TEAMHumanity

The planned corruption prosecution of BAE Systems unveiled yesterday has its roots in the successful 2006 government effort to force prosecutors to drop their probe into the company's £43bn Saudi Arabian arms deals on national security grounds.

Serious Fraud Office staff, dismayed at this political interference, immediately set to work on the myriad other probes into BAE's activities in Africa, Europe, Latin America and the Middle East.

The agency, according to one lawyer familiar with what went on, "took the other cases off the back burner and began to look at them very seriously and actively".

"You could say that [although] the Saudi case ended, it was clear that wasn't the end of the matter," the lawyer says.

The effort led to a moment yesterday that - while a landmark of sorts - carries with it enough uncertainties to make it look more like Churchill's end of the beginning than the start of the closing phase of a case that is now more than five years old.

"The SFO alleges - and BAE contests - that some of these payments were bribes, many of them routed through a company called Red Diamond Trading in the British Virgin Islands"

Lawyers and other obser-vers say the SFO's announ-cement that it is seeking the attorney-general's consent to prosecute BAE for corruption still leaves many avenues open for a possible resolution of the matter. Alexandra Wrage, head of Trace International, a US-based anti-bribery organisation, goes as far as dismissing the SFO's two-line statement on the prosecution as a "strange and hollow threat". She says: "Before the deadline the options were 'settle or we will prove guilt' and after the deadline the options are the same."

The increasingly public talks, which the SFO has been holding with BAE representatives over the past few weeks have, according to people familiar with the case, been going on quietly for some time and predate the appointment of Richard Alderman as director 18 months ago.

A key act of Mr Alderman's stewardship was the appointment last year of Keith McCarthy, a former Revenue & Customs investigator, as head of overseas corruption. Mr McCarthy - seen by the director, according to an insider, as "a man who gets things done" - set a deadline of September 30 for BAE to agree a settlement or face prosecution.

Whether that was the best strategy is still a moot point. Although not immediately successful, it has left open a window for the two sides to strike a deal before the case reaches court and perhaps even after it does so. The time available may be considerable, as the matter could spend months with the attorney-general and then many more going through the early stages of the court process.

The nub of the case is the SFO's suspicions about payments made by BAE to a network of agents round the world who helped it secure contracts for aircraft, boats and other military hardware.

The SFO alleges - and BAE contests - that some of these payments were bribes, many of them routed through a company called Red Diamond Trading in the British Virgin Islands. Among the payments being probed by investigators is £70m allegedly distributed through Red Diamond to agents in South Africa, which became one of the SFO's main points of focus after the dropping of the Saudi affair.

Echoes of the scrapping of the Saudi case were reverberating after yesterday's announcement, with Lord Goldsmith, then attorney-general, recalling in an article on The Guardian's website how he told the SFO to pursue the remaining BAE probes "vigorously" to show that no company was above the law.

SFO investigators, some of whom were unhappy with Lord Goldsmith's handling of the Saudi affair, would argue they were now meeting his challenge.

If successful, they may at last dispel the public perception after the Saudi case that they could be - in the words of a lawyer who witnessed some of the events - "compromised and backed into a corner for political reasons". As the lawyer recalls of the mood then: "Everybody was absolutely determined they would not be kicked around".