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Fahd bin Abdul Aziz
Sultan Bin Abdul Aziz
Naef Bin Abdul Aziz
Salman Bin Abdul Aziz
Ahmad Bin Abdul Aziz
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In July of last year, the Internal Revenue Service
began investigating Litton Industries, Inc, a Los Angeles-based defense
electronics supplier and shipbuilder. The IRS is trying to discover
whether Litton paid millions of dollars in bribes to Prince Khaled bin
Sultan and wrote off the payments as business deductions. The alleged
bribes allowed Litton to win a contract to build a $1.7 billion
air-defense system for Saudi Arabia. Construction began in 1979 and was
completed in 1993.
PART OF A PATTERN
If the allegations are true, then not only has Litton violated U.S. law,
but Prince Khaled is guilty of illegal acts under Saudi law, which bars
receipt of commissions on military sales. Not that being a criminal
matters to Khaled or any of the other corrupt princes. His actions are
just business as usual for the House of Saud.
Since 1982, the royal family has been using Saudi Arabia's drive to
modernize as a means to line the pockets of the ruling family. Corruption
generally comes in three guises. Princes will take land and have it
registered in their name and then sell it back to be used for a government
or business project at highly inflated prices. The Riyadh Airport, which
cost "$16 billion in pure corruption"--as a former State
Department official put it--is one example of this practice. Khaled's
father, Prince Sultan was a primary beneficiary of this scheme.
The next two corrupt ways to procure money are more relevant to the Litton
scandal. Both Saudis and U.S. experts having wide experience in Saudi
Arabia say that the primary source of income for the many of the princes
comes from the huge cuts they take on business deals as members of the
government or as private brokers. Throughout the course of the Litton
Scandal, Khaled has been a member of the government and a private broker.
However, he allegedly received illegal commissions while he was deputy
commander of the Saudi Arabia Air Defense Command.
The final form of securing wealth comes in the form of "shell"
companies, that is, companies which exist solely to circumvent a
government's anti-corruption laws and to hide the real recipient of funds
which pass through that company. Again, Khaled has allegedly set up and
benefited from shell companies in the Litton case.
THE CASE AGAINST LITTON
Stephen Reddy, a lawyer and the former manager for Litton Industries,
Inc.'s Saudi Arabia housing program, alleges that Prince Khaled was one of
a number of Saudi government officials who received between up to $183
million in illegal commissions for a contract on a project to build houses
for the Litton workers living in Saudi Arabia during installation of radar
equipment. Litton issued a $214 million subcontract to a firm controlled
by Wafic Said, the prince's alleged business agent, for housing
construction. Said's firm assigned that subcontract to Tag Systems in
Liechtenstein, allegedly controlled by Said and Khaled. Tag subcontracted
a German firm to build the houses for $99 million. The $115 million excess
is said to have been disbursed among the subcontractor's, one of them,
Tag, was allegedly run by Prince Khaled, who allegedly pocketed at least
$47 million. The prince also owned land which he supposedly sold to Litton
at inflated prices. The 66 houses weigh in at a price tag of $1.3 million
each.
Stephen Reddy says, "Everybody at Litton knew Prince Khaled was in
charge of Tag. The prince made every decision on the job." Khaled
himself says that he "personally negotiated the broad outlines of the
Litton air defense contract."
Reddy claims that he was fired for whistle-blowing. Neither the Department
of Justice nor the courts have looked into the merits of Reddy's charges.
The Department of Justice asked him to withdraw his suit in 1994 because
the statute of limitations had run, but the IRS is using his allegations
as the basis for their investigation into Litton's alleged payment of
bribes to Khaled and others.
In fact, the Service has gone far beyond the preliminary stage.
Investigators have taken possession of more than 1,000 documents
concerning the case, drafted 13 pages of questions relating to the deal,
and questioned Reddy and his attorney, Phillip Benson. Sources close to
the investigation told the Los Angeles Times that the IRS audited Litton's
tax returns and has determined that Litton took tax deductions on the
housing payments.
Litton and Khaled, of course, deny any wrongdoing. The prince's attorney
in this case is Richard A. Anderman, a partner at the New York law firm
Christy & Viener.
Steve Kantor, a former subcontracts administrator in Litton's Saudi
Arabian program, said he attended several meetings where Reddy raised
ethical concerns about Litton's relationship with Tag. "He was
ignored. I believed him."
SOURCES FOR LITTON SCANDAL
 | Los Angeles Times, March 28, 1996, Thursday, Valley Edition,
Page 1, 815 words, FEDERAL AGENTS RAID OFFICES OF LITTON
INDUSTRIES, AARON CURTISS and RALPH VARTABEDIAN, TIMES STAFF WRITERS ,
WOODLAND HILLS |
| City News Service, March 27, 1996, Wednesday, 248 words,
Litton Raid, WOODLAND HILLS |
| The Washington Post, January 02, 1996, Tuesday, Final
Edition, A SECTION; Pg. A01, 3021 words, Saudi Court Case Raises
Question
Of Wide Corruption by Leadership, David B. Ottaway, Washington Post
Staff Writer |
| Reuters, July 5, 1995, Wednesday, BC cycle, Financial
Report., 290 words, LITTON <LIT.N> REJECTS ALLEGATIONS |
| Los Angeles Times, July 3, 1995, Monday, Home Edition,
Business; Part D; Page 1; Financial Desk, 1590 words, LITTON SAUDI
DEFENSE PROJECT IS TARGET OF IRS INQUIRY; PROBE: FOCUS IS ON
ALLEGATIONS OF IMPROPER PAYMENTS LINKED
TO A SAUDI PRINCE AND ON SUBSEQUENT TAX DEDUCTIONS. FIRM, ROYAL FAMILY
MEMBER DENY ALLEGATIONS., By
RALPH VARTABEDIAN, TIMES STAFF WRITER |
| United Press International, July 3, 1995, Monday, BC cycle,
Regional News, California, 328 words, Report: IRS probing Litton
project,
LOS ANGELES, July 3 |
| Business Week, May 8, 1978, Industrial Edition, FINANCE;
Corporate Finance; Pg. 112, 1020 words, A plan to shelter overseas
profits |
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