Airbus Faces Nearly $4 Billion in Fines to Settle Corruption Probes--3rd Update
January 28 2020 - 2:27PM
Dow Jones News
By Benjamin Katz
LONDON -- Airbus SE will pay a record EUR3.6 billion in a
settlement with fraud agencies in the U.S., U.K. and France over
probes into bribery and corruption, lifting a reputational and
legal cloud that has hung over the company for years.
The European plane maker said it had reached an agreement in
principle with prosecutors at a preliminary court ruling in the
U.K. on Tuesday, paving the way for a so-called deferred
prosecution agreement that allows the company to avoid formal
charges.
The agreements still require final approval by courts in each
jurisdiction, Airbus said, with hearings expected on Jan. 31. If
approved, Airbus will book the penalties as a provision in its 2019
financial accounts.
The settlement comes about four years after Airbus first
announced it was under investigation for using third-party
consultants to help secure lucrative orders for commercial
aircraft.
Airbus said at the time it had self-reported to investigators
after discovering irregularities in its submissions for
state-backed funding guarantees. It later came under the purview of
the U.S. Department of Justice for inaccuracies in disclosures
relating to military export equipment that included U.S.-made
components
The resulting investigations grew into a slow-boiling crisis for
Airbus, eventually triggering a nearly complete overhaul of its top
management and sales teams. Airbus has handed over millions of
documents to investigators, and created a new ethics and compliance
system designed to prevent future contraventions.
It also placed a blanket ban on the use of third-party agents
and halted ongoing contracts, a move which has led to a series of
legal disputes.
The deal follows a similar agreement reached with Rolls-Royce
Holding PLC in 2017 that required the engine maker to pay GBP671
million ($874 million) in penalties to U.K., U.S. and Brazilian
investigators. Based on the scope of the Airbus probe, any
settlement the company reaches could be several times bigger.
Airbus shares rose sharply on the news of the deal, though fell
back somewhat later in the day. Airbus was trading up 1% in
midafternoon trading.
The deal allows Airbus Chief Executive Guillaume Faury, who took
over the top job in April, to move past a major legacy overhang
from his predecessor, Tom Enders. Airbus' new management team can
now focus more fully on running the company at a time when its arch
rival, Boeing Co., is facing its own crisis surrounding the
grounding of its 737 MAX airliner.
The grounding has allowed Airbus to overtake Boeing as the
world's largest jet maker by deliveries, a crown it has chased for
years. Despite that victory, Airbus has been battling its own
production issues at its factories and among its suppliers. Those
issues have prevented it from increasing production rates of its
A320neo, the main competitor to the MAX, and winning over some
Boeing customers exploring dropping orders for the grounded
jet.
The probe consumed much of Mr. Enders' time at the end of his
tenure as Airbus CEO. He helped oversee an internal investigation
into the use of middlemen and changed out management layers in an
effort to secure a deal with international prosecutors.
Write to Benjamin Katz at ben.katz@wsj.com
(END) Dow Jones Newswires
January 28, 2020 14:12 ET (19:12 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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