Airbus's unfriendly skies
"Today Airbus operates with the strictest integrity," company counsel Gilles August boldly proclaimed to a French court last November 30. Yet Airbus's recent scandal-ridden past of illegal bribery payments to foreign customers across the globe raises objective concerns over whether the European aviation giant has truly changed its ways — and its track record should inform future American defense contracts.
August spoke in the context of a settlement agreement with French prosecutors, under which Airbus will pay a €15.9-million ($16.4-million) fine. This sanction concluded their corruption probe into Airbus sales of commercial jet aircraft to Libya under dictator Moammar Gaddafi in 2007 and helicopters, satellites, and a satellite control center to Kazakhstan in 2009. The Libyan sale resulted in accusations that former French president Nicolas Sarkozy had illegally financed his 2007 political campaign with Libyan funds. Airbus revealed that French authorities had questioned the firm in the "Kazakhgate" case as an "assisted witness," an intermediary French legal status in which a criminal suspect is not formally charged.
Airbus also faces civil claimants in its Netherlands legal domicile, who allege that Airbus failed to inform investors about sales intermediaries. However, the settlement, equivalent to the bribes middlemen received during the suspect deals, allows Airbus to avoid acknowledging criminal liability. Airbus can thus continue bidding for public contracts.
Airbus's present legal woes are merely an extension of international investigations that forced Airbus on January 31, 2020 to pay unprecedented fines totaling $3.96 billion to authorities in France, the United Kingdom, and the United States. These Deferred Prosecution Agreements (DPAs) followed a four-year investigation by the French National Financial Prosecutor's Office (PNF), the United Kingdom's Serious Fraud Office (SFO), and the American Departments of Justice and State. Of the levied €3.7 billion, France received the largest payout, €2.1 billion, while the United Kingdom received nearly €1 billion and the United States more than €500 million.
As the American Department of Justice noted at the time, Airbus had fulfilled the "largest global foreign bribery resolution to date." The Financial Times observed that the Airbus "fine dwarfs the £671m sanction imposed on Rolls-Royce in 2017 by regulators in the U.S., U.K. and Brazil for similar bribery and corruption offences." French prosecutors determined that due to violations uncovered in their investigation, Airbus had increased profits by €1 billion.
After receiving over 30 million Airbus documents and interrogating employers worldwide, investigators had found that Airbus over a decade had bribed officials in at least 20 countries, including China, Colombia, Indonesia, Malaysia, Nepal, Russia, and Taiwan. In one notable example, Airbus in 2003 sold 18 Eurofighter Typhoon jet fighters to Austria in a sale greased by €55 million in political contributions and fees. Shenanigans like lavish Airbus Hawaii trips for executives of China's state-controlled airlines occurred precisely when the European aircraft-maker rapidly gained global airliner market share.
As the international law firm Ropes & Gray described, Airbus's "considerable baggage" included violations of the U.K. Bribery Act, France's Sapin II, the U.S. Foreign Corrupt Practices Act (FCPA), and the U.S. International Traffic in Arms Regulations (ITAR). Particularly, ITAR requires dealers in controlled defense articles and services to report sales-related political contributions, fees, and commissions paid by the applicant, or any third-party agents. Airbus willfully violated ITAR through concealed payments in at least forty transactions in countries including Ghana, Indonesia, and Vietnam. As District of Columbia United States attorney Jessie K. Liu stated in 2020, "Airbus falsely reported information about their conduct to the U.S. government for more than five years in order to gain valuable licenses to export U.S. military technology."
"According to prosecutors, Airbus personnel engaged in criminal conduct at the company's headquarters in France and at its subsidiaries in Germany, Spain, and the U.S., with the direct involvement, knowledge, and approval of Airbus management," Ropes & Gray recounted. United States district judge Thomas Hogan similarly described a "pervasive and pernicious bribery scheme in various divisions of Airbus SE that went on for a number of years." The prosecution's "numerous counts" showed Holland & Knight law partner Jonathan M. Epstein that Airbus, "at best, tacitly tolerated repeated questionable conduct and actively evaded the compliance review and approval processes set up to protect the company."
As part of its 2020 settlements, Airbus agreed to remain under surveillance by authorities for three years, with any subsequent corruption conviction resulting in Airbus's exclusion from government contract bidding in several countries. Ropes & Gray especially noted that "Airbus entered into a Consent Agreement with the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) for a term of three years to settle its civil liability for violations of the ITAR." Therefore, "Airbus agreed to appoint an independent monitor for the term of the Consent Agreement; enhance its compliance policies, procedures, and training; submit to two audits," among other measures.
Airbus's three-year probation period will end in January 2023, and the firm claims to be reformed. Airbus has taken "significant steps since 2016 to reform itself" with a "benchmark compliance system underpinned by an unwavering commitment to integrity and continuous improvement," read a 2022 Airbus statement. According to concurrent press reports, Airbus "has undergone sweeping management changes since the original probe began in 2016 and says it now has a state-of-the-art compliance and whistleblower system."
Nonetheless, the United States government should hesitate to trust in Airbus's born-again professions. Caution particularly applies to the previously analyzed "bad deal" Airbus offers to the United States Air Force (USAF) in replacing its aging tanker refueling fleet with Airbus tankers recently built with Russian titanium. Airbus's past unethical behavior appears in line with the firm's tardiness in cutting business ties with Vladimir Putin's corrupt Russia following its invasion of Ukraine. The USAF and the wider American government should think hard before doing business with Airbus again.
Image via Public Domain Pictures.