Should war memorials be built with money from the arms industry?

Two new war memorials are to be built in Canberra, provided final regulatory approvals are obtained and the memorials' proponents, the Memorial(s) Development Committee (MDC), can raise $A25 million.

The memorials will commemorate the dead from World Wars I and II. They will each be 20 metres high, in two-tone grey granite, separated by 100 metres of paving, etched with commemorative inscriptions. They will sit on the shore of Lake Burley Griffin, at the foot of Anzac Parade, straddling Burley Griffin's 'land axis', a key component of Canberra's landscape plan.

The MDC argue that the new memorials are necessary because there are no existing memorials in Canberra to these two great conflicts. The Australian War Memorial, the Committee argue, commemorates all wars but not specifically the two world wars.

The MDC are on record (in Ken Inglis's book, Sacred places, published in 2008) that their fundraising will target the defence industry, as well as other companies. (This information does not currently appear on the MDC's website.) The defence industry has plenty of money to spare if the MDC come knocking. In Australia, combined revenue in calendar 2010 for the top 40 defence contractors, plus the top 20 small and medium-sized defence enterprises, was $A7.257 billion.

Donations may be made for the purest of motives. The defence industry worldwide, however, is renowned for its corruption, defined by Transparency International as "the abuse of entrusted power for private gains." A 2005 study quoted by the Stockholm International Peace Research Institute estimated that corruption in the arms trade amounts to roughly 40 per cent of all corruption in global trade. The security attaching to defence contracts and the numbers of commission-seeking middlemen in the industry provide many opportunities for covert payments.

A case study is in order. In 2009, BAE Systems had the second highest global revenue of all defence suppliers, $US33.419 billion. BAE Systems Australia, a subsidiary of the UK-based parent company, is Australia's leading defence contractor, with revenue in calendar 2010 of approximately $A1.5 billion. Currently, BAE has more than 50 major defence contracts in Australia and is bidding for some twenty more.

Among BAE's hundreds of products and services are aircraft armour, ammunition and munitions of all sorts, an artillery orienting system, communications networks and related items, fighter aeroplanes, a laser aiming system, various missiles, naval gun systems, unmanned aerial vehicles and, until quite recently, cluster bombs and land mines.

BAE's corruption record is as spectacular as its revenues and its range of products. In 2004, the UK Serious Fraud Office began investigating claims of corruption regarding BAE deals with Chile, the Czech Republic, Qatar, Romania, Saudi Arabia, South Africa and Tanzania. In 2007, BAE, concerned by the fallout from this investigation, commissioned Lord Woolf to investigate the company's ethics. BAE executives admitted to Woolf that "the Company did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage."

The United States also investigated. In February 2010, BAE agreed to pay £257 million ($US400 million) in criminal fines to the US Department of Justice (DoJ). US district court judge John Bates said that BAE's conduct involved "deception, duplicity and knowing violations of law, I think it's fair to say, on an enormous scale." The DoJ said that BAE "consistently failed to identify commissions paid to third parties to assist in securing the sales of defense articles." BAE "was aware that some or part of those payments would be passed on to others to influence government procurement processes" for the benefit of BAE. "The undisclosed payments were pervasive across the Company, covered numerous markets, and lasted for decades."

BAE never admitted to bribery. (The US charges referred, not to bribery as such, but to conspiring to make false statements to the US government about BAE's anti-bribery arrangements – the falsity of the statements was proved by the fact that bribery had taken place – and failing to keep proper accounting records about BAE's operations in Tanzania.) Senior personnel were replaced and internal systems improved. The new chairman, Dick Olver, said the company had "put a really hard line separating the past from the future" and it realised the "need to be a transparent, modern, clean company." BAE also tried to be a model corporate citizen. Its global code of conduct, issued in 2009, has a section on "company giving."

We will support, sponsor and contribute to the activities of other organisations where the activities are aligned with our own business objectives, values and ethical principles and will enhance the reputation of the company.

The company had a "particular focus … on those organisations which support the Armed Forces and their families."

According to the BAE Systems plc website, "[s]upport for charities and community organisations helps foster good relationships with the communities near our sites in the countries in which we work." Globally in 2009, the company's investment in the community amounted, in time, cash and in-kind, to 13.8 million somethings – either $A or £; different company websites report the same figure but in different currencies.

Many such payments – by BAE or any other company – will be unexceptionable. Some will be difficult to categorise, like BAE's sponsorship deal with the Australian War Memorial, which includes naming rights to the "BAE Systems Theatre." The Memorial's director, retired Major General Steve Gower, has said that BAE is an "integral part" of the Memorial, where many aircraft built by BAE and its predecessors are on display.

It may seem incongruous or worse that defence suppliers should put money into war memorials, particularly new ones. It would be natural, however, for the MDC, composed entirely of retired military officers, to consider tapping the defence industry. Industry contacts made in uniform will still be strong. For example, MDC member and retired Air Marshal Doug Riding went from senior RAAF positions in materiel and aerospace systems acquisitions, and a final posting as Vice Chief of the Defence Force (July 1998 to 5 June 2000), to a directorship with BAE Systems Australia Holdings Limited (3 August 2000 to 16 July 2002). Air Marshal Riding is now (June 2011) a senior defence adviser to BAE Systems Australia. MDC chair, retired Lieutenant Colonel Mike Buick, was, in late 2010, National Project Manager, Barcoding Project, for BAE Systems Australia Logistics.

We have no evidence that corruption associated with defence industry corporate giving has happened or will happen in Canberra. On the other hand, Transparency International has recently included "Charitable Contributions and Sponsorship" in a list of "key corruption issues" facing defence suppliers globally.

Actual instances of charitable-giving corruption in the defence sector overseas seem to be rare, perhaps because they are well concealed within the complex financing of defence purchasing. In a 1990s South African case, again involving BAE Systems (then British Aerospace or BAe), the defence minister intervened on BAe's behalf after the company had donated five million rand ($US1 million) to a war veterans' association, of which the minister was a trustee.BAe said the donation had been made "to demonstrate that we wish to be good corporate citizens doing business in South Africa."

Transparency International's warning acknowledges that corporate giving could serve the same purpose as payments to third parties have served in the past for companies like BAE. Any project that is financed by the defence industry risks being tainted with the whiff of corruption surrounding the sector. That is the potential problem facing the proponents of Canberra's lakeside memorials.

The risk grows with secrecy. Transparency International says every enterprise, defence and otherwise, "should ensure that charitable contributions and sponsorships are not used as a subterfuge for bribery [and] … should publicly disclose all its charitable contributions and sponsorships." It is unfortunate, then, that the MDC offer secrecy to their donors. The MDC's website says: "The Committee will not disclose any details of Memorial(s) Development Committee Members, Donors or Supporters without the consent of said Members, Donors or Supporters." That is the sort of provision that would be attractive to tobacco companies funding lung cancer wards or to breweries donating to road trauma units.

Colonel Buick said on television in October 2010:

We have not had any discussion whatsoever with any company which will be providing money from overseas or anywhere else. We are seeking funding support from wealthy and philanthropic Australians. That's where we've gone, at the moment (emphasis added).

The highlighted words leave the way open for a change of fundraising strategy in the future, especially as global financial circumstances constrain alternative sources. The MDC's website still says, "Priority # 1 [for fund-raising]: Australian and international companies interested in making significant financial contributions …" Philanthropists are only the second priority target, according to the website.

Would our war dead like to be memorialised with the profits from making the weapons that killed them? The MDC need to do two things: first, announce that they will not solicit or accept donations from the defence industry; secondly, undertake to disclose the source and amount of every donation received. Once these things are done, we can focus on the many other reasons why this ill-conceived project should not proceed.