This is going to be messy. According to the Guardian, the Justice Department's corruption investigation into British defense giant BAE -- accused by the U.K's Serious Fraud Office of lining the pockets of Prince Bandar, the former Saudi ambassador to the U.S., with $2 billion over 20 years -- threatens to strain ties between Washington and Gordon Brown's nascent government:

The department of justice in Washington has formally demanded that Britain hand over all evidence of secret payments the company made to members of the Saudi royal family to secure huge arms deals.

The department has taken over the corruption investigation after British prosecutors were forced by the then prime minister, Tony Blair, to halt it late last year on alleged grounds of national security.The Serious Fraud Office in London spent £2m and more than two years amassing documents which showed BAE had transferred £1bn to Washington accounts controlled by Prince Bandar of Saudi Arabia, and another £1bn to Swiss bank accounts linked to agents acting for Saudi royals. The records include highly classified Ministry of Defence files detailing the government's involvement in the al-Yamamah arms deal payments. ...

If British ministers defy the justice department, this could go on to endanger reciprocal cooperation and intelligence-sharing with the US. Britain depends far more heavily on Washington than it does on Saudi Arabia. One senior source close to the US department of justice told the Guardian: "Britain's definition of national security might have to change under these circumstances."

Be skeptical of that. The U.S.-U.K. intelligence relationship is one of the most prized of the CIA's global partnerships. It would take extraordinary pressure on the part of the Justice Department -- and probably the intervention of President Bush -- for the U.S. to withhold intelligence cooperation from the British, especially as the FBI is trying to run down ties between Muslims in the U.S. to the London and Glasgow bombings. Even so, a diplomatic row between the U.S. and its closest ally over a huge, well-connected defense contractor is probably the last thing either country wants.

So here's yet another instance of shadiness to add to the BAE bribery scandal.

Up until December, the British Government's Serious Fraud Office had a wide-ranging corruption investigation open into alleged kickbacks paid by defense giant BAE Systems to prominent Saudi officials -- including, allegedly, Prince Bandar, the ex-ambassador to the U.S. -- in order to secure a multi-billion arms deal. Suddenly, then-PM Tony Blair announced an abrupt end to the SFO inquiry, citing unspecified national security concerns. And while the inquiry ended, the stain on BAE's reputation by the probe was enough to push the Justice Department into opening its own corruption investigation of the company ahead of its scheduled purchase of a U.S. armor manufacturer.

But it may be that Blair wasn't so worried about the probe's effect on British national security. It turns out BAE is negotiating a whole new arms sale to the Saudis -- something very lucrative for the British government. The deal would send 60 Hawk trainer jets to Saudia Arabia and establish a multi-year partnership between the Royal Air Force and its Saudi counterpart for training pilots worth "billions of pounds."

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Well, that clears that up. After a long are-they-or-aren't-they period, BAE, the British defense giant accused of paying $2 billion in kickbacks to Prince Bandar of Saudi Arabia over 20 years, admitted today that the Justice Department is investigating the company.

Across the Atlantic, stories continue to churn around the U.K. defense giant BAE Systems' alleged payment of $2 billion in kickbacks over 20 years to Prince Bandar bin Sultan, the former Saudi Ambassador to the United States, in a massive U.K.-Saudi arms deal in the 1980s. The Organization for Economic Cooperation and Development's panel on bribery is scheduled today to inquire why the British government abruptly ended its Serious Fraud Office inquiry into BAE last year. And if that doesn't provide enough grist for the story mill, later this month -- and probably this week -- U.K. Attorney General Lord Goldsmith will try to explain to parliament his role in the BAE scandal.

So why the comparative silence over here? After all, from 1983 to 2005 -- during the period in which he allegedly received BAE's bribes -- Bandar was one of the most powerful individuals in Washington. And it was Riggs Bank, the collapsed, CIA-tied Washington financial powerhouse, where BAE allegedly sent money to Bandar, despite the sale proceeding from London and Riyadh. Finally, BAE is trying to purchase Armor Holdings, a leading U.S. defense firm that produces vehicle armor for Humvees and Strykers, putting a company allegedly involved in bribery in the regulatory crosshairs.

For starters, it's not clear that the Justice Department in fact has opened an investigation into BAE. The U.K.'s Serious Fraud Office has reportedly accused BAE of bribery in six countries, which should be enough to prompt an inquiry into whether BAE is in violation of the Foreign Corrupt Practices Act, a law banning companies that pay bribes from the U.S. market. The Los Angeles Times reported last week that an investigation has begun, but the Guardian reported yesterday only that the Justice Department is "on the verge" of investigating BAE. (DoJ hasn't clarified matters to TPMmuckraker.) What's more, even if the Justice Department does investigate BAE, that's no guarantee that it can bring a case against the company -- and thereby reveal details about Bandar's role in the scandal.

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It's good to have an international rainmaker for a father.

So far, Prince Bandar bin Sultan, the former Saudi ambassador to the U.S., has denied all accusations that he received up to $2 billion in kickbacks from British defense giant BAE for a massive British-Saudi arms deal. That's been a pretty tenable line to maintain, since neither the BBC nor the Guardian, which broke the story, have disclosed the basis for their reports. But that was before anyone learned about the December 1996-January 1997 honeymoon of Bandar's daughter, Princess Reema.

Reema and her husband, another Saudi royal, celebrated their nuptuals with a six-week trompe through some of the world's most expensive hotels in Singapore, Australia, Malaysia, Bali and Hawaii. Their wedded bliss included a private Gulfstream flight to the Great Barrier Reef. And according to Peter Gardiner, managing director of the travel firm that booked the honeymoon, the nearly half-million-dollar affair was entirely paid for by BAE. Gardiner tells the Sunday Times:

“They were a young, attractive couple in love and on a dream honeymoon. They knew nothing about BAE paying and must have believed it was their parents paying. I was instructed by BAE not to discuss payments with them – or with anyone. I was told by BAE to give them the very best,” Gardiner said.

BAE's accounting for the trip appears brazen. Documents obtained by the UK's Serious Fraud Office show that Gardiner's company, Travellers World, billed BAE with statements reading "HM.Aus," for "Honeymoon, Australia." When Reema's husband needed to find a place in Australia where he could watch the Dallas Cowboys live on cable, Travellers World arranged it, and BAE paid about $12,000 for three hours of gridiron drama.

Last week, the Los Angeles Times reported that BAE is under investigation by the Justice Department for potential violations of the Foreign Corrupt Practices Act, a law preventing access to U.S. markets for companies involved in bribery. BAE told the Sunday Times it denies any wrongdoing.

Josh Meyer at the Los Angeles Times makes it official: the Department of Justice has opened an investigation into whether BAE Systems, the British defense corporation accused of bribing ex-Saudi Ambassador to the U.S. Prince Bandar bin Sultan, has violated the Foreign Corrupt Practices Act. The Act is meant to prevent companies engaged in bribery from doing business in the United States. Bandar's alleged payoffs are only one element in the inquiry, as the British government's Serious Fraud Office has linked BAE to fraud cases in Tanzania, South Africa, Chile, the Czech Republic, Qatar and Romania.

The Justice Department is investigating whether British defense giant BAE Systems, which supplies Bradley fighting vehicles to the U.S. military and is becoming a major player in the U.S. defense industry, paid bribes to win contracts in Saudi Arabia, Chile and elsewhere, federal officials confirmed Thursday.

The Justice Department's fraud section, with the FBI's help, has begun a preliminary investigation to review allegations that the company conducted an ambitious campaign of payoffs to key officials to win contracts to sell fighter jets and other major weapons systems, according to several federal law enforcement officials familiar with the case. The key officials included Prince Bandar bin Sultan, former Saudi ambassador to the United States and a close Bush administration ally.

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From The Guardian:

The US department of justice is preparing to open a corruption investigation into the arms company BAE, the Guardian has learned. It would cover the alleged £1bn arms deal payments to Prince Bandar of Saudi Arabia.

Washington sources familiar with the thinking of senior officials at the justice department said yesterday it was "99% certain" that a criminal inquiry would be opened under the Foreign Corrupt Practices Act (FCPA). Such an investigation would have potentially seismic consequences for BAE, which is trying to take over US arms companies and make the Pentagon its biggest customer.

Those "seismic consequences" would be sure to extend to the relationship between the U.S. and Saudi Arabia. After all, Tony Blair scotched a British investigation of the payments for just that reason. One wonders if the Bush administration might do the same.

Here's Spencer's piece from earlier this week on the alleged payments to Bandar.

Accusations continue to swarm about a British defense corporation's alleged kickbacks over 20 years to Prince Bandar, the former Saudi ambassador to the United States.

Last week, the BBC and the Guardian reported that BAE Systems, the world's fourth-largest defense company, paid approximately $2 billion to an Saudi account in the now-defunct Riggs Bank controlled by Bandar as part of Britain's largest-ever defense deal. That purchase, known as al-Yamamah, brought Britain over $80 billion in Saudi money in return for BAE-manufactured aircrat in 1985, and has been a fruitful target for UK scandal-watchers ever since. Tony Blair personally scotched an investigation by his government's Serious Fraud Office into the alleged kickbacks in December, and he reaffirmed that decision last week when the Bandar allegations broke, saying, "I don't believe the investigation would have led to anywhere except to the complete wreckage of a vital interest to our country."

Both Bandar and BAE strongly maintain their innocence. BAE claims that paying the money into the Saudis' Riggs accounts was an above-board investment in "local advice, capabilities and guidance" in order to ensure the purchase went smoothly. Bandar's lawyers released a statement saying that the prince was an "authorized signatory" to the accounts, which were controlled by the Saudi Arabian Ministry of Defense and Aviation (MODA), and any withdrawals were used "exclusively for purposes approved by MODA." Bandar's father, Prince Sultan, is the Saudi defense minister.

Following lengthy investigations by the Treasury Department and the Senate, in 2005, Riggs Bank, once one of the most prestigious banks in the U.S., admitted its guilt in numerous money laundering schemes involving, among others the Saudi Embassy to Washington (which Bandar helmed), former Chilean dictator Augusto Pinochet, and the government of Equitorial Guinea. According to this week's Newsweek, Riggs's documentation of its Saudi accounts may contain clues about what Bandar in fact received from BAE:

The Riggs Bank records show the use of those funds raised concerns among bank officials and U.S. regulators. In November 2003, Riggs filed a "suspicious activity report" with the Treasury Department disclosing that over a four-month period, $17.4 million from the Saudi Defense account had been disbursed to a single individual in Saudi Arabia. When Riggs officials asked the Saudis who the person was and why he was receiving the funds, they were told the individual "coordinates home improvement/construction projects for Prince Bandar in Saudi Arabia," and the payments were for a "new Saudi palace," one document shows.

In another instance, Bandar wired $400,000 from a Riggs account to a luxury-car dealer overseas. "It was impossible to distinguish between government funds and what would normally be considered personal purposes," said David Caruso, who served as Riggs's compliance officer at the time. Caruso also confirmed to NEWSWEEK that the Saudi Defense account was regularly replenished with $30 million each quarter from an account in London. But the bank never knew the source of the funds. The bank was so concerned about the withdrawals that it cut off all business with the Saudis. In May 2005, the U.S. Treasury fined Riggs $25 million for failing to monitor "extensive and frequent suspicious" activity in Saudi and other accounts. (Asked about the Riggs records, Bandar's lawyer said the palace in question was "Prince Bandar's official residence" in Saudi Arabia and that audits by the Saudi Finance Ministry found "no irregularities" in the Saudi accounts while Bandar was ambassador.)

Look for more to come out of the Riggs collapse involving Bandar in the near future.