraft deal between London and Riyadh.

Lawyers for the Saudis and spokesmen on their behalf have repeatedly argued that the payments were entirely legitimate and were made to a Saudi Defense Ministry account over which Bandar, whose father is the Saudi defense minister, had control. But evidence of the payments prompted Britain's Serious Fraud Office to launch an inquiry into whether BAE had violated British laws in paying bribes to Saudi officials. In 2006, Saudi officials—and reportedly Bandar himself—stepped up the pressure on Blair's government to close the investigation, suggesting that pursuit of the probe could lead them to cut off cooperation with the British on counterterrorism matters.

The court ruling today, written by Lord Thomas Bingham, described how Blair himself and Sir Sherard Cowper-Coles, Britain's ambassador to Saudi Arabia, used Saudi threats of new terror attacks in Britain to get the SFO to shut down the bribes investigation. According to the ruling, Blair personally sent a "personal minute" about the matter to the U.K. Attorney General, who oversees SFO operations. Blair warned of "a real and immediate risk of a collapse in UK/Saudi security, intelligence and diplomatic cooperation," and included attachments based on information from Britain's secret intelligence agencies, M.I.5 and M.I.6.

In three meetings with the head of the Serious Fraud Office, Ambassador Cowper-Coles conveyed increasingly dire warnings about possible new terror attacks on British soil, the ruling states. "At the first meeting the ambassador had described the threats to national and international security as very grave indeed and had said that British lives on British streets would be at risk," according to Lord Bingham's ruling, summarizing the evidence presented to the court. "At the second meeting, he had again said that lives would be at risk. At the third he had spoken of a real threat to British lives."

One assistant SFO director concluded following these warnings that if the Saudis carried out their threats to withdraw counterterrorism cooperation, it could lead to "another 7/7."

Though the U.K. government declined to explicitly confirm the incident to the courts, last year London's Sunday Times reported that in a meeting with one of Blair's top advisers, Bandar personally threatened that the Saudis' "intelligence and diplomatic relations" with Britain would be curtailed unless the SFO's investigations related to Bandar were shut down.

In the judgment of the House of Lords, all this made the final decision by the Serious Fraud Office to shut down the bribery investigation into BAE entirely justified. Wrote Lord Bingham: "What determined the decision [to shut down the investigation] was the [SFO] Director's judgment that the public interest in saving British lives outweighed the public interest in pursuing BAE to conviction."