BAE faces criminal inquiry in US over £1bn payments

The US Department of Justice is said to be "99% certain" to open a corruption investigation into the alleged £1bn arms deal payments from the arms company BAE to Prince Bandar of Saudi Arabia.

The sources say US officials were particularly concerned by the allegations in the Guardian that UK Ministry of Defence officials actively colluded in the payments.

One said: "The image of all these Bob Cratchits in Whitehall sitting at their high stools processing invoices from Bandar has been a startling one to us."

This announcement came at the very moment that Tony Blair was telling the House of Commons that he took full responsibility for the decision to halt an investigation by the Serious Fraud Office into corruption allegations against BAE and to withhold details of the £1bn payments to Prince Bandar from the anti-corruption watchdog, the Organisation for Economic Cooperation and Development.

Menzies Campbell, the Liberal Democrat leader, asked: "Which minister is answerable ... for the decision to withhold information from that inquiry in relation to payments made by the Ministry of Defence to Prince Bandar?"

The prime minister replied: "If he wants to blame anyone for this he can blame me, and I'm perfectly happy to take responsibility for it."

Mr Blair did not say whether the Bandar payments were continuing. He went on: "It would lead to the complete wreckage of a relationship that is of fundamental importance of the security of this country ... That's why I took the decision; I don't regret it then and I don't regret it now."

The Prime Minister is, of course, referring to Saudi Arabia's disgraceful threat to withdraw from any intelligence co-operation with the UK if the investigation into Bandar's payments continued.

It is for this reason that Blair has been claiming that the decision was a matter of "national security".

The Americans have a history of seeing things differently from the UK when it comes to the subject of bribery.

Released documents show that the former FCPA prosecutor Peter Clark clashed with Sir Kevin Tebbit, former MoD permanent secretary, over the UK's refusal to pursue allegations of corruption in the Czech Republic and in Qatar.

In the Qatar case, £7m was discovered to have been paid by BAE to the foreign minister of the Middle East oil state, and deposited in offshore accounts in Jersey. One source said: "We said to Sir Kevin, 'There's a roomful of documents in Jersey indicating bribery'. But he told us he had got a letter sent after the event from the ruler of Qatar saying he had no objections to the payment. We didn't regard that as altering the legal situation."

In London, the chairman of the OECD's bribery panel, Swiss lawyer Mark Pieth, told a legal conference that under the terms of the anti-bribery treaty, to which the UK is a signatory, Britain could only flout it on national security grounds "in an extreme case of necessity". That had yet to be proved. He said his personal view was that a British court should have the opportunity to decide whether the alleged payment to Prince Bandar had been legal or illegal. He hoped a judicial review would be allowed on the decision to halt the police investigation.

It will be fascinating to see if the Americans open an investigation into this matter, especially as Bush has such a strong personal relationship with Bandar, so much so that he is nicknamed Bandar Bush.

And it's sadly part of an established pattern that Blair is let down by the country that he sacrificed his Premiership for. I welcome their intervention in this case, but if I was Blair I would hope that they would turn a blind eye after all I had done for them.

But it is becoming part of the pattern that, the more Blair gives, the less he receives in return. Brown should take note.

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Tags: Blair, Prince Bandar, BAE, bribery allegations, US investigation