THE Ministry of Defence has reached a settlement with the second of the three foreign firms who bribed civil servant Gordon Foxley to divert ammunition orders away from Royal Ordnance's Blackburn factory.

Junghans of Germany has comprehensively apologised to the Government, paid compensation including interest for legal costs, and promised to meet all MoD conditions in a bid to get further orders.

Defence Minister Lord Gilbert has revealed the conclusion of negotiations with Junghans, which follows a successful deal with Raufoss of Sweden. Raufoss are now able to bid normally for orders following a period on probation, but Junghans will have to wait several months while the MoD checks their accounts and behaviour before normal commercial relations are restored.

A third company - the Italian successor to Fratelli Borletti (SpA) who made payments to Foxley - are currently in "sensitive negotiations" with the MoD.

In a letter, Lord Gilbert told Rossendale and Darwen MP Janet Anderson that the compensation payment must remain commercially confidential until the Italian talks are over.

Junghans have made a commitment to help further with continuing investigations into the Foxley affair.

Lord Gilbert said: "The company has taken, so far as we can ascertain, an open approach in revealing to us papers which provide evidence of the extent of its links with Foxley.

"This agreement opened the way for resumption of normal commercial relations with the company. However, this will not happen immediately."

Lord Gilbert says the company's behaviour will be monitored for the next few months.

Mrs Anderson said: "I am delighted that the new Labour government is taking this issue seriously.

"I am also glad that it is insisting on the highest standards from the firms involved both now and in the future.

"I am pleased that compensation is being paid as a result of this affair and I hope that a similar deal can soon be concluded with Italian firms involved."

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