• Weir Group chairman Lord Smith, left, CEO Keith Cochrane, right, and senior index director Michael Dearden at the High Court in Edinburgh. All three joined the company after the kickback scandal took place. Photograph: Julie Bull
Once criticised for failing to investigate corporate crimes, the authorities had proved they had the power to take on large companies that break international law to secure lucrative contracts.
The prosecution of Weir, a FTSE-100 company, for providing kickbacks to the Iraqi regime was precedent-setting. It was the first case to be brought by the dedicated sanctions team at the National Casework Division, part of the Crown Office and Procurator Fiscal Service; it was the first time confiscation powers under the Proceeds of Crime Act 2002 had been used against a large corporate for its behaviour overseas; and it was the largest confiscation order to date in the UK.
By agreeing to overcharge the controversial Oil For Food Programme (set up to ensure United Nations' sanctions didn't hurt ordinary Iraqis) for contracts agreed between 2001 and 2003, the Weir Group was able to divert 3.1m of humanitarian aid to Saddam Hussein's coffers.
Fining the company 3m at the High Court in Edinburgh last week, Lord Carloway said he was taking into account Weir Group's guilty plea and its willingness to pay back the 9.4m profits it made from the deals, the 3.1m it diverted from the OFFP and the 1.4m it paid to its Iraqi agent for acting as a conduit for the illegal payments. The judge accepted those directly involved had since left the company, that the subsidiary involved had been sold and that a large number of new businesses had been acquired "to create a company of a different complexion". He also pointed out the company had overhauled its procedures and training.
Discussions are now under way as to how the confiscated money should be spent. Traditionally, cash taken under the Proceeds of Crime Act would be used for youth and community initiatives in Scotland, but it is understood at least some of the 16.9m could be ploughed back into water projects in Iraq through a charity.
It seems as if an attempt is being made to draw a line under the affair. And yet some believe justice has not yet been done. Like many other firms which traded with Iraq in the early Noughties, Weir Group PLC put profits before ethics; when told it had to pay a 10 per cent kickback or it wouldn't win contracts, any scruples about UN sanctions seemed to disappear.
This decision was taken at a high level. According to a 64-page Crown Office narrative, a director of the company, a senior manager and the principal salesman together with directors and the manager of the principal subsidiary company involved in the deals were all present at a meeting when the illegality of the kickbacks was spelt out.
Yet none of those directly involved in the scandal have been identified or pursued through the courts. This is despite the fact that individuals from other companies - including bridge-builders Mabey & Johnson, which was fined 6.5m after it pleaded guilty to ten charges of corruption and violation of sanctions last year, have been charged and are awaiting trial.
In 2004, more than 50 Weir Group executives and key employees connected to the affair were summoned to a strict briefing by the then chief executive Mark Selway and one or more of them were the subject of internal disciplinary proceedings.
But - even then - the company refused to identify those involved or confirm if anyone other than the Iraqi agent had been fired. Moreover, though most of those at the helm at the time have moved on, many secured prestigious posts elsewhere.
In a statement explaining its decision on keeping individuals out of the frame, the Crown Office said: "In the course of this investigation it became clear that the decision to pay kickbacks to the Iraqi government, and to pay fees to the Iraqi agent, was taken at Weir Group level. It was, therefore, deemed that the most appropriate course of action was to prosecute The Weir Group plc rather than any individual who may have been involved in these events."
That does not explain, however, why the names of the men who made the crucial decisions - clearly known to prosecutors - were not included in the Crown Office narrative submitted to the High Court. There is a suspicion in legal circles Weir's guilty plea and co-operation may have come at the price of keeping the identity of the guilty directors secret.
But anti-poverty charity War on Want wants tougher actions taken against those at the top of offending businesses. "The UK has a very poor record in dealing with bribery and corruption cases involving British companies and we would look to the new government to clean up its act and prosecute those which are involved in this kind of activity," said WoW executive director John Hilary.
"If this marks a new beginning then that's to the good, but I think directors at the top levels of British companies should be held responsible for the actions of their companies.
"What tends to happen is that the sum levied against the companies are easily digestible - they're so small in terms of overall turnover, they can be easily incorporated into their annual profit and loss account, but once you've made it a personal responsibility of the directors it's going to have much more bite."
The offences committed by Weir Group PLC came against a background of trade sanctions against Iraq. Introduced after Saddam invaded Kuwait in 1990, it soon became clear the measures were leading to suffering and starvation among the Iraqi population so the UN set up the Oil for Food Programme. From 1996 onwards, Saddam was allowed to sell oil, but all the receipts were placed in a UN account in Paris. Iraq was then able to use the funds to buy goods approved by the UN for the benefit of its population.
Using its French subsidiary Wemco to administer the deals (because of Iraq's "Buy British Last" policy), it tendered for and won several contracts which involved supplying spare parts for water and oil pumps to Baghdad mayoralty, Iraq's North Oil Company and South Oil Company.
However, in 2000, Saddam's Revolutionary Command Council decreed that, in order to secure contracts, foreign companies would have to pay a kickback or "after-sales tax" of 10 per cent. The companies were told they would have to bring their goods through the port of Um Qasr, and would be prevented from unloading until they proved the kickback had been paid.
Made aware of the new arrangement by Baghdad's mayor, a salesman for Weir Pumps, the subsidiary most heavily involved in the contracts, told his superiors if the company didn't pay, there would be no more orders.
Knowing they couldn't pay the money into an Iraqi bank, it was agreed an Iraqi agent would pay it from his own pocket. When it received the money from the OFFP, the company would pay the 10 per cent kickback plus a further 4 per cent for the agent's services to a fake Geneva-based company, Corsin Finance Ltd. These payments would be unlikely to arouse suspicion as paying an agent to act on overseas deals is in itself entirely legitimate.
Two meetings were held on 13 and 14 September 2001 at the behest of a director who was not involved in the OFFP contracts, but had become aware of what was going on. At the second meeting, a director of Weir Group gave the go-ahead for the kickbacks despite being told they were illegal. The first payment was made that same day.
In total, Weir Group plc secured 16 contracts worth 34,340,204 by paying kickbacks of 3,104,527.
Things began to unravel after the invasion of Iraq in 2003. It quickly became clear the OFFP had been abused by the Iraqi regime and several UN officials.
In the two years that followed a report by the US Defence Contract Audit Agency, a hearing before the US Senate and an independent inquiry committee headed by US banker Paul Volcker all implicated Weir Group as one of dozens of companies which might have capitulated to Saddam Hussein's demands. At first Selway denied the company had been involved in any wrongdoing, but, following an internal investigation, Weir Group admitted irregular payments had been made.
The former executive chairman and chief executive Sir Ron Garrick became a non-executive director and then deputy chairman of HBOS before retiring and Selway became chief executive of Australian building firm Boral. Chairman Sir Robert Smith (Lord Smith of Kelvin), who took up his role in 2002, is still in his post and now chairs the organising committee for Glasgow's 2014 Commonwealth Games.
In the wake of the prosecution, Weir took the opportunity to promote itself as born-again. "Since 2001, Weir has been transformed," Lord Smith said. "We have a different board and management team, all of whom are committed to doing business at all times in an ethical manner."
But others believe not enough is being done to hold companies accountable for their actions. The SFO insists the Bribery Act - which comes into force in April - will make it easier to crack down on unethical behaviour by multinationals. For the first time, any company with British offices or owning a UK subsidiary will be subject to the act, and the SFO will not have to prove intent by directors - merely that fraud has been committed.
But many believe we have a long way to go before the culture of bribery and corruption in business is eradicated. Campaigners also hope the guilty men will be named in future corporate cases similar to Weir's defiance of the UN. On Monday, anti-arms trade protesters are set to gather outside Southwark Crown Court to protest at a deal that is likely to see BAE Systems plead guilty and pay 30m for "accounting errors" in Tanzania in exchange for the SFO dropping its probe into alleged bribery and corruption in Tanzania, the Czech Republic, Romania and South Africa. The proposed deal comes four years after an earlier SFO probe into BAE arms deals with Saudi Arabia was dropped after the intervention of the then prime minister Tony Blair.
"Even if BAE is ordered to pay the full 30m fine, it is still peanuts in their reckoning and far less than the real costs paid by the people of Tanzania, one of the world's poorest countries," said Kaye Stearman from the Campaign Against Arms Trade.
In addition to new legislation, War on Want is pushing for an independent watchdog on ethics. "If we had a Commission for Business and Human Rights it would be possible to take far greater action against this kind of nefarious dealing overseas, and that would act as a caution to other companies.
"The idea is it would have some power to get redress for people, but it would also promote the standards that UK companies should adhere to when they're operating overseas," Hilary said.
Weir is one of the most famous names in Scottish manufacturing. Set up by brothers George and James in 1872 at the height of the industrial revolution, the Weir Group - or G&J Weir as it was then - produced pioneering pumping equipment for the thriving Clydeside shipyards.
Double-acting Weir steam pumps were virtually standard fitment on British-built steamships well into the 1950s and were used on ships across the world.
But the company has also built cars and buses, constructed prefabricated housing, oil pipelines and desalination plants, produced armaments during two world wars and been involved in the development of the precursor to the helicopter.
Today, the company is a global leader in the design, supply and ongoing service of the engineering equipment for the mining, oil and gas, power and industrial sectors and is listed on the London Stock Exchange. With annual sales of 1.4 billion, it employs 9,000 people and operates in more than 42 countries with manufacturing facilities in North and South America, the UK, mainland Europe, Australia, South Africa, India and China.
It forecast profits in the second half of 2010 of about 145m, which is 50m more than the same period the previous year, thanks to the growing global demand for oil.