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 at least 10 different 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 matter eclipsed Petróleo Brasileiro S.A. (Petrobras) as the world’s most expansive bribery scandal. Over the next several blog posts I will be exploring the enforcement actions. Today, I begin with an overview. Documents referenced in this blog post include the Airbus Information, Airbus Deferred Prosecution Agreement (DPA) and US Department of Justice (DOJ) Press Release.
Statements
According to the Press Release, Assistant Attorney General Brian A. Benczkowski, DOJ Criminal Division, noted, “Airbus engaged in a multi-year and massive scheme to corruptly enhance its business interests by paying bribes in China and other countries and concealing those bribes. This coordinated resolution was possible thanks to the dedicated efforts of our foreign partners at the Serious Fraud Office in the United Kingdom and the PNF [Parquet National Financier] in France.” While there was a significant component of the case brought under the Foreign Corrupt Practices Act (FCPA), there were other US laws willfully violated by Airbus. In addition to violations of the FCPA, Airbus was found to have violated the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations (ITAR), in the United States.
Principal Deputy Assistant Attorney General David P. Burns, DOJ National Security Division (NSD), said, “International corruption involving sensitive U.S. defense technology presents a particularly dangerous combination. Today’s announcement demonstrates the Department’s continuing commitment to ensuring that those who violate our export control laws are held to account.” Echoing this sentiment was Special Agent in Charge Peter C. Fitzhugh, US Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) New York, who stated, “the bribery of government officials, specifically those involved in the procurement of U.S. military technology, posed a national security threat to both the U.S. and its allies. The global threats facing the U.S. have never been greater than they are today, and HSI New York is committed to working with our federal and international partners to assure sensitive U.S. technologies are not unlawfully and fraudulently acquired. As this investigation reflects, national security continues to be a top priority not just for Department of Homeland Security, but for HSI New York.”
Bribery Schemes and Countries Involved
The systemic corruption was truly on a global basis. It appears that Airbus was willing to a pay a bribe anytime, anywhere to anyone to garner business. The Information listed bribery schemes in Vietnam, Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana. The most detailed information was regarding the bribes paid in China, where between 2013 and 2015, Airbus engaged a business partner in China to make payments to third party partners that were intended to be used as bribes to government officials in China to obtain approval of contracts for the purchase and sale of Airbus aircraft to state-owned and state-controlled airlines in China. This scheme was facilitated through payments to a bank account in Hong Kong in the name of a company controlled by yet another third party. Another massive bribery scheme was luxury travel to locations where Airbus assuredly did not have business operations. These locations included Park City, Utah and the island of Maui, Hawaii.
As previously noted, a large part of the bribery and corruption fell under the purview of AECA and ITAR. As noted in the Press Release, “between December 2011 and December 2016, Airbus filed numerous applications for the export of defense articles and defense services to foreign armed forces. As part of its applications, Airbus was required under Part 130 of the ITAR to provide certain information related to political contributions, fees or commissions paid in connection with the sale of defense articles or defense services. The admissions and court documents reveal, however, that the Company engaged in a criminal conspiracy to knowingly and willfully violate the AECA and ITAR”.
Penalties
Airbus has also entered into a DPA with the UK Serious Fraud Office (SFO) as well as a resolution with PNF in France. The fines paid by Airbus are stunning. As a part of its settlement with the PNF, Airbus has agreed to pay more than €2 billion, more than approximately $2.29 billion. As a part of its settlement with the SFO, Airbus has agreed to pay approximately €990 million, approximately $1.09 billion. Finally, in the US, Airbus has agreed to pay $527 million for the FCPA and ITAR violations, and an additional €50 million, approximately $55 million, as part of a civil forfeiture agreement for the ITAR-related conduct and a $10 million penalty to the US Department of State’s Directorate of Defense Trade Controls (DDTC).
Even with its clear intention to engage in systemic bribery and corruption, Airbus was able to obtain partial credit leading to a fine and penalty reduction. According to the DPA, Airbus did not receive self-disclosure credit for its FCPA-violative conduct because it only reported its conduct to the DOJ after it was being investigated for bribery and corruption in the UK and after such information was made public. Airbus did receive credit for cooperation with the DOJ in the investigation and for its remedial efforts during the pendency of the investigation. These remedial efforts included termination and discipline of individuals involved in the corruption, enhancements to the company’s compliance regime and cooperation going forward. All of this led to a 25% reduction off the bottom end of the US Sentencing Guidance’s fine range for FCPA violations. Finally, a US monitor was not mandated as oversight will be handled by PNF.
The Airbus matter has been a long-standing, multi-country investigation. Over the next few days, I will be exploring it in-depth. Stay tuned and enjoy the flight.
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