Freeh defends Saudi payments

Former FBI Director Louis J. Freeh says $2 billion that flowed from a British arms manufacturer to U.S. bank accounts controlled by Prince Bandar bin Sultan, then Saudi ambassador to the U.S., was not a bribe, but was instead part of a complex barter involving the exchange of Saudi oil for British fighter jets.

The transfer of funds to accounts at Riggs Bank in Washington, D.C., has come under scrutiny as the Justice Department continues an international corruption investigation involving British arms manufacturer BAE Systems. Freeh, who is now a lawyer and consultant for Bandar, made his comments to the Public Broadcasting Service for a “Frontline” documentary to be broadcast this evening. Bandar is now a national security advisor to the Saudi king. He has denied any wrongdoing, as have other Saudi officials.

Freeh said that a 1985 treaty between Britain and Saudi Arabia allowed the trade of oil for weapons. BAE signed an $86-billion contract with the Saudis under the provisions of the treaty, and the funds that flowed between Britain and the Bandar-controlled bank accounts in the U.S. may have come from the sale of Saudi oil under the terms of the contract. As part of the deal, BAE also supplied an Airbus 340 plane, which for years has been used by Bandar.

U.S. government officials said the investigation was being conducted under the Foreign Corrupt Practices Act, which has jurisdiction over business executives making bribes but not the government officials receiving them. As a result, someone like Bandar would not be the target of the Department’s investigation, but his role helping to manage the Riggs Bank accounts has made him central to the inquiry.

Bandar was among the longest-running Saudi ambassadors to the United States, serving from 1983 to 2005.

In a statement issued to The Times, Freeh’s consulting firm, Freeh Group International, dismissed the bribery allegations, saying that “not only have both these reckless allegations not been proved in any court or fair factual forum, but neither has been the subject of any charge or official government accusation.”

Freeh was FBI director from 1993 to 2001 and became known for his tough approach to white-collar crime and terrorism.

BAE confirmed that it is the subject of ongoing investigations, saying in a statement:

“BAE Systems’ view is that the interests of the company as well as of all its stakeholders, including the general public, are best served by allowing these investigations to run their course. The company is working with regulators towards that end, with a view to achieving resolution of the ongoing investigations.”

The British government has halted its own corruption investigation into the BAE contract. At the time it terminated the probe, there were published allegations that the Saudis were threatening to stop cooperating on counter-terrorism matters if the investigation continued. In the statement issued Monday, Freeh’s office said that “the claim that Prince Bandar attempted to interfere” with the British investigation is “refuted by the facts.”

Richard Clarke, a top counter-terrorism advisor to Presidents Clinton and George W. Bush, and others said they have concerns about Freeh’s defense of Bandar.

“Someone who characterizes himself as a U.S. patriot and national security advocate ought not to be on the side of someone blackmailing people not to investigate crimes by threatening to withdraw a nation’s cooperation against terrorists,” Clarke said.

In his “Frontline” interview, Freeh emphatically tells correspondent Lowell Bergman that Bandar did not accept a bribe, either in the form of $2 billion in funds flowing to Riggs Bank or in the use of the aircraft supplied by BAE.

Freeh says that the Airbus -- painted in the colors of Bandar’s favorite football team, the Dallas Cowboys -- is in fact owned by the Saudi Air Force. If members of the Saudi royal family agree to allow Bandar to accept an airplane or anything else, “what was personal or not personal is really none of the business of the United States,” he says.

Actually, that question was important to a former FBI supervisory agent who oversaw the financial investigation into the Saudi government’s accounts at Riggs. Dennis Lormel said Bandar controlled at least 20 accounts at the bank and that government and personal expenditures were intermingled.

The FBI found that significant funds were used by Bandar and his family for personal travel, for his mansions and for some parties, Lormel said. “What’s personal and not personal?” Lormel asked, especially when the Saudi royal family essentially is the government. He said the FBI would ask Saudi officials, “Was this personal money? Where was the money going?” and that the Saudis’ answers were evasive.

Lormel said he had the “utmost regard” for Freeh’s integrity but thought it was nonetheless a mistake for him to represent someone who reportedly helped shut down the British investigation into BAE.

In the “Frontline” interview, Freeh strikes a politically controversial note by contending that the BAE deal was structured partly to avoid congressional restrictions on sale of U.S. parts to the Saudi military.

“U.S. arms could be purchased through BAE in a way that did not deal with the objection of the U.S. Congress to the selling of American equipment to the Saudis,” Freeh says. He does not elaborate.

BAE has sold planes with American-made components to the Saudis. U.S. law requires congressional review before such deals are completed. Congressional arms experts said that as far as they knew all such sales to the Saudis by BAE were reviewed and that they could not explain Freeh’s comment.

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tom.hamburger@latimes.com

josh.meyer@latimes.com