Per Ardua

Paul Foot

  • In the Public Interest by Gerald James
    Little, Brown, 339 pp, £18.99, December 1995, ISBN 0 316 87719 0

If you’d scanned the British industrial and financial scene in the boom spring of 1988 you would not have found a more successful, cockier City gent than Gerald James. A public school education and a distinguished career as an accountant among the big names of the City (Barings, Ansbacher, Singer and Friedlander, Hill Samuel) had prepared him perfectly for his chairmanship of Astra, a burgeoning, middle-ranking arms and explosives company which he had built up since 1981 with the help of the directors of a Scottish fireworks company. Elegant, hard-working, well-mannered, with two sons in the Army and an MP on the Board, James was breaking into the big time. He was invited to dine at The Parlour, a secret club whose purpose is to introduce politicians and businessmen to intelligence chiefs. He lunched regularly at the Institute of Directors. He was even invited to attend the British industrialists’ equivalent of Mecca, the ICI golf championship at Troon. He had become, fleetingly, an honorary member of the ‘Savoy Mafia’, a group of arms manufacturers and dealers who met in the Savoy suite of Alan Curtis, a close friend of Denis Thatcher, to discuss their contracts and the chances for more of them. He had met everyone he needed to know. He had met Denis Thatcher and Mark at an arms fair. He had several times come across Stephen Tipping, Mark’s ambitious and thrusting partner in the defence business. No establishment door was shut to him.

Naturally, James was very right-wing. He’d been a disciple, he still boasts, of George Kennedy Young, an MI6 agent who became deputy chairman of Kleinwort Benson. James describes Young as ‘a brave man’ who ‘knew the difference between good and evil’. In fact, Young was a racist of a pretty poisonous variety who never let his business or intelligence connections get in the way of his public campaigning to keep black people out of Britain. Through Young, James joined the Monday Club and teamed up with Airey Neave, who organised the Intelligence Services behind Mrs Thatcher’s campaign for the Tory leadership in 1975. James is proud of his membership of Unison, a gang of mainly military hotheads who in 1975 talked openly of overthrowing the Labour Government. James’s contribution was an ingenious plan to impeach Tony Benn (he does not reveal what for) – a plan which, to James’s disgust, was peremptorily turned down by Monday Club MPs.

By 1988 Astra had snapped up two mighty subsidiaries, the Walters group in the US and BMARC, an arms company based in Sandwich. Chairman James couldn’t help noticing that both companies had contracts for which the ‘end user’ was obviously either Iran or Iraq, who had been fighting each other since 1980. The Governments of Britain and the United States had banned the export of ‘lethal equipment’ to either side in the war, but that didn’t mean that the arms industry could afford to ignore such a tempting honeypot. Various clandestine ruses were thought up to enable them to satisfy the voracious appetite for weapons in the Iran-Iraq War without flouting their governments’ embargoes. One easy manoeuvre was to export to another country, for re-export to Iran or Iraq. BMARC, for example, had a contract to export hundreds of naval cannon to Singapore, a country with a very small navy. These guns were destined for Iran. A favourite conduit for arms to Iraq was Chile. US money poured into the combine owned by Carlos Cardoen, who amassed a great fortune by selling cluster bombs and artillery fuse factories to Saddam Hussein. Shadowy firms were set up for the funnelling of ‘defence equipment’ to the battle zone. These companies were run so secretly, and so far from the official spotlight, that they invariably got into difficulties. Jim Guerin’s ISC had been formed chiefly to supply arms to embargoed South Africa and, later, Iraq. ISC went bust in 1989. Guerin went to prison for fifteen years for fraud, but not before he had persuaded one of the most blue-blooded arms firms in Britain, Ferranti, to buy up his company for a sum so much more than its real worth that Ferranti went bust too, with the loss of 30,000 jobs. Another casualty was Allivane, a Scottish company that manufactured and shifted huge quantities of artillery fuses to Iran and Iraq, until it, too, went bust in 1987. Many of its trickier transactions were conducted under the name of the Allivane International Group, a company which was never registered and therefore did not exist.

Governments on both sides of the Atlantic, James noticed, were curiously tolerant of these breaches of their own embargoes. In Britain, the arms industry snuggled up to Government and the Intelligence Services. At the Ministry of Defence it was hard to tell the difference between a civil servant and a merchant of death. Sir Colin Chandler left his post as marketing director of British Aerospace to spend three years at the Ministry as head of the Defence Export Sales Organisation. Then he became chairman of Vickers. Sir James Blyth (later Lord Blyth) was chairman of Defence Sales until he left to join the Board of Plessey. Lt Gen Donald Isles had been director of weapons in the Ministry of Defence and was now a director of James’s own company, BMARC, as was Jonathan Aitken who had close links to the Saudi Royal Family, and Stefanus Adolphus Kock, a leading British intelligence agent and Midland Bank consultant whose business was arms sales.

At the time none of this worried James very much. ‘You got the impression,’ he writes, ‘that every arms company was involved in some kind of covert dealings.’ But, he adds in the best Monday Club tradition, ‘the overriding release had always been that I was very happy that we were making money.’ The boys in the big time were encouraging him to enlarge Astra, re-tool his already spanking plant at Faldingworth, Lincs, and join them on the top table.

Two years later. James was deposed. His managing director was facing a minor corruption charge for which he was later sent to prison for a year; his other supporters had all been sacked. For a time the only director of Astra was Stefanus Adolphus Kock. Kock brought in a company doctor at the standard rate of £300,000 a year and Astra was dragged off to the knackers’ yard. The assets were flogged off at absurdly low prices, chiefly to the major competitors like British Aerospace, the offices closed and all the directors (except Kock) disgraced by disqualification proceedings.

What did he do wrong? James asks himself – and gives two answers. First he played by the rules. In 1989, when his company took over PRB, a Belgian arms company, he reported to MI6 and the Ministry of Defence that PRB had a contract to supply propellant for a massive new gun for Iraq whose barrel was being manufactured in Britain. He knew that government guidelines prohibited the export of such propellent to Iraq. Yet the two spooks he got in touch with urged him to go ahead and honour the contract. Almost immediately, the production line which made the propellant was blown up in a freak explosion, and at least one loss adjuster reported that the explosion had probably been caused by sabotage. In April 1990, when parts of the finished Supergun were finally seized by Customs at Teesport, James was surprised to hear Nicholas Ridley, the Secretary of State for Trade and Industry, tell the House of Commons that the Government knew nothing about the Supergun contract – given that he had reported it seven months earlier.

James reckons that what he calls ‘the cabal’ knew all about the Supergun from the moment work started on it in two of Britain’s biggest engineering factories, but that ministers were not informed in case they interfered with what was, after all, an important money-spinner for Britain. He also believes that his own decision to report the propellant contract marked him out in the eyes of that same cabal as a goody-goody who might in future break ranks by continuing to play by the rules. This, he reflects, might have had disastrous consequences for large numbers of important people, for the other striking feature of the contracts which fell into Astra’s lap when they took over PRB was the size of the commissions attached to them. One contract in Thailand was valued at £16m, on which the kickbacks to prominent people in Belgium, Britain and Thailand came to £5m, or 30 per cent of the total. If James and Co could report the Supergun contract to the authorities, might they take it into their heads to report the grotesque commissions as well? And if so, where would all this enthusiasm for disclosure leave the defence industry, riddled as it was with corruption?

James’s second ‘mistake’ was to campaign against what became known as the EPREP agreement, a monument (yet another) to Thatcherite privatisation. Royal Ordnance was privatised with all the usual hallelujahs about the fundamental importance of competition. One man plainly influenced by this rhetoric was Sir Peter Levene, who had been brought into the Ministry of Defence to inject some of the entrepreneurial experience he had picked up in his arms company, United Scientific Holdings. Levene approached Astra at a naval equipment exhibition in 1987, and urged them to expand so that they could compete for ammunition contracts previously monopolised by fuddy-duddy old Royal Ordnance, now privatised. ‘You should be able to get about 40 per cent of the MoD market, which is running at £500m a year,’ Sir Peter is supposed to have said to James. Encouraged by this prediction, James and his colleagues expanded and renewed their plant and prepared to bid for Royal Ordnance ammunition work. At every turn they were blocked. Then at last they were told why. Eighty per cent of the Royal Ordnance work had been committed by secret agreement to British Aerospace. Fuddy-duddy old Royal Ordnance had effectively been handed over lock, stock and certainly barrel to the biggest manufacturer in the field and in the new spirit of private enterprise no other company was allowed even to bid for its contracts. James was furious and complained publicly. Astra’s days were numbered.

No one should shed too many tears over the bankruptcy of a medium-range arms company. And Astra’s ruin has brought us one huge benefit: the metamorphosis of Gerald James. In the six years since he was deposed, the laid-back Monday Clubber has become an eternal irritant to the defence establishment, writing endless furious notes in his ornate handwriting, giving impertinent evidence to Commons Commissions, consorting with subversive journalists and generally campaigning against the corruption of the arms business and the consequent corruption of government. Of course he has an axe to grind, and therefore often slips into paranoia. In this book, for instance, he deals carefully and persuasively with the hideous murder of the young defence journalist Jonathan Moyle – hanged in the wardrobe of his hotel room in Chile the day after he asked awkward questions about a helicopter contract for Iraq. Moyle’s murder was made all the more horrible by the authorities putting it about that he had killed himself during an auto-erotic stunt. The passage is then ruined by James’s attempt to connect Moyle’s murder with the obviously accidental auto-erotic death of Stephen Milligan. There are far too many of these reckless nudges, far too many ‘it is said that’ and ‘I have heard that’ without any attempt at proof.

What really matters, however, is that Gerald James is a whistleblower who is out to expose a secret world not from the outside looking in, battering away, as we journalists do, at official denials and cover-ups and trying to make sense of what we don’t understand. James comes from the inside. Unlike so many businessmen who feel they have been wronged, he has no intention of staying there. Shocked by what happened to him and his company, he is determined to expose the world of what he calls ‘Thatcher’s defence contracts’: a world in which a cabal of arms manufacturers, civil servants and spooks have usurped the role of elected government, and, in the interest of quick profits, defended what they hold against all investigators, challengers and competitors. ‘Permanent government’, James concludes, has almost completely replaced representative government.

James’s information, which he has passed to all sorts of journalists, ceaselessly, tirelessly and never in return for money, contributed as much as any other single factor to the sense of public outrage which led eventually to the Scott inquiry. The astonishing nature of that inquiry, too – above all its access to information which has traditionally been kept secret – owes not a little to his persistence.

The Scott Report will soon be out. It is likely to be the most valuable and informative constitutional document in recent British history. It will tell us a lot we want to know, and a lot we don’t, about the real relationship between Parliament, the Civil Service and the people. But it is also likely that it will tell us too little about the pervasive influence of the arms companies, as they have become more and more important to the British economy. For reasons which I hope he will explain, Scott decided early on that he was not going to bring the arms companies into his hearings. So the merchants of death were not subjected to the searching inquiry which brought crusted civil servants and perplexed ministers blinking into the light. For what really goes on in those companies, we shall have to rely on the few who, having worked in them, take time to reflect on the social consequences of what they do, and on the undemocratic and secret nature of their organisations; and who then decide, as Gerald James has done, to lay it bare for everyone to see.