Airbus: Bribes, Fines But No Names

Airbus’s master salesman, John Leahy, posed with the chief executive of SriLankan Airlines in an air-conditioned office at the Paris air show in June 2013. Every two years, Europe’s Airbus and US arch-rival Boeing vie to notch up the most orders on a baking patch of concrete north of the French capital. Leahy had just signed a contract to sell the state-owned airline six A330 jets.

“The efficiency, reliability and passenger appeal of our in-service A330s form the pillar of SriLankan’s long-haul operations,” said Kapila Chandrasena, SriLankan’s chief executive.

“We are grateful for this renewed confidence SriLankan Airlines is placing with us,” said Leahy.

Several months earlier, a “straw” company had been set up in Brunei, the tiny Asian sultanate, to profit from this deal. The company had only one shareholder and one director, a woman with no experience of the industry. She happened to be the wife of a senior SriLankan executive. Airbus agreed to pay her company $1m (£760,000) for every A330 delivered. In all, $16.8m was pledged in bribes.

Explosive details of that deal emerged late last week in documents published as part of the biggest ever foreign corruption inquiry, one that will cost Airbus €3.6bn (£3bn) in fines and costs paid to authorities in the UK, France and US.

The European aerospace giant had engaged in years of bribing middlemen and officials worldwide to win orders for planes. In return for a suspended prosecution, it has agreed to pay the Serious Fraud Office (SFO) 991m; €2bn to France’s Parquet National Financier; and €525.7m to the US Department of Justice.

The record-breaking Deferred Prosecution Agreement dwarfs a £671m settlement paid by Rolls-Royce in 2017 after an SFO and DoJ inquiry into graft spanning decades.

Mrs Justice Sharp said in a high court judgement on Friday: “The seriousness of the criminality in this case hardly needs to be spelled out. As is acknowledged on all sides, it was grave.” She added that bribery was “endemic in two core business areas within Airbus” — civil aerospace and defence.

She said: “It is no exaggeration to describe the investigation it gave rise to as worldwide, extending into every continent in which Airbus operates.” Had Airbus not co-operated, the penalty would have been doubled, she added.

Lisa Osofsky, SFO director, said: “Airbus paid bribes through agents around the world to stack the decks in its favour and win contracts around the globe.”

The judgment revealed corruption in countries including China, Austria, Ghana and Sri Lanka. The joint investigation, which was “vast in scale and scope”, involved about 110 intermediaries who were used to win orders, and saw Airbus assess more than 30m documents.

The SriLankan deal involved misleading UK Export Finance, the government agency that supports overseas deals and to which Airbus had applied for funds.

When staff at the agency pointed out that the company director had little aviation experience and asked Airbus to confirm she was not the wife of a SriLankan executive, an Airbus employee replied: “This is a homonym but certainly not the same person.” An internal Airbus memo later read: “The truth is most unfortunate.” The woman was paid $2m. There is no suggestion that Leahy or Chandrasena were involved in the corruption. No individuals were named in the judgment, which Mrs Justice Sharp said was necessary to ensure those involved receive a fair trial in separate inquiries.

In another case, Airbus’s predecessor, EADS, paid $50m to sponsor a sports team that was jointly owned by two executives at Malaysian budget carrier AirAsia, run by Tony Fernandes, the majority shareholder in Queens Park Rangers. The unnamed executives were key decision-makers at AirAsia and AirAsia X, and helped to seal deals for 180 aircraft.

Between 2009 and 2015, Airbus employees promised to pay €5m to a British man born in Ghana who was a close relative of a Ghanaian government official. In return, Ghana bought three C-295 military transport planes. The middleman had no experience in aerospace, and his CV listed his experience as an events manager for a council, director of a football merchandising business and facilities manager. He was assisted by two Britons, who had worked as TV actors.

In one scheme involving Taiwanese airline TransAsia, Airbus staff and middlemen communicated using an elaborate code involving “Van Gogh”, a “patient”, “Dr Brown” and “medications and dosages”. The coded emails referred to payments intended for executives at the airline. The agents were paid a total $14.3m and TransAsia bought 20 planes.

The judge said Airbus had made a “slow start” in co-operating with the authorities, but then assisted them to the “fullest extent possible”. The company froze payments to third-party agents in October 2014, but only reported itself to the SFO in April 2016.

Airbus has since overhauled its board and management, with Guillaume Faury, the former head of its helicopters division, replacing Tom Enders as chief executive last year. None of its current committee was implicated in the inquiry. It has parted ways with 63 senior staff: 31 have been sacked and 32 resigned, the judgment revealed. It has also changed its internal processes, with an independent compliance panel led by lawyer Lord (David) Gold, who was also retained by Rolls-Royce to review its global anti-corruption compliance policies. Denis Ranque, Airbus chairman, said the settlements would “turn the page on unacceptable business practices from the past”, although the company did not apologise.

Yet the clamour for individuals to be brought to justice will not die down.

Daniel Bruce, chief executive of Transparency International UK, said: “Individual prosecutions in this case are vital to ensure that justice is seen to be done.

“Failing to go after those involved will give the impression that big companies play by a different set of rules and can simply buy their way out of trouble.”

The SFO said that the investigation remained active and the position in relation to individuals was being considered.

The weapon of choice for fraudbusters

Deferred prosecution agreements (DPAs) have become the weapon of choice for the Serious Fraud Office in its pursuit of large-scale corporate wrongdoing.

They have not been without controversy. A DPA allows a company to reach an agreement with the prosector, where it is charged with a criminal offence, but the prosecution is suspended in return for a fine, corporate overhaul and a promise to behave.

This is the seventh DPA since they were introduced in 2013, and dwarfs Rolls-Royce’s deal in 2017 — part of a £671m settlement.

However, DPAs have come under fire for allowing individuals to escape justice. The judge in the Rolls-Royce judgment said “controlling minds of the company” were implicated in the corruption, but last year the Serious Fraud Office (SFO) dropped its investigation into individuals.

There have also been doubts raised over the strength of the DPA regime, after former Tesco executives walked free when a case against them collapsed early last year. A judge ruled the prosecution was “so weak” there was no case to answer — despite Tesco having agreed to a DPA on the same charges brought against the men.

Tony Lewis, a partner at law firm Fieldfisher, said: “The SFO has previously failed to secure convictions against individuals in high-profile cases where companies have entered DPAs, raising questions about the level of scrutiny applied in during DPA process.

“If the SFO fails to secure convictions in this case, this will sharpen scrutiny on whether the SFO’s DPA process is fit for purpose at all.

“Although DPAs continue to be agreed, organisations are becoming aware that the DPA regime is not as attractive as it first seemed, particularly given the SFO’s poor charging record and conviction rate, often relating to individuals charged on the same set of facts on which a DPA was agreed.”