UK fraud watchdog probes EADS Saudi defence deal

By Rhys Jones

LONDON (Reuters) - Britain's Serious Fraud Office is investigating allegations that European defense group EADS <EAD.PA> bribed Saudi Arabian officials to win a $3.3 billion communications contract.

The probe centers on a contract awarded to GPT Special Project Management, owned by EADS, to provide communications and intranet services for the Saudi National Guard, which protects the Kingdom's royal family.

"It is the case that the SFO are looking at it (the contract) but have been trying to keep it under the radar because it's a sensitive issue," a source close to the investigation told Reuters on Tuesday.

GPT Special Project Management is a subsidiary of Paradigm Services, a unit of Astrium, the satellite arm of EADS.

"Certain allegations have been made and these are being properly investigated," an EADS spokesman said on Tuesday. The SFO declined to comment.

EADS shares in Paris, which have risen a quarter in 2011, were 1.8 percent higher at 22.83 euros by 4:52 a.m. EDT, valuing the group at around $26 billion.

The allegations surfaced in employment tribunal proceedings and were made by a former GPT employee who claimed Saudi officials were given luxury cars, jewelry and large sums of cash from London accounts through intermediaries, the source added.

The claims are similar to recent UK and U.S. corruption probes into deals between British defense contractor BAE Systems <BAES.L> and Saudi Arabia.

The SFO in 2006 dropped an investigation into allegations BAE paid bribes to Saudi officials to help clinch a 40 billion pound ($66 billion) arms contract, citing a need to "safeguard national and international security."

BAE last year said it would pay around $450 million in fines in the U.S. and Britain following long-running corruption investigations on both sides of the Atlantic into defense deals in Saudi Arabia, Tanzania, Sweden, the Czech Republic and Hungary.

Tough British anti-corruption laws that companies fear will expose them to unlimited fines will come into force in early July, but will only cover crimes committed after that date.

Under the act, companies with any British interest face unlimited fines if they cannot show they have made "adequate procedures" to prevent bribery.

(Additional reporting by Karolina Tagaris; Editing by Dan Grebler, Paul Hoskins and Erica Billingham)