Compliance Evangelist

Last week, Airbus SE (Airbus) settled a long-standing corruption scandal by agreeing to enforcement actions in three countries; France, the United Kingdom and the US. The matter involved a massive, worldwide, long running bribery and corruption scheme, approved at the highest levels of the organization and perpetrated in multiple countries. It also became the highest amount ever assessed against an organization for international bribery and corruption, approximately $3.9 billion. Although limited to one industry, aerospace, the Airbus corruption scandal is now not only the  the world’s most expansive bribery scandal but also its most expensive. Over the next several blog posts I will be exploring the enforcement actions. Today, I provide consider the bribery schemes employed by Airbus.

The breadth and scope of the Airbus bribery schemes were stunning. They were literally worldwide in scope. As I noted yesterday, the company had a superb paper compliance program but it was either designed to be ignored or circumvented or never actually worked in practice. Whichever it was, the number of persons bribed in countries inhabiting every corner of the globe was striking. Indeed, one might conclude that the total fines and penalties was not so high but in reality too low.

While it will take several hours to do so, I urge every compliance professional to read the settlement documents to see not simply the breadth and scope of the bribery but the specific means used by Airbus employees, officers and directors. From the UK-DPA and Judgment are very detailed statements of the amounts of bribes paid and facts surrounding the payments. The Judgment includes handy charts (Bribery Box Scores really) detailing dates of purchase, airline and aircraft involved, dates of bribes paid and amounts.

Malaysia

The Judgment relates that Airbus paid bribes to both airlines in Malaysia, AirAsia and AirAsiaX. The bribes were funded by sponsoring a sports team unrelated to either airline but in fact owned by airline executives. The bribe payments were to the tune of $50MM.

Sri Lanka

Here Airbus engaged the wife of the person with decision making authority for the purchase of planes to fund bribes to through a shell company. The shell company was registered in Brunei. The wife had zero experience in the airline industry. Although some $16MM+ was offered as bribes to this person, apparently only $2MM was paid by Airbus.

Perhaps more troubling was the outright misrepresentations made to United Kingdom Export Fund (UKEF) who was guaranteeing the purchase. According to the UK-DPA, “Our research has identified the wife of the [SLA Executive 1] as having the same name as the one we have been given. Please confirm that this is not a party to this issue and is not your agent. This is an homonymy but certainly not the same person. She is not a party to this issue and she is not our agent. We assume this is a coincidence but could you also confirm that your agent has no connection to the airline, its personnel or family members of staff and executives at the airline. We confirm.” [emphasis in original]

 Taiwan

Here Airbus funneled bribes of over $14MM to the person at the airlines with purchasing authority through two improperly approved business partners. The scheme was facilitated with a completely idiotic code for the bribery scheme using false names for the parties (two Chinese doctors and Vincent Van Gogh). Bribe payments were referred to as Van Gogh paintings and even medical prescriptions, all of which were created by a written protocol from an Airbus employee. As the UK-DPA stated, “The prescribed amounts of the “medications”, namely the payments mentioned in these emails match exactly the amounts and dates in invoices submitted to Airbus by” the corrupt intermediaries whom through the bribes were funded.

Indonesia

Here Airbus paid bribes to secure contracts through corrupt business partners who then passed the illegal payments onto officials of the state-owned enterprise which operated the country’s airline. Interestingly, here payments were made to offshore bank accounts controlled by family members of the corrupt officials. The payments were made to shell corporations in the British Virgin Islands and Singapore.

 Ghana

Here the company sold both commercial jets and military transports to the government. The bribery scheme involved funneling illegal payments to a corrupt business partner who was a relative of a key decision maker on such purchases by the government. Interestingly, and no doubt to facilitate the internal corruption at Airbus, the company’s Spanish subsidiary was used to engage the corrupt intermediaries, with fraudulent contracts for which no services were performed and then payment was made. At one point there were payments under a “verbal contract” and all payments were instructed to represent it going forward.

China

In China the bribery scheme was to use corrupt third parties who had fraudulent contracts for which no work was performed as a conduit. Once again payments were made offshore so the company was [apparently] unable to link the offshore payments to bribery and corruption. The US-DPA introduced a term we have not previously seen in international bribery and corruption enforcement, the “comfort letter”, which would confirm the illegal payments were to be made.

In addition to the facilitation of bribery and corruption through intermediaries, Airbus used lavish travel and entertainment as a part of their overall bribery program. This special fund was concluded on a “handshake deal” between Airbus representatives and Chinese government officials “related to management education, seminars and pilot education.” Airbus funded the travel plan but it was administered by Chinese government officials who directed the actual travel arrangements and details be handled by companies controlled by themselves and other Chinese government officials. In reality all this money was used to fund was “leisure travel” to the US for the officials.

Tomorrow, I will take a look at the AECR and ITAR violations, fines and penalties.

Resources

Airbus Information with the US Department of Justice

Airbus Deferred Prosecution Agreement with the US Department of Justice (US-DPA)

Airbus Deferred Prosecution Agreement with the Serious Fraud Office (UK-DPA)

Airbus UK Court Judgment

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