Last week, Airbus SE (Airbus) settled a long-standing corruption scandal by agreeing to enforcement actions in three countries; France, the United Kingdom and the US. The matter involved a massive, worldwide, long running bribery and corruption scheme, approved at the highest levels of the organization and perpetrated in multiple countries. It also became the highest amount ever assessed against an organization for international bribery and corruption, approximately $3.9 billion. Although limited to one industry, aerospace, the Airbus corruption scandal is now not only the world’s most expansive bribery scandal but also its most expensive.
Today, I want to focus on the UK Approved Judgment (Judgement), which approved the UK-Deferred Prosecution Agreement (UK-DPA). The Judgement demonstrates the material difference in the US DPA protocol and the why a DPA can be such a powerful tool for all concerned.
The UK-DPA process includes Court involvement, with the Court issuing a Judgment. This is not simply going before the Court for a stamp of approval but a real analysis by the Court. The Court had a lengthy review of Airbus’ conduct and noted, in typical dry British style, “the seriousness of the criminality in this case hardly needs to be spelled out. As is acknowledged on all sides, it was grave. The conduct took place over many years. It is no exaggeration to describe the investigation it gave rise to as worldwide, extending into every continent in which Airbus operates.”
The two basic questions considered by the Court to determine if a DPA is warranted are (1) Was the resolution in the interest of Justice and (2) whether the terms of the proposed DPA are fair, reasonable and in proportion to the facts of the case. The Court found the answers to both in the affirmative. One of the key purposes of a DPA is to encourage both self-reporting and cooperation. Here the Court stated, “In this case, it is apparent from everything that I have seen, after what might be described as a slow start, when, it must have been apparent to others within
Airbus that all was not well within SMO International, that Airbus have cooperated with the prosecuting authorities conducting the investigations, to the fullest extent possible.”
The Court then laid out in lengthy detail the steps that Airbus engaged in around cooperation. Airbus also engaged in significant remedial measures and worked to change the culture of corruption within the organization. As noted in the Cordery Compliance Ltd. Client Alert, “Since 2015 as a result of the investigation, Airbus has parted company with 63 top and senior managers.”
I was quite intrigued by the economic analysis of the Client Alert. It noted that the lack of charges under Section 7 Bribery Act 2010 provisions of failure to prevent bribery “is significant. The court heard of independent reports from accountants which showed that thousands of jobs would be at risk in the UK, US, Germany, France and Spain if Airbus was debarred from having contracts. Evidence was given that that could lower the GDP in each country by over €100bn. There was also concern about the fact that Boeing and Airbus are effectively for many contracts, a duopoly, and removing Airbus from tenders may lead to increased prices for governments.”
The Court concluded that Airbus’ co-operation with the SFO investigation; coupled with the substantial remedial measures taken by the company; the potential disproportionate consequences for Airbus of a conviction under domestic law and the law of other jurisdictions; the likely collateral effects on the public, the company’s employees and shareholders and/or institutional pension holders of a conviction persuaded the Court that a DPA was appropriate.
The Court also provided an exhaustive analysis of the fine, penalty, disgorgement and credited amounts attributable. There was discussion of the US and French resolutions as well. The Court concluded with the following statement of the power of DPAs which should be understood by every corporation which finds itself under an international corruption investigation, which I quote in full.
Finally, I should say this about the DPA, its specific terms and beneficial effects. The DPA requires Airbus to pay a significant financial penalty, thereby sending an important deterrent message to corporate wrongdoers. It also recognises and rewards what Airbus has now done to address the problem by discounting that financial penalty by 50 percent. The DPA has, in addition, given Airbus the opportunity to demonstrate its corporate rehabilitation and commitment to effective compliance over the period of the DPA, without facing the potential consequences of a criminal conviction. This ensures a major UK employer continues to operate according to high ethical and compliance standards. By entering into the DPA, the SFO avoids the significant expenditure in time and money inherent in any prosecution of Airbus, and it can use its limited resources in other important work. The DPA is likely to provide an incentive for the exposure and self-reporting of organisations in similar situations to Airbus. As the SFO submits, this is of vital importance in the context of complex corporate crime.
Next, I will take a look at the company’s response after the investigation began and its cooperation.
Airbus Information with the US Department of Justice
Airbus Deferred Prosecution Agreement with the US Department of Justice (US-DPA)
Airbus Deferred Prosecution Agreement with the Serious Fraud Office (UK-DPA)
Airbus UK Court Approved Judgment
Airbus UK Statement of Facts
Cordery Compliance Ltd. Client Alert: Airbus agrees to pay more than £3bn to resolve bribery charges in France, UK and US
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© Thomas R. Fox, 2020