Airbus has confirmed it will pay €3.6bn to settle a long-running investigation in which French, UK and US authorities trawled 30m documents investigating potential bribery and corruption.
In 2012, a whistleblower alleged that Airbus's GPT subsidiary used gifts and bribes of over £14m to secure a contract to upgrade military communications in Saudi Arabia. In 2017, the French-based planemaker was also investigated over its use of middlemen and third-party consultants to secure airline sales. The subsidiary at the centre of the allegations has cease trading.
Now, the unprecedented scale of bribery and corruption has been revealed, and it's not pretty.
The investigations uncovered:
- Political donations. Yes. Lavish hospitality. Yup. Bribes. You bet. Fake invoices. Uh-huh. Loans that never needed to be repaid. All-expenses paid trips to Hawaii and a ski resort in Utah. Check.
- Middlemen with no experience whatever in the aerospace industry - one was a director of a "football merchandising company", and two others were former UK television actors. Yes, really.
- $17m was paid to the wife of a Sri Lankan Airlines executive, via a straw company registered in Brunei, to influence the sale.
- The children of executives at companies controlling Taiwanese airline TNA were given around $15m, with illicit payments coded in communications as "medical dosages", giving the "prescription" to the "patient", with aliases such as "Van Gogh" used to conceal beneficiaries.
- The firm sunk $10m in a company owned by the son of a Korean Air executive and made donations to academic institutions in which he had an interest. With $15m splurged on an African mine to conceal intermediary payments.
The case has once again left many wondering why Airbus has been granted a Deferred Prosecution Agreement (DPA), escaping prosecution and a potential debarment on tendering for public contracts in the UK and abroad. The clue comes in the judgment itself.
Dame Victoria Sharp noted that, while these corrupt business practices were "grave, endemic and pernicious":
"What matters here is not the potential loss of contracts per se, but the effect this will have on the company financially and on its (innocent) employees, and the wider effects this will have on innocent third parties."
Referencing a study by Deloitte, Sharp also noted that GDP in the UK, United States, France, Germany and Spain would take a €100 billion hit, concluding the public interest factors outweigh those in favour of prosecution. Whisper it, but was Airbus too big to fail?
- The case shines a spotlight on section 7 of the UKBA, vicarious liability with extraterritorial reach. Headquartered in France, registered in the Netherlands, Airbus admitted bribery and corruption outside of the UK and its "failure to put in place appropriate measures to prevent bribery". Would your own company meet the threshold? What control do you have over overseas subsidiaries? Do they get the same training as workers onshore?
- Conduct proportionate due diligence - What due diligence checks do you make on consultants, intermediaries and third parties? Are they adequate?
- Train employees to spot red flags - For example, gifts, hospitality, expenses, donations, etc? A consultant with no proven track record in the industry? Payments being made via a company registered in Brunei? The signs were all there once the authorities started looking. Or, as someone close to the investigation put it, "It's not sophisticated once found. It was in plain sight". (see next point)
- Don't try to bypass the rules - In this case, Airbus organised a 30-minute marketing or business presentation before hitting the golf course in order to get around hospitality rules.
- When you're in a hole, stop digging - Internal emails reveal the inner conflict employees faced in coming clean, "We know the truth I suspect, but is that what we are intending to inform UKEF?”. It shouldn't be difficult to do the right thing.
- Compliance matters and needs to be integrated fully in all business processes - It must not be seen as something that merely stands in the way of making a profit. Dodgy payments flagged by compliance were brushed aside. An internal audit of the subsidiary at the centre of the corruption found "significant breaches of compliance policies" and projects that "performed poorly". Take note.
- It's about deeds, not words - Airbus had compliance programs, policies, committees, and astonishingly was even awarded a certificate for the design of its anti-bribery compliance program. But it was still not enough. Why? Was there a philosophy to get the business "at any cost"? Were senior managers setting a different example? It seems so.
- Ensure adequate oversight - Some committee members were involved in misconduct and concealed material facts about business partners' remuneration, beneficial owners, and the process by which intermediaries were found. Essentially, the unit was marking its own homework.
- "Tone from the top" matters - 63 of its top or senior management have left the company (31 were dismissed) in just five years. It looks like those good role models were in short supply.
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