Over the past several blog posts, I have been exploring the Airbus SE (Airbus) international anti-corruption settlement in some depth. One of the questions I have had and hopefully raised for readers is not why the overall fine and penalty was so large, at nearly $4 billion, but how Airbus managed to reduce it so much. Today, I want to take up that line of inquiry by exploring the investigation undertaken by Airbus, the remediation engaged in during the pendency of that investigation and conclude this series with some final thoughts.
According to the UK-DPA it was UK Export Finance that initially referred this matter to the Serious Fraud Office (SFO) and notified Airbus that it believed it was also appropriate for Airbus to do so. Thereafter, the SFO notified the Parquet National Financier (PNF) in France and they formed a Joint Investigation Team (JIT) to facilitate the investigation. The PNF also controlled the documents provided to the SFO under the terms of the French Blocking Statute. The JIT reviewed more than 1,750 third parties used by Airbus and focused on some 110 where red flags had been identified. Documents reviewed were over 30.5 million in number from some 200 document custodians.
In the UK-Judgment it noted that Airbus cooperated in the production and dissemination of these documents, provided key information on the bank accounts used to pay illegal bribes. Airbus provided its full list of third parties including multiple entities not unearthed by investigators in the JIT. This also included providing all reports on these third-parties, particularly those which demonstrated actual knowledge of red flags that the company had buried and hidden from the corporate compliance and legal functions. Interestingly, the UK-Judgment also approved of Airbus’ use of technology to help not simply in the e-discovery phase of the investigation and proceedings but also in deploying predictive coding to assist in the prioritization and identification of relevant contemporary documents.
According to the UK Statement of Facts, Airbus agreed to approach internal investigation interviews with the JIT and deferring interviews at their request; the company provided the first account of all relevant individuals to the JIT; disclosed materials including interview transcripts and memoranda under a limited waiver of privilege for the purposes of the JIT investigation; it provided a schedule of contemporaneous documents withheld on the basis of privilege, including the reason for asserting privilege; and, finally, the company communicated with the JIT in respect of media reporting.
Airbus also engaged in extensive remediation. According to the US-DPA, the company took disciplinary action by terminating or otherwise disciplining 62 employees, ceased to do business with corrupt third parties and froze payments to them. The remedial measures were listed with greater specificity in the UK-Judgment, starting with the top of the organization. There is a new Chief Executive Officer (CEO), Chief Financial Officer (CFO) and General Counsel (GC). Eight of the 12 Board members are new as well.
To remediate its internal control and processes failures, Airbus established an Independent Compliance Review Committee (ICRC) which is made up of independent experts who reviewed the compliance program and made some 55 recommendations in a 2018 Report. The corporate compliance function has been restructured to make it independent reporting to a newly formed Ethics & Compliance Committee at the Board level. With regard to some specific compliance issues, the company has engaged in systemic, companywide risk assessment, reduced the use of third-party sales consultants, redesigned the onboarding process to upgrade due diligence, implemented targeted 24-month training and redesigned the internal controls.
All of the above led the UK Judge to state, “It is submitted that these [remedial measures] have transformed Airbus into what it is, for present purposes (in relation to compliance, culture and the like) effectively a different company to the one that it was at the time the offences alleged in the indictment occurred.” She concluded by noting “I am satisfied this is the case.”
It is clear that when you have such a systemic bribery system in place as did Airbus that a clean sweep of the company is necessary and is what seems to have happened at the senior management level. It will be interesting to see if there are any individual prosecutions and if, once again, the SFO cannot obtain guilty pleas against individuals where the company has entered into a DPA.
The Airbus case lays bare any claim that the Department of Justice (DOJ) under Trump is soft on corruption or is cutting back. The severity of the US penalty and full amount of the Foreign Corrupt Practices Act (FCPA) fine was $2.09 billion. As noted by the FCPA Blog, “part of Airbus’ $4 billion global settlement, it paid French prosecutor Parquet National Financier (PNF) about $2.3 billion. The DOJ agreed to credit Airbus up to $1.8 billion for amounts paid to PNF.” It also demonstrates that robust cross-border investigations can be done efficiently with the one pie, non-piling on process applied to fines and penalties. DPAs shine in this enforcement action as well as providing solid benefits to companies which have cooperated with the investigations and extensively remediated. Such conduct is clearly rewarded.
What about the US compliance practitioner who wonders how a nearly $4 billion international anti-corruption enforcement action impacts them directly? This case demonstrates that paper programs will always lead to disaster. Airbus’ compliance function was far more concerned that all the paperwork was filled out neatly than reviewing any of the information submitted by the business folks. When pressed by a new GC in 2016 about the failings in this paper program, a senior trade compliance executive outright lied and said that compliance certified everything, when in fact they did no independent investigation. It would seem that the Airbus compliance function was much more concerned about protecting itself than actually doing compliance.
Having lied, cheated and defrauded the governments of several countries for years, Airbus finds its reputation in tatters. Imagine the position it would be in today, vis-à-vis Boeing its only real rival, if it had not engaged in bribery and corruption. But Airbus is now the No. 1 poster child on every corruption Top Ten list in the world. How long will it take to overcome this? That remains to be seen. Airbus has certainly worked over the past few years to do so. They convinced the UK court who approved the DPA that they have turned over a new leaf. Let us hope they can get through the DPA successfully and begin to move forward, doing business ethically and in compliance.
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
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© Thomas R. Fox, 2020