BAE SYSTEMS yesterday denied fresh allegations that it ran a £60 million “slush fund” to help to secure arms contracts in Saudi Arabia.

The allegations come after the seizure by Ministry of Defence police of documents apparently claiming to detail bribes, including to a former civil servant working for the MoD’s arms sales unit.

The company said: “As we have said on several previous occasions, BAE Systems rigorously complies with the laws of the UK and of the countries in which it operates. BAE denies any allegations of wrongdoing.”

MoD police, who began investigating the civil servant earlier this year, have taken documents from a now- defunct travel agency that is claimed to have acted for BAE.

A spokesman for the police confirmed that documents had been seized from a warehouse in Hertfordshire, but declined to comment further.

The allegations centre on the £20 billion al-Yamamah defence contract signed between the UK and Saudi Arabia in 1985, under which BAE was responsible for supplying military equipment.

Ever since the contract was signed, BAE has faced claims that bribery and corruption were rife. However, with BAE bidding for a £1.5 billion upgrade on the contract, the new allegations are potentially embarrassing. Claims of wrongdoing will also be watched closely in the Pentagon, BAE’s biggest customer, where any hint of corruption could harm BAE’s US growth prospects.

BAE is accused of spending up to £60 million on sweeteners — principally on Saudi officials — to secure defence contracts. These include paying hotel bills around the world, offering the use of luxury flats and giving expensive cars and other gifts.

Last year BAE was accused of operating a £17 million slush fund, but the latest allegations are that the money spent was far larger.

In 2001 Sir Kevin Tebbit, Permanent Secretary at the MoD, was approached by the Serious Fraud Office (SFO) about allegations that it had received that BAE was involved in corruption. Sir Kevin appears to have felt there was no need for a formal investigation, although the inquiries this year into the former civil servant suggest that the MoD has received new evidence.

If the MoD police find enough evidence for prosecution, they can, like any police force, charge an individual and seek a conviction through the courts.

The SFO said that it was not involved in the latest allegations against BAE. The Financial Services Authority is also believed to see the issue as not being a matter for it.