By Benjamin Katz in London and Matthew Dalton in Paris
Airbus SE agreed with the U.S. to have its global defense
business monitored by an external compliance officer -- part of a
sweeping EUR3.6 billion ($4 billion) deal with American, U.K. and
French prosecutors that settles alleged bribery and export-control
violations against the plane maker.
Airbus disclosed the financial terms of the deal -- the largest
international settlement over alleged bribery ever -- earlier this
week. Prosecutors and officials in all three jurisdictions, in
detailed allegations released Friday, said the company made illicit
payments for years to intermediaries to secure contracts for its
planes and other products.
In one example, British prosecutors said Airbus paid $50 million
between October 2013 and January 2015 to sponsor a sports team
jointly owned by two AirAsia executives in Malaysia. Airbus
allegedly made the payment to secure an order for 180 aircraft. An
AirAsia representative wasn't immediately available for
comment.
In some cases, communications related to payments were allegedly
disguised using fake names and coded emails. British prosecutors
say payments in one instance were referred to as "medications and
dosages prescribed by Dr. Brown" -- Dr. Brown being an alias for an
Airbus executive and the dosages referencing invoices. In the same
deal, at a different time, a senior airline executive was referred
to as Van Gogh and details of the deal were referenced as his
"paintings," the prosecutors said.
The U.S. also accused Airbus of violating export-control laws
related to the sale of defense gear with American components. It
alleged Airbus hadn't accurately disclosed political contributions,
fees and commissions in connection with defense sales and had
failed to maintain records of military equipment subject to U.S.
export-control rules.
As part of the settlement, the U.S. State Department said Airbus
agreed to pay the department $10 million. It said it would suspend
$5 million of that penalty if Airbus spends the amount on
U.S.-approved compliance improvements.
Airbus also agreed to appoint an external compliance officer for
at least two years to monitor the company's handling of its
defense-related sales and disclosures around the world. The plane
maker must also conduct two separate audits of its defense
activities during a three-year period. The company can be
prosecuted if it fails to fully comply with the agreement over the
period, the State Department said.
The defense-business monitoring represents an unusual example of
U.S.-mandated oversight of the business practices of a large,
foreign industrial heavyweight. Airbus is a Franco-German aviation
giant that competes globally for commercial and defense business
with American firms, including rival Boeing Co.
Airbus, based in Toulouse, France, hasn't determined where the
compliance officer will be based. As part of its deal with French
and British prosecutors, Airbus agreed separately to allow
additional monitoring by a French-led compliance team to ensure the
company meets the terms of the broader deal.
By agreeing to the deal, called a deferred prosecution
agreement, Airbus isn't required to admit or deny specific
wrongdoing, and it avoids criminal charges that would bar it from
winning contracts in the U.S. and European Union.
The settlements "turn the page on unacceptable business
practices from the past," Airbus Chairman Denis Ranque said in a
statement. "The strengthening of our compliance programmes at
Airbus is designed to ensure that such misconduct cannot happen
again."
A French judge said the company is alleged to have made illicit
payments to middlemen in China, South Korea, Russia, Japan,
Colombia and other countries. U.S. and U.K. prosecutors issued
their own allegations. Of the dozen-plus jurisdictions named, the
biggest contracts involved Chinese customers.
According to French prosecutors, Airbus contributed $24.2
million between 2012 and 2017 to an entity called the China
Aviation Cooperation Fund, which was supposed to fund activities
such as the training of Chinese pilots. Some of the money served as
a slush fund to bribe Chinese bureaucrats and airline company
executives, according to the French settlement.
A representative of the Chinese embassy in Washington wasn't
immediately available for comment.
The settlement covers allegations between 2004 and 2016, and
included contracts in Turkey, the United Arab Emirates, Brazil,
Taiwan and Nepal, French prosecutors said.
French prosecutors said in court Friday that the overall fine
had been reduced by half because of Airbus's cooperation. France
will take the greatest share of the settlement: EUR2.08 billion.
U.S. authorities will take EUR984 million and the U.K. will take
EUR527 million.
Authorities are deciding whether to prosecute individual Airbus
executives who they say directed the payments. "We must now examine
the responsibility of individuals," said Jean-Francois Bohnert, the
French financial prosecutor.
Airbus disclosed the probe into suspect payments about four
years ago. At the time, it said it alerted authorities after
discovering irregularities in its submissions for state-backed
funding guarantees.
An entity inside Airbus, called the Strategy and Marketing
Organization that employed about 150 people, was responsible for
arranging the illicit payments, according to French and British
prosecutors. The SMO used elaborate strings of shell companies in
tax-haven states to help conceal the purpose of funds
intermediaries used to pay bribes on the plane maker's behalf,
according to the allegations. In addition to cash, so-called
"business partners" allegedly promised airline officials luxury
trips and apartments.
The SMO was formed in 2008, and typically would pay agents a
percentage of an aircraft deal's value or a fixed amount per plane,
according to British prosecutors. The unit had an annual budget of
up to $300 million.
Write to Benjamin Katz at ben.katz@wsj.com and Matthew Dalton at
Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
January 31, 2020 15:41 ET (20:41 GMT)
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