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Mon 19 May 2008 10:52 AM

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BAE execs detained in Saudi corruption probe

CEO and non-executive director issued with subpoenas in US and questioned.

Two senior BAE Systems executives were detained by authorities in the US last week as part of an investigation into allegations of bribery against the UK arms manufacturer in deals it did with Saudi Arabia, it was revealed on Sunday.

Chief Executive Mike Turner and Sir Nigel Rudd, a non-executive director, are understood to have been issued with subpoenas upon arrival in Houston and questioned for around half an hour, according to the UK's Sunday Telegraph newspaper.

The paper said the pair also had electronic devices such as laptops and PDAs inspected before being released, with both men asked to return for formal interviews at a later date.

Some US-based BAE employees have also been questioned by investigators, according to the Sunday Telegraph.

"The company has been and continues to be in discussion with the DOJ (Department of Justice) concerning the subpoenas served in the course of its investigation,'' BAE spokesman Stephen Bethel said in a statement emailed to newswire Bloomberg, declining to comment further.

The two executive's detention is part of an ongoing corruption investigation by the DOJ into BAE's 43 billion-British pound ($84 billion) Al-Yamamah arms deal between the UK and Saudi governments, which was signed in 1989 by prime minister at the time Margaret Thatcher.

The DOJ got involved after it was revealed some of the alleged bribes may have been paid into US banks accounts.

British media reports have accused BAE of paying 1 billion pounds over a decade to Saudi Prince Bandar bin Sultan in connection with the Al-Yamamah deal.

Bandar, former Saudi ambassador to the US and now Secretary-General of the Saudi National Security Council, has strongly denied the sums involved represented secret commissions to him, describing this as "a zenith in fabrication".

The UK’s Serious Fraud Office dropped a two-year investigation into the Al-Yamamah deal in 2006, with then prime minister Tony Blair stating that pursuing the inquiry would have harmed national security and relations with Saudi Arabia.