Sen. Mitch McConnell, R-Ky., is pushing $25 million in earmarked federal funds for a British defense contractor that is under criminal investigation by the U.S. Justice Department and suspected by American diplomats of a "longstanding, widespread pattern of bribery allegations."
McConnell tucked money for three weapons projects for BAE Systems into the defense appropriations bill, which the Senate approved Oct. 3. The Defense Department failed to include the money in its own budget request, which required McConnell to intercede, said BAE spokeswoman Susan Lenover.
BAE is based in Great Britain but has worldwide operations, including a Louisville facility that makes naval guns and employs 322. McConnell has taken at least $53,000 in campaign donations from BAE's political action committees and employees since his 2002 re-election. United Defense Industries, which BAE purchased two years ago, pledged $500,000 to a political-science foundation the senator created, the McConnell Center at the University of Louisville.
In June, BAE confirmed that the Justice Department is investigating possible corruption in its Saudi Arabian deals. According to British media reports, BAE set up a slush fund with hundreds of millions of dollars in a Washington, D.C., bank to bribe Saudi Prince Bandar bin Sultan in order to win weapons contracts. Bandar, who heads the Saudi National Security Council, has denied the allegation.
BAE cannot discuss the allegation, Lenover said.
"We can't really comment on it because it's an ongoing investigation," Lenover said. "We're continuing to cooperate."
Since BAE publicly disclosed the federal investigation, causing its stock to drop nearly 8 percent, its chief executive officer has announced his retirement earlier than expected and the company retained Britain's former lord chief justice to lead an internal ethics review.
Although the current controversy focuses on Saudi Arabia, internal records from the U.S. State Department reveal that diplomats also have worried about how BAE won weapons contracts in South Africa, Austria, Tanzania and Qatar.
In a 2002 briefing memo, Deputy Assistant Secretary of State Janice Bay told a colleague to "ask what the British government has done to investigate allegations of bribery by BAE, not only in connection with recent projects, but in connection with older contracts for which bribe payments may still be ongoing."
"This volume of allegations about one company would have triggered a Department of Justice Criminal Division long ago," Bay wrote. Bay's memo, and other State Department documents related to BAE, are posted on the Web site of the British newspaper The Guardian.
The British Serious Fraud Office later opened its own investigation of BAE's Saudi deals. But Prime Minister Tony Blair ordered the case closed last year, citing potential damage to British-Saudi relations and possible disclosure of military secrets.
Justice Department spokeswoman Jaclyn Lesch said she could not comment on, or confirm, her agency's investigation. In 2002, BAE and another defense contractor, Lockheed Martin, agreed to pay the Justice Department $6.2 million to settle a False Claims Act case involving defective equipment they sold to the Navy.
McConnell spokesman Don Stewart did not respond to repeated requests for comment.
Ethics watchdogs say they're surprised McConnell, the Senate Republican leader, would continue to give earmarks and take donations from a corporation in hot water with his own government. McConnell should keep his distance, said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.
"Most politicians decide that a scandal is a good time to stop doing business with a company, at least until the scandal is over," Sloan said. "Particularly when we're talking about a criminal investigation over bribery. You would think that a member of Congress would want to steer clear of anyone accused of bribery."
Even without the scandal, it looks bad for a senator to earmark federal money for a corporation, as compared to a public university or a local government in his state, said Ken Boehm, chairman of the National Legal and Policy Center in Washington.
"Why did they need special favors from Senator McConnell instead of going through the usual open competition and budgeting process at the Pentagon?" Boehm asked.
Nor should McConnell take donations from a company to which he steers federal funds, said Boehm, a former Republican congressional aide.
"Contributions from entities that directly benefit from earmarks are a bad idea," he said. "There's a big difference between a company that just likes your general ideas and a company that stands to benefit from one or more transactions that you're making on their behalf using public money."
McConnell's earmarks include $12.2 million for five-inch Naval gun mount overhauls; $8 million for Naval destroyer weapons modernization; and $4.8 million for ammunition pallets for Naval ships.
The defense appropriations bill awaits action by a Senate-House conference committee that will iron out differences between bills from the two chambers before sending one bill to President Bush for his signature. Members of the conference have not been chosen, but McConnell sits on the Senate Appropriations subcommittee that controls defense spending.