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U.K. arms firm paid £1 million to Pinochet

David Leigh and Rob Evans

Money was paid through a front company; commission on arms deals

LONDON: The U.K.'s biggest arms firm, BAE Systems, has been identified on U.S. banking records as secretly paying more than £1m to General Augusto Pinochet, former Chilean dictator.

An investigation by the London-based Guardian newspaper has revealed some of the money was listed as being paid through a front company in the British Virgin Islands, which BAE has used to channel commission on arms deals.

Covert payments to Pinochet-linked groups are listed on documents compiled by the Chilean authorities and obtained by the newspaper. They record large payments from BAE as recently as last year. Asked on Wednesday night why it had paid the general, who is the target of numerous allegations of murder and torture from the time he seized power in Chile, BAE issued a statement saying: ``We at BAE Systems have clear and rigorous policies which govern the conduct of our relationships with third parties. We require all our employees to adhere to these policies and comply with the law.''

Target of bribery allegation

The company, a prime exhibitor at the international arms fair in London, has been the target of bribery allegations. It is under investigation by the U.K.'s Serious Fraud Office on suspicion of money laundering and false accounting, after allegations of a £60 million Saudi "slush fund."

A Chilean judge, Sergio Munoz, is pursuing Gen. Pinochet on allegations of tax evasion. Last month he made successful court applications in the U.S. to obtain banking records.

They disclosed huge sums of cash flowing into banks including the then Miami branch of Coutts. Coutts operated accounts, which Chilean prosecutors say are linked to Gen. Pinochet, from 1993 to 2004, though the bank has now sold out to a Spanish bank, Santander. Coutts said : ``We have no reason to believe our Miami affiliate did anything inappropriate by reference to the banking requirements at the time.''

Documents obtained by the Guardian show it has been used since 1998 to funnel covert commission payments for aerospace deals to Argentina.

The BAE payments went to offshore firms - also registered in the British Virgin Islands - controlled, the Chilean authorities say, by Gen Pinochet's financial adviser, Oscar Aitkin, described in a US senate committee investigation this year as a conduit for payments to Gen Pinochet.

BAE sought to conclude a deal in the 1990s to sell Chile a rocket system and are now trying to sell it naval electronics. Chile is described as a ``key market'' by the U.K. Ministry of Defence. — © Guardian Newspapers Limited 2004

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