The US Department of Justice has launched an inquiry into British arms manufacturer BAE Systems' compliance with anti-corruption laws, including those regarding lucrative Saudi contracts, BAE revealed on Tuesday.
The news sent the share price in BAE, which makes about 40 percent of its sales in the United States, plunging 10.57 percent to 395.50 pence in early afternoon deals on London's falling FTSE 100 index.
"BAE Systems has been notified by the US Department of Justice that it has commenced a formal investigation relating to the company's compliance with anti-corruption laws including the company's business concerning the Kingdom of Saudi Arabia," it said in a brief statement to the London Stock Exchange.
The group has been accused of setting up a 60-million-pound (89-million-euro, 120-million-dollar) slush fund for members of the Saudi royal family to secure business, and of making illegal payments to those involved in its deals.
BAE strenuously denies the charges.
Britain's Serious Fraud Office (SFO) had been investigating BAE Systems' 43-billion-pound Al-Yamamah deal in 1985, which provided Hawk and Tornado jets plus other military equipment for the Saudis.
But the investigation was shelved in December in a move supported by outgoing British Prime Minister Tony Blair amid concerns over Britain's national and international interests.
The PM's official spokesman was asked on Tuesday whether Blair had any regrets about the SFO investigation being closed and a new inquiry being opened in the United States.
He told reporters: "I have no comment to make whatsoever. Our position on the investigation in this country hasn't changed. We have no comment to make on the inquiry in the States."
"It would be wrong to do so in this country and wrong to do so in any other coutry."
He also said he had no comment to make when asked if British officials were ready and willing to co-operate with the US authorities.
The probe comes at a crucial time for BAE Systems after it won US regulatory approval last week for a takeover of US defence group Armor Holdings in a deal worth 4.5 billion dollars.
A company spokesman said Tuesday that BAE would not comment on the substance of the formal US investigation.
But he added: "The company is committed to meeting the highest ethical standards in its dealings with others, and doesn't tolerate unethical behaviour or attempts to improperly influence decisions for customers.
"We continue to be very proud of the support we give to the armed forces globally."
Meanwhile, the Organisation for Economic Cooperation and Development (OECD), which coordinates policies and advises member countries on governance, said it had "serious concerns" about the SFO probe being dropped.
The Guardian newspaper in Britain has alleged that BAE secretly transferred more than one billion dollars to accounts controlled by Prince Bandar, who was at the time Saudi Arabia's ambassador to Washington.
The center-left daily has also alleged that BAE bought the prince a top-of-the-range Airbus airliner worth 75 million pounds and was still paying the costs of flying it.
Both the prince and BAE have denied any charges of wrong-doing.
BAE contracts are still being investigated by British justice officials in Africa, eastern Europe and South America.
Earlier this month, meanwhile, BAE set up an independent committee to evaluate the firm's business practices and ensure they abide by the highest ethical standards.
But Lord Harry Woolf, a retired judge heading the committee, and BAE chairman Dick Olver have suggested the panel would not examine media allegations of impropriety surrounding the Saudi deal.
Analysts said the allegations could affect BAE's agreed purchase of Armor Holdings, which manufactures armored vehicles and other equipment for the US military and law enforcement.
BAE wants to boost its growing operations in the United States, one of the world's largest defence markets.
