Sales of Airbus SE military helicopters to Ghana, cited in the company’s record USD 4 billion global corruption settlement struck late last month, show how bribes paid in the pursuit of business abroad can mix with U.S. defense-related export controls violations.
The bribery allegations, which involved illicit payments made by Airbus-linked middlemen to strike deals in more than a dozen countries, have sparked investigations across the globe, including airline buyers and government officials accused of taking payments or other gifts.
Concerning the sales to Ghana, the export controls violations appear to have been part of a broader scheme to secure a contract with the Ghanaian government via bribery payments, according to records filed in the case in the U.S. and U.K. Airbus completed two campaigns to sell the C-295, a twin turboprop tactical military transport aircraft, to Ghana in 2009 and 2015, according to the settlement documents.
Airbus paid EUR 3.9 million connected to the first campaign and promised another EUR 1.7 million for the second, but it didn’t make that payment, according to records filed in the U.K. However, the company said in its U.S. defense-related export license applications that it hadn’t paid or agreed to pay commissions related to the Ghana sales, the U.S. settlement said.
Under U.K. anti-bribery law, the commission payments constitute bribes;the U.S. defined them as commissions under its defense-related export control regulations. The U.S. regulations bar the use of payments, such as political contributions, fees or commissions, to sell defense items to governments.
Ghana’s president has ordered a probe into the accusations. A special prosecutor said last week there is reasonable suspicion of corruption, and his office has sought assistance with the investigation from domestic public institutions.
The prosecutor also cautioned against speculation or politicization of the findings in the Airbus settlements. An opposition party that was in power at the time of the sales has denied wrongdoing.
The settlement agreements, struck with the U.S., France and U.K., broke a 2016 record for largest global corruption settlement set by Brazilian construction firm Odebrecht SA.
Denis Ranque, chairman of the Airbus board of directors, said in a statement that the settlement will “turn the page on unacceptable business practices from the past”.
In the statement, Airbus said it wouldn’t comment on the agreements’ findings, citing legal reasons.
On Friday, the company reported an annual loss in 2019 of nearly EUR 1.4 billion, compared with a net profit of EUR 3.1 billion the year prior.
In addition to the U.S. criminal settlement, Airbus also reached a civil agreement with the State Department, agreeing to pay USD 10 million, half of which was suspended on the condition that the funds are spent on remedial compliance measures.
Airbus is also required under the civil agreement to hire a special compliance official to oversee its adherence to the deal.
Though the bribery side of the Airbus settlement has received widespread attention, less was paid to the U.S. export-controls matters:
The company admitted violating the International Traffic in Arms Regulations (ITAR), which implement the Arms Export Control Act (AECA).
The State Department’s Directorate of Defense Trade Controls (DDTC), which also enforces compliance with ITAR, settles about two cases per year, according to its enforcement page.
Airbus export compliance personnel were generally aware of the company’s use of third parties in its sales efforts, but did not know who worked on what campaign, and did not ask sales personnel to verify that no payments were made to seal a sale, the company admitted in U.S. court documents.
The export compliance staff also signed certifications on ITAR license applications, produced using a template, attesting that no payments or commissions were used to sell defense-related material.
Airbus, which in 2008 created a division that managed third-party relationships, “willfully obscured from oversight” the division and the company’s overall activity in the commission payments, according to the U.S. settlement.
“International corruption involving sensitive U.S. defense technology presents a particularly dangerous combination,” said Principal Deputy Assistant Attorney General David P. Burns of the U.S. Justice Department’s National Security Division.
Airbus was aware of its obligations under ITAR as far back as 2009, but it failed to develop a formal policy despite multiple conversations at high levels of the company about the issue over several years, according to the U.S. records. It finally established a policy — on Dec. 30, 2016, the records show.
The investigations date back to April 2015, when U.K. Export Finance (UKEF), which provided financing for Airbus deals, asked the company about its anti-bribery due diligence procedures surrounding third parties, according to the U.K. records.
Airbus began an internal review later that year; UKEF and the company contacted the Serious Fraud Office (SFO) in April 2016, the U.K. records show. Authorities in France opened a preliminary investigation months later, according to the French settlement.
The U.S. opened a parallel probe, and French authorities shared some evidence with their U.S. counterparts, the French document said.
Airbus cooperated extensively with the investigations, according to the authorities in all three countries.
The company produced more than 30 million documents, and kept French and U.K. authorities regularly informed about the process of its internal probe, the French settlement said.
U.S. prosecutors said they reached their resolution regarding the AECA and ITAR-related conduct based on the voluntary and timely nature of the company’s disclosures, as well as Airbus’ cooperation and remediation.
The Airbus settlement marks the first case since the Justice Department amended its self-disclosure policy for companies regarding sanctions or export-controls violations, said law firm Ropes & Gray LLP in a recent client note.
“To the extent that the Airbus settlement signals a renewed interest by DOJ in prosecuting the ITAR violations, this could have a significant impact, particularly for companies in the aerospace industry that may deal in defense articles and services and rely upon third-party intermediaries,” the note said.
“The work required within the Criminal Division to investigate the various Airbus issues and coordinate a resolution may have helped to inform the new export policy, and may serve as a catalyst for further alignment of [Justice Department] policies.”
In Ghana, Airbus worked with a high-ranking elected government official, using the person’s brother “as a conduit” to strike the deals to sell the C-295 aircraft, according to U.S. and U.K. court documents.
Though Airbus compliance staff initially rejected a contract to furnish the deal, senior leadership in the company’s defense and space division and marketing department “concocted a plan to deliberately circumvent” the compliance program, using a Spain-based third party business partner to make the payments, the documents show.
While the U.S. settlement said the commission payment was about EUR 3 million, it was EUR 3.9 million, which was “in excess of the agreed commission amount,” according to the U.K. document.
The DDTC said it decided not to debar Airbus from business in the U.S. due to the company’s cooperation, its expression of regret for the activity and the steps it took to improve the corporate compliance program.
Companies under a corruption investigation have to think about collateral consequences, such as how the conduct could have affected trade-compliance activity, said Christine Savage, a partner at King & Spalding LLP who leads the firm’s international trade practice on export controls and sanctions law.
“Sometimes [a company] is so focused on dealing with immediate corruption issues that it doesn’t look at the entire landscape,” she said in an interview.
Source: Brief.kharon.com
