BAE Systems shares fell on the London Stock Exchange on Tuesday after the company announced that the US Department of Justice is to investigate its compliance with anti-corruption laws.
BAE says the formal investigation will cover the company's business "concerning the Kingdom of Saudi Arabia."
The company's shares plunged nearly 50 pence to trade below 400p on the London Stock Exchange after the investigation was announced.
The US market accounts for nearly half of its revenues and BAE says it was the fourth largest defence contractor in the USA, behind Lockheed Martin, Northrop Grumman and Boeing by 2006 sales.
Earlier this month BAE appointed the former Lord Chief Justice of England and Wales Lord Woolf to lead an external committee on the company's business ethics.
The committee is expected to report its findings to the company's board of directors early next year.
The UK's Guardian newspaper has conducted a lengthy investigation into BAE's dealings, alleging that the company made unlawful payments to Saudi officials as part of the Al Yamamah deal to supply Tornado and Eurofighter Typhoon aircraft to the Kingdom.
The UK's Serious Fraud Office (SFO) dropped an investigation into BAE's Al Yamamah dealings in Saudi Arabia in December, because of "the need to safeguard national and international security."
The SFO said at the time: "It has been necessary to balance the need to maintain the rule of law against the wider public interest."
The SFO is still investigating contracts in Eastern Europe, South America and Africa.
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Source: FlightGlobal.com
