The New, Open Way to Sell Arms

The U.K. invites contractors to support army athletics.

Boeing Apache

Source: Courtesy Boeing

Champion cyclist Ryan Perry, a British army captain, was uncharacteristically tipsy the night of Nov. 25, but no one could blame him for enjoying the Champagne. Standing on the stage of a grand 15th century hall in London, the 28-year-old cradled a crystal plaque naming him the army’s sportsman of the year. Seated in front of him was one of the British military’s most influential officers, the chief of the general staff, or CGS. “Yesterday I was riding around Burnley in the wind and rain,” Perry told the crowd, referring to his seaside hometown. “Tonight I’m drinking Champagne with CGS.”

Attending the banquet were executives from at least 20 contractors for the U.K.’s Ministry of Defence—including U.S.-based arms manufacturers Boeing, Lockheed Martin, and Raytheon. They raised glasses with senior military officials, many of whom are directly involved in spending some of the $268 billion in defense procurement the U.K. has planned for the next decade. The contractors paid for the black-tie dinner in the historic Guildhall.

The corporations are sponsoring the dinner through Team Army, a charity established in 2011 after an antibribery law went into effect in the U.K. The law was enacted following a string of high-profile corruption cases, including some in defense deals. Team Army’s role is to be in the middle of what were once unofficial big-dollar transactions between generals and defense companies. “It’s as clean as we can make the damn thing,” says Lamont Kirkland, a general who ran the army’s boxing, rugby, and winter sports programs before retiring to lead the charity.

Arms makers and other contractors pay Team Army as much as £70,000 ($104,000) for memberships. The members sponsor tables or buy tickets for Champagne receptions and other fêtes. Corporate suites at premier soccer games, rugby matches, and horse races are also used to raise money. Contractors are invited to spend time at the events with the top brass who buy their wares.

The charity uses money from the contractors to fund military sports programs, Paralympics, and elite military athletes. Top-draw competitions, including the annual army-navy rugby match at London’s 82,000-seat Twickenham Stadium, are used for more fundraising. Although the official numbers won’t be public until 2016, Team Army raised a record amount this year, Kirkland says. Since 2011 the charity has amassed about $4.5 million for military sports.

When Kirkland commanded the army’s 4th Division and simultaneously ran army sports programs, he says he saw a system rife with conflicts. Generals directly solicited money from their contractors to sponsor individual sports or events, while some companies offered funds on their own. None of it was transparent, he says.

Team Army was created to become “the third-party entity” that handled “commercial arrangements between the generals and the defense contractors” when sports sponsorships were involved. Kirkland says everything has been vetted by lawyers and the Ministry of Defence to comply with regulations and the Bribery Act. “I get the toxic combination of generals, defense contractors, money, and hospitality—it’s a bed of snakes,” Kirkland says. “So what we’re trying to provide here is a mechanism and a process that keeps the thing as clean as possible, given that the activity is going to take place.”

Team Army’s most opulent activities include almost three weeks of skiing in the French Alps for the army and navy, as well as the combined forces’ winter sports championships in January and February. The charity advertises the events as the premier networking opportunity for the services. For the final week, the group invites company representatives to join “VIPs from all three services” for what it calls “a fully hosted experience on and off piste in our catered hotel.”

On Nov. 23 the U.K. published its first long-term military spending review since 2010, including its plan to pledge that $268 billion for gear and support over the next decade. One big unanswered question: whether the army air corps will upgrade its Apache helicopters—made by Boeing—or pursue a new system. The former deputy commander and operations director of the Joint Helicopter Command was seated at Boeing’s table for the Nov. 25 awards, according to the event’s seating plan. (A former Apache commander who’s at the Joint Helicopter Command also was scheduled to sit with Boeing, but didn’t attend, the company says.) Boeing sponsors sports programs in the air corps through Team Army, Kirkland says. In an e-mail, the company said, “Boeing is proud to support Team Army and those who take part in its activities as part of our wider support for the U.K.’s Armed Forces.”

The chopper commanders were to stay at Boeing’s table all night, according to the seating plan. Some senior officers at Boeing’s table and elsewhere rotated to other tables in the great hall between dinner and the awards ceremony, the plan showed. Kirkland says that wasn’t about maximizing contractor access to military brass, but giving officers the chance to thank as many sponsors as they could. “There’s a very credible and important imperative to meet as many of your sponsors as possible during the evening,” he says.

The bottom line: Contractors and officers know they’ll face more scrutiny under new rules as the U.K. prepares major increases in military spending.

    Before it's here, it's on the Bloomberg Terminal.