Airbus faces $4 billion fine after international bribery probe

By Sudip Kar-Gupta and Tim Hepher (Reuters) — Airbus faces a $4 bil­lion (3 bil­lion pounds) fine and sharply low­er 2019 prof­its after unveil­ing a pre­lim­i­nary deal with French, British and U.S. author­i­ties fol­low­ing a crip­pling three-year probe into alle­ga­tions of bribery and cor­rup­tion over jet­lin­er sales

By Sudip Kar-Gupta and Tim Hepher, Reuters, January 29, 2020,

By Sudip Kar-Gupta and Tim Hepher (Reuters) — Airbus faces a $4 bil­lion (3 bil­lion pounds) fine and sharply low­er 2019 prof­its after unveil­ing a pre­lim­i­nary deal with French, British and U.S. author­i­ties fol­low­ing a crip­pling three-year probe into alle­ga­tions of bribery and cor­rup­tion over jet­lin­er sales

(Reuters) — Airbus faces a $4 bil­lion (3 bil­lion pounds) fine and sharply low­er 2019 prof­its after unveil­ing a pre­lim­i­nary deal with French, British and U.S. author­i­ties fol­low­ing a crip­pling three-year probe into alle­ga­tions of bribery and cor­rup­tion over jet­lin­er sales.

The deal, among the biggest in a bribery case, ends an almost four-year cri­sis that led to a sweep­ing man­age­ment over­haul and delayed plans to rede­ploy the plane giant’s cash surplus.

If approved by courts, the deal is expect­ed to allow Airbus to avoid crim­i­nal charges that risked ban­ning the com­pa­ny from pub­lic con­tracts in the United States and European Union — a mas­sive set­back for one of Europe’s top defence and space firms.

The European plane­mak­er has been inves­ti­gat­ed by French and British author­i­ties for sus­pect­ed cor­rup­tion over jet sales dat­ing back over a decade. It has also faced U.S. inves­ti­ga­tions over sus­pect­ed vio­la­tions of export controls.

Announcing the ten­ta­tive agree­ment, Airbus — which dom­i­nates the com­mer­cial jet mar­ket along­side U.S. rival Boeing — said it would take a pro­vi­sion of 3.6 bil­lion euros (3 bil­lion pounds) in its 2019 earn­ings if the deal won approval in court hear­ings in the United States, Britain and France on Jan 31.

That com­pares with ana­lyst expec­ta­tions of 3–5 bil­lion euros and dwarfs an $809-mil­lion multi­na­tion­al set­tle­ment over the use of mid­dle­men by aero-engine mak­er Rolls-Royce , which includ­ed the biggest ever cor­rup­tion fine in Britain.

Analysts had expect­ed 2019 net prof­it of 4.638 bil­lion euros against 4.405 bil­lion in 2018, accord­ing to Refinitiv data.

Despite the hit, Airbus shares rose 1% on what appeared to end one of the most dam­ag­ing chap­ters in its history.

Sorting out the fraud inves­ti­ga­tion is like­ly to remove a major over­hang for the com­pa­ny,” said Vertical Research Partners ana­lyst Rob Stallard. Others not­ed plans for a new share buy­back had been post­poned as Airbus faced uncer­tain­ty over the fines.

British and French inves­ti­ga­tions began after Airbus alert­ed reg­u­la­tors to mis­lead­ing and incom­plete dec­la­ra­tions it had made to Britain’s export cred­it agency over pay­ments to sales agents.

Britain’s Serious Fraud Office (SFO) launched its probe in August 2016, fol­lowed sev­en months lat­er by France’s Parquet National Financier (PNF).

It was not imme­di­ate­ly clear to what extent the U.S. part of any set­tle­ment would stick to the infringe­ment of export con­trol vio­la­tions or include the broad­er cor­rup­tion case.

The U.S. Department of Justice has sig­nalled a close inter­est in the bribery affair while main­ly allow­ing Britain’s SFO to take the lead, say peo­ple famil­iar with the matter.

It was also not clear whether a deal would lead to indi­vid­ual pros­e­cu­tions, which are not cov­ered by cor­po­rate plea bar­gains. Britain’s SFO aban­doned indi­vid­ual pros­e­cu­tions over the Rolls-Royce case last year.

AGENT NETWORK

At the cen­tre of the Airbus case was a decades-old sys­tem of third-par­ty sales agents run from a now-dis­band­ed head­quar­ters unit which at its height involved some 250 peo­ple in parts of the world and sev­er­al hun­dreds of mil­lions of euros of pay­ments a year, sources famil­iar with the mat­ter have said.

In 2014, then finance direc­tor Harald Wilhelm ordered a halt to all third-par­ty pay­ments, trig­ger­ing a mas­sive inter­nal probe and claims from unpaid consultants.

The inves­ti­ga­tion, which racked up legal bills of around 100 mil­lion euros a year, led to a board-dri­ven clearout of the com­pa­ny’s top man­age­ment and plunged the com­pa­ny into years of self-exam­i­na­tion, ham­per­ing its sales efforts.

Nobody has been accused of wrong­do­ing but Airbus act­ed to clear out its senior ranks to improve its chances of win­ning a U.S.- style deferred pros­e­cu­tion agree­ment (DPA), insid­ers said.

In a land­mark 2017 rul­ing set­ting the bar for future set­tle­ments, a British judge had described Rolls-Royce as “dra­mat­i­cal­ly changed” with a new lead­er­ship and culture.

Airbus has fired more than 100 peo­ple over ethics and com­pli­ance issues as a result of its own probe into the alle­ga­tions, which widened to oth­er divisions.

But the inter­nal probe led to anger with­in the Franco-German firm and its jet sales teams who denied any influ­ence over the tight­ly con­trolled agent sys­tem, which polit­i­cal sources have described as part of a wider French influ­ence net­work abroad.

It also threat­ened to reopen Franco-German ten­sions over Airbus as French sources com­plained the row divert­ed atten­tion from a sep­a­rate probe into fight­er jet deal­ings with Austria, par­tial­ly over­seen by German-born Tom Enders who lat­er served as chief exec­u­tive. Enders has denied any wrongdoing.

A fur­ther German probe into poten­tial mis­use of client doc­u­ments is ongoing.

(Additional report­ing by Kirstin Ridley; edit­ing by Jason Neely, Mark Potter and Sonya Hepinstall)

This sto­ry has not been edit­ed by Firstpost staff and is gen­er­at­ed by auto-feed.

Firstpost.Com

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