Rogue Airbus Unit the Focus of Record $4 Billion Settlement


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Airbus SE used a department with a $300 million annual budget to illegally sway government officials and other decisionmakers on airplane sales, boosting profit by more than $1 billion in a long-running bribery campaign, according to documents filed in the biggest corporate bribery case on record.

The European planemaker admitted guilt and agreed to pay $4 billion in a settlement approved Friday by courts in France, the U.S. and the U.K. According to documents filed in the cases, the crimes spanned countries including Malaysia, Russia and China over 13 years. A French prosecutor said in court that the plan helped to boost the company’s profits by 1.05 billion euros ($1.2 billion).

U.S. District Court Judge Thomas Hogan called the conduct by Airbus employees and executives “pervasive and pernicious” and asked prosecutors whether individuals would be charged. The investigation is ongoing, answered U.S. prosecutor Elina Rubin-Smith. She told the judge that Airbus’s deal requires them to aid any efforts to charge individuals.

“All you can assume is that somehow the Airbus ethics and the philosophy in certain parts of the company simply did not move with the times,” said Sandy Morris, an analyst at Jefferies International. “It’s a long time to be doing things wrong and the scale of this penalty seems to suggest this wasn’t just a handful of examples.”

Airbus will be under scrutiny for the next three years. For the Toulouse, France-based company, the settlement ends four years of investigations into accusations that it used middle men to win over officials with bribes when it entered new markets. It agreed to pay 2.1 billion euros to France, 991 million euros including costs to the U.K. and 527 million euros to American authorities.

While steep, the so-called Deferred Prosecution Agreement frees the aerospace giant to press its advantage over struggling rival Boeing Co., which remains in crisis almost 1 year after its 737 Max workhorse was grounded because of deadly crashes.

Airbus used the 150-person strategy and marketing department to pay bribes to win business, according to prosecutors in Washington, D.C. The company made $50 million in improper payments to AirAsia Group directors through the sponsorship of a sports team, promised to pay off the relative of a high-ranking Ghanaian government official and paid $2 million to the wife of a Sri Lankan Airways purchasing official, according to the U.K. judgment.

The company’s crimes in the U.S. included export violations, the court was told. In the U.K., there were five counts, four relating to commercial aircraft in Malaysia, Sri Lanka and Taiwan while the fifth related to a defense contract.

Red Flags

The wrongdoing first came to light when the U.K.’s export finance body, which supports some Airbus sales, questioned the company about missing information about sales agents contained in its filings, according to the U.K. judgment.

A subsequent review by Airbus included “red flags for corruption,” after which U.K. Export Finance suggested the company reports itself to the SFO, the judgment said.

Then-Chief Executive Officer Tom Enders launched an internal probe, and the European manufacturer turned itself in to authorities in 2016. Investigations into Airbus were subsequently opened in France and the U.S.

The fallout led to the departures of top company executives and dominated the last several years of Enders’s tenure. The fine dents profits but lets CEO Guillaume Faury clear away a major distraction. The company just came out the clear winner in the perennial duopoly battle for plane orders with Boeing, which has struggled with delays as it tries to lift the grounding of the 737 Max, idled since last March.

Faury, who took over in April, will be able to turn his attention to another pressing issue: how to resolve production issues that have led to a massive order backlog and compensation for airlines.

While the company can largely move on, Jean-Francois Bohnert, a prosecutor at France’s Parquet National Financier, said investigations into individuals isn’t over. Authorities still have open probes into former executives and other representatives.

Airbus shares fell 0.9% to 133.24 euros in Paris. The stock is up 2.1% so far this year.

Painful Past

“Airbus is relieved to be here today after having had a rather painful past,” Sylvie Kande de Beaupuy, chief compliance officer at Airbus, said in court in France.

Eric Russo, another French prosecutor, said the probe was helped by the “exceptional cooperation” Airbus provided, handing over 30 million documents — three times the size of the Panama Papers leak.

“We went backstage to examine the largest contracts won by the company,” Russo said.

The total Airbus fine surpasses J&F Investimentos SA’s 2017 penalty of about $3.2 billion, billed the world’s largest bribery settlement at the time.

The U.K. settlement is also the largest ever, surpassing the then record 500 million-pound ($651 million) fine paid by jet-engine maker Rolls-Royce Holdings Plc. Airbus plans to book the fines in its year-end results due on Feb. 13.

Investigators from the Serious Fraud Office scrutinized the use of some middlemen who acted as go-betweens for companies and officials in the Middle East and elsewhere. That led to a sweeping review by Airbus into its controls and practices in 2016.

The European manufacturer isn’t the only company that has been tripped up attempting to manage growth in the Middle East, Asia and other fast-growing regions. Companies often use intermediaries with local connections to help establish a presence in new markets, where setting up local offices can take years. The practice isn’t illegal, but it can complicate oversight.

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