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BAE Braced for Tough US Curbs

BAE Systems is braced for the imposition of strict curbs on its business by the U.S., as it moves closer to resolving a year-long review by the State Department of its guilty plea to a conspiracy charge last year.

A debarment by the State Department could prohibit the British parent company from transferring US-origin technology or capabilities to other entities.

According to people familiar with the matter, BAE has not officially been alerted that it will be debarred, but it is prepared for such a decision, as well as an additional fine against the company to be announced by the end of the month.

There is still a chance that the threat of debarment could be lifted in the final hour.

The impact of a debarment, which will not affect BAE Inc, its US subsidiary, could be inconsequential or substantial depending on how it is structured.

The State Department could elect to debar BAE Plc in its entirety or, in a decision that would be favorable to the British group, debar only select legal entities.

It could also debar the group, but then release it of restrictions.

It put a “hold” on certain new BAE Plc export licenses shortly after the company pleaded guilty in March 2010 to one charge of conspiracy to defraud the U.S. in connection to the company’s anti-bribery compliance program and violations of export control laws.

BAE Plc also paid a $400 million fine in connection to the plea deal with the Department of Justice.

The State Department took the action because it is mandated by law to ensure that no licenses are granted to parties involved in illegal practices.

Based on its handling of BAE export licenses during the review, it would likely establish exceptions to protect technology deployed in current wars and next generation weapons programs that are vital to U.S. interests, such as the Joint Strike Fighter, from being affected.

The State Department declined to comment.

A spokesman for the company in the UK said: “Dialogue continues and is progressing with the Department of State in order to address its concerns regarding matters arising from the [DoJ] settlement.”

More than half BAE’s profits are generated by BAE Inc.

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