It is alleged the company paid bribes to secure contracts in Tanzania, South Africa, Romania and the Czech Republic. The Serious Fraud Office had been investigating the claims for six years and was ready to reach a settlement, but weekend reports suggested BAE refused to pay a £300m fine over fears that it would leave itself open to civil action by shareholders.
The news dominated the business pages late last week and over the weekend. The BBC's Robert Peston called it 'the most explosive investigation into a British company that I have ever encountered'. The coverage has not been universally negative - BAE has stressed the investigation concerns the activities of previous boards and that it could threaten thousands of British jobs.
Who are the PR players?
Charlotte Lambkin is BAE's group communications director and the firm uses FD for its financial PR and Bell Pottinger for public affairs.
What happens next?
BAE said it was 'perplexed' and 'puzzled' by the SFO's announcement because negotiations were ongoing. These talks are now, according to The Times, 'legal political poker' worth billions of pounds. It is thought BAE is keen to avoid a trial, but is unwilling to pay a fine of more than £20m, so it may decide to take its chances. The future of the investigation also depends on the Attorney General Baroness Scotland. BAE has suffered a huge blow to its reputation and will be mindful of damage limitation, stressing its central role in the British economy.