KPMG Accused in Saudi Bribery Case

Standard

Auditing firm KPMG will possibly face criminal charges for their role in the bribery of government officials in Saudi Arabia by Dutch construction giant Ballast Nedam, according to a report published Monday in de Telegraaf newspaper.

Public prosecutors in the Netherlands suspect that KPMG has played an active role in helping Ballast Nedam win major construction projects by obscuring hundreds of millions of dollars that were paid as bribes to officials, the newspaper said. The investigation focuses on the use of false contracts and secret payments via Switzerland during the period from 1997 to 2004.

Ballast Nedam is the fourth biggest Dutch construction and engineering company and they have been involved in several mega projects in Saudi Arabia over the last 25 years, including building King Fahad Causeway that connects the country to Bahrain and the construction of military bases. Saudi billionaire Prince Alwaleed bin Talal owns a minority stake in Ballast Nedam.

Photo courtesy of Line Ørstavik via Flickr

Saudi Failure to Protect Against Corruption in Defense Spending

Standard

Bloomberg:

Saudi Arabia is among the biggest arms-importing countries that have insufficient safeguards against corruption in the defense industry, Transparency International said.

Seven of the nine countries that imported more than $1.5 billion of weapons in 2011 ranked between high and very high for corruption risk, the non-profit organization said today as it unveiled a ranking of 82 countries. Morocco, Pakistan, Turkey and China were among the largest markets with the lowest grades.

Saudi Arabia signed a $29.4 billion agreement with the U.S. in 2011 to buy 84 new F-15 fighter jets and modernize 70 existing ones. A unit of European Aeronautic, Defense & Space Co. (EAD) is currently being investigated by the U.K. Serious Fraud Office over bribery allegations in the country.

The Government Defense Anti-Corruption Index can be found here, and Saudi Arabia’s profile is here.

Do Not Expose Corrupt Officials, Saudi Mufti Says

Standard

Saudi Grand Mufti said he opposes exposing corrupt individuals publicly, adding that there are officials who are responsible for punishing those corrupt individuals. “The solution is by raising awareness and warning against corruption and its consequences in this life and the afterlife,” said Sheikh Abdulaziz Al Alshekih during a speech he gave at Dammam University Saturday according to al-Hayat daily.

This comes in contrast to statements he made last year when he called on monitoring bodies to expose corrupt officials, especially those who take bribes. “Those must be stopped and punished,” he said as reported in Okaz daily on May 15, 2012.

This reversal is not surprising because Wahhabi clerics generally oppose criticizing officials in public. “In the Wahhabi worldview, politics became religious when it was concerned with relationship between ruler and ruled, obedience being the only possible relationship, with secret advise by people of knowledge allowed only after praising the ruler for his good deeds,” writes academic Madawi al-Rasheed.

Saudi Government Accused of Favoritism in Awarding Major Contract

Standard

The state-owned Saudi National Water Co. reportedly plans to spend $38 billion on water projects over the next 16 years. As the world’s largest producer of desalinated water, the Saudi government sure spends a lot of money on water projects. There are, however, some questions over how this money is being spent and the lack of necessary oversight in the process for awarding major government contracts.

On November 21, al-Riyadh daily reported that China’s SEPCO3 complained to several Saudi government departments, including the National Anti-Corruption Commission and the General Audit Bureau, after they lost competition for a contract to build a power plant in Yanbu. The company chief sent an angry letter to the Minister of Water and Electricity saying that the contract was awarded to a local company that lacks experience to build the project, which would cost SR11 billion and supply Madinah with water and electricity

SPECO3 chief wrote in his letter to the minister: “I met with you in your office on 14/11/2012 and the meeting was attended by the representative of the Chinese Embassy. You said you would award the project to a local company despite the fact it does not meet the requirements of the bid, did not submit complete documents and did not have enough experience,” Saudi Gazette reported.

The Ministry of Water and Electricity has rejected the assertion that it has favored a local company, the newspaper reported. In a statement issued earlier this week, the ministry said the contract was awarded to the local company because SEPCO3’s tender was SR700 million higher in terms of capital, saying “All information Sepco Electric mentioned in its letter did not have a shred of truth and was mere fabrications.”

Aramco Identifies Bribery Suspects

Standard

Al-Watan has a story citing unnamed Saudi Aramco sources who said the company has identified a number of current and former employees believed to be suspect in the Tyco bribery case. The paper is also reporting, according to the same sources, that Aramco has asked Tyco in the US to provide them with the names of the employees who accepted the bribes.

Company Pays $26 Million To Settle Saudi Bribery Charges

Standard

Bloomberg:

Tyco International Ltd. agreed to pay more than $26 million to resolve US charges that it bribed officials of companies including Saudi Aramco to win contracts. Tyco Valves & Controls Middle East Inc., a subsidiary of Schaffhausen, Switzerland-based Tyco, agreed to pay $13.7 million as part of a guilty plea entered today before US District Judge Claude Hilton in Alexandria, Virginia, for conspiring to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, the US Justice Department said in a statement. In a civil proceeding, Tyco, which makes and sells products related to security, fire protection and energy, agreed to pay $13.1 million under a final judgment with the Securities and Exchange Commission, according to the statement.

Fueled by large revenues due to the high oil prices, recent years witnessed huge government spending in Saudi Arabia. With the huge government spending, the potential for corruption to win government contracts increased exponentially. What we see here might be just the tip of the iceberg.