Arms giant BAe Systems 'paid £1m to ex-dictator Pinochet'

The Guardian newspaper said it had documents showing three companies linked to Gen Pinochet were getting money from the firm as late as June last year.

BAe Systems, which employs more than 2000 people in Edinburgh, is already under investigation by the Serious Fraud Office on suspicion of money laundering and false accounting, after allegations of a 60m Saudi "slush fund".

The newspaper said it had obtained documents showing that between December 1997 and October 2004 the firm had made payments of $1,998,871 (1.1m) in 14 instalments.

The money went to three companies - Tasker Investments, Cornwall Overseas Corporation and Eastview Finance - all of which were named in a US Senate report in March this year as conduits for payments to General Pinochet.

The last direct payment from BAe is said to have been on June 30 last year, for 98,000.

Since 2002, it has been illegal for British firms to make corrupt payments to foreign nationals.

But the firm said in a statement: "We at BAe Systems have clear and rigorous policies which govern the conduct of our relationships with third parties.

"All BAe Systems employees are required to act with honesty, integrity and fairness. We will not tolerate bribery or other attempts to improperly influence the decisions of customers or suppliers.

"We are committed to the highest ethical standards. We comply with the law in all countries where we operate."

The newspaper said many of the recent payments were not recorded in the name of BAe but in that of Red Diamond Trading, a company said to have been set up in 1998 by a sub-division of BAe and registered in the British Virgin Islands. It said documents showed that Red Diamond was not listed as a subsidiary in BAe's accounts, but transfers secret "commissions" on their behalf through Lloyds Bank.

The paper said the documents also showed many of the payments went through a Miami branch of Coutts, the British bank which looks after the Queen's money.

General Pinochet seized power in a military coup in 1973, overthrowing the democratically elected Socialist government of Salvador Allende. It is alleged 3000 people were killed or disappeared under his regime.

He was forced to stand down in 1990, but remained head of the armed forces during Chile's transition to democracy.

Throughout the 1990s he visited Britain as a guest of BAe and in 1995 Chile bought a cluster bomb system from them.

In 1998 Pinochet was put under house arrest in Britain after a Spanish court brought torture charges against him, but he was released after the Government decided he wasn't fit to stand trial.

He is currently under investigation in Chile for tax evasion and human rights abuses.

BAe Systems - one of the main exhibitors at a major arms fair in London - was last year accused of running a 60m slush fund to pay bribes in connection with the 20 billion Al Yamamah arms-for-oil deal between the UK and Saudi Arabia under Margaret Thatcher.

The Serious Fraud Office is investigation the allegations.