These pages have long asserted that if a country is to have a deferred prosecution regime that the regime in the United Kingdom (which requires meaningful judicial review and approval) is far more preferable than the U.S. regime.
This is apparent when reviewing the Statement of Facts,, Deferred Prosecution Agreement and Approved Judgment relevant to the U.K. Serious Fraud Office prosecution of Airbus. (See here for a collection of the U.K. documents and see here for the prior post regarding the U.S. enforcement action). The U.K. documents provided a substantially more thorough and transparent glimpse into the underlying conduct compared to the U.S. resolution documents.
Statement of Facts
As to the origins of the investigation, the Statement of Facts notes:
“As part of its business, Airbus obtained export credit financing from Export Credit Agencies (“ECAs”), including UK Export Finance (“UKEF”), a government body. On 24 April 2015, UKEF wrote to Airbus regarding UKEF’s anti-bribery due diligence procedures in respect of agents and made specific references to UKEF’s obligation to report all suspicious circumstances to the SFO. The letter also raised the lack of information that had been provided in respect of Airbus’ BP in Sri Lanka (see Count 2).
In late 2015 Airbus conducted a review of the accuracy and completeness of all declarations relating to the use of BPs [third parties used to increase Airbus’ international footprint and assist Airbus in winning sales to customers in numerous jurisdictions] in applications for aircraft export credit financing. Issues with export credit declarations were reported to UKEF initially in January 2016, in accordance with Airbus’ contractual obligations to inform UKEF of any inaccuracies. Following further investigation a more detailed report was made to UKEF in March 2016, on the understanding that the information could be shared with other relevant United Kingdom agencies. This disclosure sought to correct the inaccurate information which had been previously provided to UKEF and included red flags for corruption. At the time that they made this report to UKEF they had already been notified that UKEF were under an obligation to report a suspicion of corruption.
Following notification that UKEF felt it appropriate to contact the SFO and its strong preference that Airbus also make a notification to the relevant authority, both UKEF and Airbus via legal advisors reported to the SFO on 1 April 2016. Airbus via legal advisors subsequently met with the SFO on 6 April 2016. 35. On 15 July 2016 the SFO opened a criminal investigation into the conduct of business by Airbus and associated persons (the “Investigation”). The SFO informed Airbus of this on 5 August 2016, prompting Airbus to make a disclosure to the financial markets.
French Law No. 68-678 of 26 July 1968 (the “French Blocking Statute” or “FBS”) prevents any French citizen, resident, or officer of a legal entity having its registered office on French territory, subject to international treaties and agreements, from communicating documents or information of an economic, commercial, industrial, financial or technical nature which could constitute evidence in foreign judicial or administrative proceedings. Airbus is subject to the French Blocking Statute. In addition, under 694-4 of the French Code of Criminal Procedure, when responding to a mutual legal assistance request, French judicial authorities are entitled to exclude from their response any documents or information that would be detrimental to the essential interests of France. In the present case, the French authorities concluded that this includes the making public of specific contract values.
On 31 January 2017 the SFO and the PNF entered into a Joint Investigation Team (“JIT”) Agreement, the purpose of which was to “…facilitate the Parties’ investigations into allegations of fraud, bribery and corruption and other related offences against Airbus Group and other Airbus companies and Airbus’ former and current employees and intermediaries”. The French authorities controlled the supply of documents to the SFO to ensure compliance with the French Blocking Statute.
The JIT’s investigation covered all of the BPs which were engaged or considered for engagement by one or more of Airbus’ divisions until 2016, i.e. more than 1,750 entities across the world. The JIT focused more particularly on Airbus’ relations with around 110 of these BPs for which red flags had been identified, among which the JIT selected several investigation priorities. The JIT Agreement resulted in a division of these investigation priorities between the PNF and the SFO. The PNF focused its investigations more particularly on Airbus and its divisions’ conduct in the following countries: United Arab Emirates, China, South Korea, Nepal, India, Taiwan, Russia, Saudi Arabia, Vietnam, Japan, Turkey, Mexico, Thailand, Brazil, and Kuwait. The SFO focused its investigations on Airbus and its divisions’ conduct in the following countries: South Korea, Indonesia, Sri Lanka, Malaysia, Taiwan, Ghana, Colombia and Mexico. Within this scope, the PNF and SFO selected a representative sample of the markets and concerns involved.
The scale of the case and number of documents collected by Airbus from custodians relevant to the JIT Investigation (in excess of 30.5 million documents post de-duplication, from over 200 custodians) required Airbus and the JIT to develop new and proportionate procedures for the identification and review of relevant documentation. Over time Airbus made the JIT aware of their findings through a series of presentations, producing evidence in the form of contemporaneous documents and interview accounts, which were reviewed by the SFO. These presentations concentrated upon the priority customers and jurisdictions identified by the JIT. In addition to examining the internal investigation documents (including the interviews of Airbus employees and BPs, Airbus having waived any claim for Legal Professional Privilege on a limited basis) the SFO undertook its own independent investigation.”
In summary fashion, the Statement of Facts asserts:
“The SFO-investigated conduct demonstrated that in order to increase sales, persons who performed services for and on behalf of Airbus SE offered, promised or gave financial advantages to others intending to obtain or retain business, or an advantage in the conduct of business, for Airbus SE. The SFO alleges that those financial advantages were intended to induce those others to improperly perform a relevant function or activity or were intended to reward such improper performance.
Airbus SE did not prevent, or have in place at the material times adequate procedures designed to prevent those persons associated with Airbus SE from carrying out such conduct.”
The Statement of Facts describes five violations of Section 7 of the Bribery Act for failure of a commercial organization to prevent bribery. Prior to summarizing these separate counts, the following background information is important.
In a material concession, Airbus (a Dutch and French domiciled company) accepted – as stated in the Statement of Facts – “that the Bribery Act had provided the SFO with extended extraterritorial powers and potential interest in the facts post 2011. This was an exemplary step for a Dutch and French domiciled company, reporting conduct which had taken place almost exclusively overseas.”
As indicated above, Airbus was charged with five violations of Section 7 of the Bribery Act for failure of a commercial organization to prevent bribery. The theory of prosecution seems to be that because improper conduct occurred a violation of Section 7 therefore occurred.
However (and as perhaps relevant to Section 7’s adequate procedures defense) even the SFO acknowledged the following:
“Airbus’ handbook contained a collection of written policies which governed payments and contractual relationships with third parties over the relevant period. These included: a) the Rules relating to Foreign Trade, published and updated between 2001 and 2006, replaced by the July 2008 and then the June 2013 Business Ethics Policy and Rules; b) the SMO Process for Business Development dated 2 February 2010; and c) the CDSC Terms of Reference dated 9 May 2011.
The Business Ethics Policy and Rules set out fundamental ethical principles for all employees. In the introduction to the July 2008 policy the then CEO described the policy as featuring state of the art business ethics provisions. The same policy detailed the due diligence process to be undertaken in relation to the appointment of BPs. It noted that it was very important to be aware of ‘red flags’ and listed examples of the same.
The SMO Process for Business Development was internal to SMO International and related both to BP appointments and the process for agreeing to IMD projects. It detailed the need for an authorisation process that included due diligence before final agreement could be reached.
The CDSC Terms of Reference related largely to IMD projects. It brought within SMO International’s remit all such projects to reduce the risks associated with these activities. The Terms of Reference stipulated that decisions taken had to ensure that the financial and legal risks associated with a third party agreement had been identified and minimised. It also was to ensure that governance of transactions was acceptable and did not generate any reputational risk.
In late 2012 Airbus commissioned the audit and certification services of a private company to review its compliance programme. A few months later that company awarded Airbus an Anti-Corruption compliance certificate for the design of its anti-bribery compliance program.
In late 2013 the CDSC requested a presentation from SMO International on the extent of SMO International’s contemplated obligations towards third parties. A “Top Management CDSC Meeting” was convened in early February 2014 for the purposes of receiving, with full transparency, details of the commitments made by SMO International, which were previously not known to the CDSC.
The Top Management CDSC Meeting immediately requested that SMO International make revisions to its policies and procedures governing the engagement of third parties. Changes implemented during 2014 included a focus on value-for-money justifications and enhanced compliance reviews.
A further Top Management CDSC Meeting took place in June 2014, the purpose of which was to consider key outstanding commitments across Airbus Group divisions.
In September 2014, Airbus initiated a review of all third party relationships. An internal Corporate Audit & Forensic (“Corporate Audit”) report on the operations of the CDSC found significant breaches of compliance policies. Corporate Audit concluded that the majority of IMD projects performed poorly and questioned whether BPs helped create viable businesses.
The heightened scrutiny of BP engagements led, in October 2014, to a freeze on all payments arranged by SMO International to BPs and in respect of IMD projects. This included all commitments related to the commercial division. The freeze was extended to the Airbus Defence & Space, and Airbus Helicopters divisions in May 2015. A Liquidation Committee was concurrently set up to review and approve or reject all outstanding commitments. The Liquidation Committee included members of the former CDSC (some of whom were involved with and/or aware of the wrongdoing), supplemented with additional representation from the commercial division, Contracts and Treasury departments, together with Group General Counsel. This committee was in turn replaced in June 2015 by a Supplemental Due Diligence Committee.
The Legal & Compliance function was re-structured and given far greater prominence and authority under a newly-appointed General Counsel from 1 June 2015, who became a member of the governing Group Executive Committee.
In April 2015 Airbus published new rules regarding future third party engagements, the Business Development Support Initiative. Among other things this passed primary responsibility for business development engagements from SMO International to the divisions. The SMO was formally closed on 1 March 2016.”
Count 1 concerns conduct in Malaysia and states:
“Between 1 July 2011 and 1 June 2015 Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by AirAsia and AirAsia X airlines from Airbus, namely directors and/or employees of AirAsia and AirAsia X airlines, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
Between October 2013 and January 2015 EADS France SAS, later Airbus Group SAS, paid US$50 million as sponsorship for a sports team (“Sports team”). The Sports team was jointly owned by AirAsia Executive 1 and AirAsia Executive 2 but was legally unrelated to AirAsia and AirAsia X. Airbus employees also offered an additional US$55 million. This offer was not finalised and no payment was made.
AirAsia Executive 1 and AirAsia Executive 2 were key decision makers in AirAsia and AirAsia X, and were rewarded in respect of the order of 180 aircraft from Airbus. The payments to the Sports team were intended to secure or reward improper favour by them in respect of that business.
AirAsia Executive 1 and AirAsia Executive 2 were on the Board of Directors of AAX. In addition they were substantial shareholders of AAB and AAX. They also owned a group of companies, including a subsidiary company that managed the Sports team. Both AAB/AAX and Airbus provided sponsorship support to the Sports team from 2010.”
There was no legal relationship between AAB, AAX and the Sports team, albeit the association between them was utilised by both parties to generate publicity. The common denominators were AirAsia Executive 1 and AirAsia Executive 2.”
Count 2 concerns conduct in Sri Lanka and states:
“Between 1 July 2011 and 1 June 2015 Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by SriLankan Airlines from Airbus, namely directors and/or employees of SriLankan Airlines, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
In 2013, Airbus engaged Intermediary 1, the wife of SriLankan Airlines (“SLA”) Executive 1, as a BP through a straw company which was registered in Brunei. Intermediary 1 had no aerospace expertise. Pursuant to the engagement, Airbus employees offered up to US$16.84 million to the Company of Intermediary 1 to influence SLA’s purchase of 10 Airbus aircraft and the lease of an additional 4 aircraft. In fact, only US$2 million of the US$16.84 million was paid to the Company of Intermediary 1. The Company of Intermediary 1 was approved by Airbus employees as a BP. To disguise the identity of the BP, Airbus employees misled UKEF as to her name and sex.”
Count 3 concerns conduct in Taiwan and states:
“Between 1 July 2011 and 1 June 2015 Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by TransAsia Airways from Airbus, namely a director and employee of TransAsia Airways, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
Company of Intermediary 2 and subsequently Company of Intermediary 3 were BPs of Airbus. Between 2010 and 2013 Airbus channelled payments to TransAsia Airways (“TNA”) Parent Executive 3 for his personal benefit through Company of Intermediary 2 and Company of Intermediary 3. TNA bought 20 aircraft from Airbus. The payments to TNA Parent Executive 3 through Company of Intermediary 2 and Company of Intermediary 3 were intended to reward improper favour by TNA Parent Executive 3 in respect of that business.
Intermediary 2 and Airbus employee 1 [senior] and Airbus employee 13 (Airbus SMO International) communicated by way of coded emails. The emails relate to payments from Airbus to Intermediary 2 and paid onwards by Intermediary 2 to the TNA Parent Executive 3. Airbus employees used aliases for Intermediary 2 (“Fu Funien” and “Fu Fu”) and the TNA Parent Executive 3 (“Van Gogh”), referring to the TNA Parent Executive 3 as “a patient” and “the artist”, and referencing “medications and dosages prescribed by Dr. Brown” – a reference to Airbus employee 1 [senior] .”
Count 4 concerns conduct in Indonesia and states:
“Between 1 July 2011 and 01 June 2015 Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by PT Garuda Indonesia and Citilink Indonesia from Airbus, namely directors and/or employees of PT Garuda Indonesia and Citilink Indonesia, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
Between 2011 and 2014 Airbus’ BP paid in excess of US$3.3 million to or for the personal benefit of senior employees of Indonesia’s national airline PT Garuda Indonesia (Persero) Tbk (“Garuda”) and/or its low-cost subsidiary, PT Citilink Indonesia (“Citilink”) or their family members. The Garuda/Citilink employees were key or significant decision makers in respect of Airbus business during that period, namely Garuda/Citilink’s purchase of Airbus aircraft. The payments were intended to secure or reward improper favour by those Garuda/Citilink Executives in respect of that business.”
Count 5 concerns conduct in Ghana and states:
“Between 1 July 2011 and 1 June 2015 Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of military transport aircraft by the Government of Ghana, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
Between 2009 and 2015 an Airbus defence company engaged Intermediary 5, a close relative of a high ranking elected Ghanaian Government official (Government Official 1), as its BP in respect of the proposed sale of three aircraft to the Government of Ghana. A number of Airbus employees knew that Intermediary 5 was a close relative of Government Official 1, a key decision maker in respect of the sales. A number of Airbus employees made or promised success based commission payments of approximately €5 million to Intermediary 5. False documentation was created by or with the agreement of Airbus employees in order to support and disguise these payments. The payments were intended to induce or reward improper favour by the Government Official 1 towards Airbus.
Intermediary 5 is a UK national born in Ghana. He was brought to the United Kingdom as a young child and lost touch with his Ghanaian family until the late 1990s. He had no prior experience or expertise in the aerospace industry. A “CV” provided to Airbus in 2011 listed Intermediary 5’s employment before 2009 as an events manager for a local authority, director of a football merchandising company and facilities manager for an estate management business.
Intermediary 5 was assisted in his Airbus work by two other UK nationals: Intermediary 6 and Intermediary 7. Intermediary 6 has publicly described Intermediary 5 as his “best friend”. There is no evidence which suggests that either Intermediary 6 or Intermediary 7 had any prior experience or expertise in the aerospace industry. A CV that Intermediary 6 provided to Airbus in 2011 listed his pre 2009 employment as a UK television actor and film director. Intermediary 7 was also a former UK television actor.
The charges against Airbus were resolved through a three year deferred prosecution agreement pursuant to which the company disgorged profit of €585,939,740, paid a financial penalty of €398,034,571 and paid the SFO’s reasonable investigation costs of €6,989,401.
In approving the DPA, Judge Victoria Sharp stated in summary fashion:
“The SFO’s investigation related to bribery offences in Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana. The PNF’s investigation related to bribery and corruption offences in China, Colombia, Nepal, South Korea, the United Arab Emirates, Saudi Arabia (Arabsat), Taiwan and Russia. The JIT investigation into Airbus’ conduct in Colombia was led by the SFO but the SFO agreed that this conduct should be included in the French CJIP to reflect French primacy in the JIT investigation. The DOJ investigation relates to bribery and corruption offences in China and violations of parts 126.1, 129 and 130 of the US International Traffic in Arms Regulations (ITAR) concerning a number of jurisdictions. The DOS’s investigation relates to civil violations of ITAR concerning various jurisdictions.
There is to be a simultaneous resolution in all three jurisdictions by way of settlement agreements.
The criminality involved was grave. The SFO’s investigation demonstrated that in order to increase sales, persons who performed services for and on behalf of Airbus offered, promised or gave financial advantages to others intending to obtain or retain business, or an advantage in the conduct of business, for Airbus SE. It is alleged that those financial advantages were intended to induce those others to improperly perform a relevant function ar activity or were intended to reward such improper performance and that Airbus did not prevent, or have in place at the material times adequate procedures designed to prevent those persons associated with Airbus from carrying out such conduct.”
Elsewhere Judge Sharp states:
“In the Statement of Facts, the identity of the individuals concerned has not been included. There are ongoing investigations in respect of a number of individual suspects in this jurisdiction and abroad. It is appropriate to protect the rights of the suspects to a fair trial. In addition some of the individuals involved in the relevant conduct are based in jurisdictions where there are human rights concerns, and the death penalty exists for corruption. Further, the intermediary companies used by Airbus were often made up of a few individuals. Naming the companies would therefore be tantamount to naming those individuals. To go further than the Statement of Facts or my summary and identify the employees or others by name, would be to prejudice potential criminal proceedings and could lead to action or the imposition of a penalty which, in this country, we would regard as contravening Article 3 of the European Convention on Human Rights. The identities and positions of relevant employees and other persons referred to in the Statement of Facts have however been made known to me so that I have been able to assess their comparative seniority and, thus, the responsibility of Airbus. In the circumstances however, none are identified.”
As to whether Airbus is a “relevant commercial organization” pursuant to the Bribery Act, the Approved Judgment states in pertinent part:
“Airbus SAS is now the main commercial aircraft making entity, and the operational headquarters of Airbus Commercial, one of Airbus’ primary divisions. Airbus Operations SAS is a subsidiary of Airbus SAS and wholly owns three companies concerned with operations in Spain, Germany and the UK. Airbus operations at Filton and at Broughton in the United Kingdom are managed through a subsidiary UK company, Airbus Operations Limited.
A Spanish company, Airbus Defence and Space SA is another subsidiary of Airbus SE. From Apri1 2012, Airbus Defence and Space SA has owned Airbus Military UK Ltd, which has as its main purpose, the support of certain programmes in the UK. From 2014, Airbus Military UK Limited has been part of the Airbus Defence and Space Division.
Part of Airbus SE’s business is therefore carried on in the United Kingdom; and for all material purposes, Airbus SE has continuously carried on a part of its business in the UK since 1 July 2011. It is also agreed that the two United Kingdom companies to which I have referred, that is, Airbus Operations Limited and Airbus Military UK Ltd, through Airbus SAS and Airbus Defence and Space SA, are subject to the strategic and operational management of Airbus SE. It follows from these facts, and indeed is common ground that Airbus SE is a `relevant commercial organisation’ for the purposes of section 7 of the Bribery Act 2010.”
Regarding the 2012 Anti-Corruption compliance certificate, the Approved Judgment notes:
“In 2012 Airbus commissioned a private company to review its compliance programme and was awarded an Anti-Corruption compliance certificate by this company for the design of its anti-bribery compliance program. Further, during the relevant period Airbus had a number of written policies governing payments and contractual relationships with third parties. These included policies applying to the committees and its employees specifically aimed at ensuring that third parties were used appropriately and only after sufficient due diligence had been undertaken. For example the Business Ethics Policy and Rules set out fundamental ethical principles for all employees; and detailed the due diligence process to be undertaken in relation to the appointment of BPs, noting that it was very important to be aware of `red flags’ listing examples of the same. Notwithstanding such policies and that compliance review, as it later emerged, there were serious weaknesses within Airbus’ compliance and oversight structure.”
Interestingly in summarizing the Statement of Facts Judge Sharp states:
“In brief, persons associated with Airbus, not exclusively its employees, offered very substantial sums of money by way of bribes to third parties in order to secure the purchase of aircraft, by civil airline companies, in counts 1 to 4; and by the Government of Ghana, in count 5.” (emphasis added).
The Approved Judgment states as follows under the heading “Previous Investigations and Conduct”:
“In February 2018 Airbus entered into a civil administrative settlement relating to an investigation undertaken by the Munich public prosecutor. Airbus paid €81.25 million by way of disgorgement and an administrative fine of €250,000. The Munich prosecutor’s investigation focussed on potential corruption concerning the sale by Airbus Defence and Space GmbH, of Eurofighter aircraft to Austria in 2003. The settlement set out that Airbus Defence and Space GmbH acted negligently by failing to ensure proper internal controls to prevent the misuse of company assets/breach of trust by employees who were found to have paid money to providers without documented services. The prosecutor confirmed in the settlement that it had found no evidence of bribery payments. In all the circumstances, this conduct is not material in my view to the matters I have to consider in determining this application.”
As to the required “interests of justice” analysis, the Approved Judgment states in pertinent part:
“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 number of countries subject to intense criminal investigation by the various agencies, and the scale and scope of the wrongdoing disclosed in the Statement of Facts demonstrate that bribery was, to the extent indicated, endemic in two core business areas within Airbus.
Bribery usually involves two sides: those willing to pay a bribe and those willing to take a bribe. As I have identified, Airbus did have bribery prevention policies and procedures in place at the material time. However, prior to September 2014, those policies and procedures were easily bypassed or breached and there existed a corporate culture which permitted bribery by Airbus business partners and/or employees to be committed throughout the world. In this case, on the Airbus side, the wrongdoing involved a number of very senior, senior and other other employees, including employees with compliance responsibilities. The conduct by some included the creation of false invoices, false payment and other compliance material and the deliberate circumvention of both Airbus’ internal compliance procedures and external compliance procedures. In some cases, the wrongdoing involved public officials and employees/directors of companies in which nation states held a significant interest. The weakness of senior corporate oversight, and the seriousness of the offending overall, must be considered in the context of the increased awareness internationally of the pernicious nature of corrupt business practices; and the obvious vulnerabilities of businesses operating in and selling in international markets, as Airbus does.
Calculation of the financial gain all this involved is not an easy exercise. However, for the purposes of assessing the sum for disgorgement of profit in this case, it can be taken that this was, to put it at its lowest, very considerable. The gross profit made in consequence of this wrongdoing has been agreed for these purposes at between €585,939,740 and €983,540,822, depending on what allowance is made for the deduction of relevant costs. The market in which Airbus operates is, as Mr Keith QC acknowledged, dominated by two main companies..Given the nature and scale of what occurred, it cannot be gainsaid that Airbus’ failure to prevent this financially motivated offending has resulted in substantial harm to the integrity and confidence of markets.
The real question therefore is whether in these circumstances, and given this extremely high level of seriousness, the interests of justice are nevertheless served by a DPA rather than a prosecution.”
To support this conclusion, Judge Sharp sets forth the following list “of all that has been done by Airbus.”
“The list of all that has been done by Airbus is a long one but in view of the seriousness of the predicate conduct, and my overall conclusion on the interests of justice in this case, it is important to set it out. Airbus has (i) comprehensively confirmed the existence of corruption concerns across its Commercial, Defence and Space and Helicopter divisions; (ii) identified to the JIT a comprehensive compilation of red flag cases across divisions of which the JIT was not aware; (iii) accepted that the Bribery Act had provided the SFO with extended extraterritorial powers and potential interest in the facts post 2011; (iv) reported conduct which had taken place almost exclusively overseas, which, as I have already said, is an exemplary step for a French and Dutch domiciled company; (v) performed and presented an analysis of all BP relationships in the company’s records; (vi) provided a list of former BPs, which included an anti-corruption risk assessment, including red flags not otherwise known to the authorities, from which the JIT could select its priorities for investigation; (vii) collected in excess of 30.5 million documents post de-duplication relevant to the JIT investigation, from over 200 custodians; (viii) signalled a clear commitment from the new Airbus Board and its Ethics & Compliance Committee (responsible for the internal investigation) to fully co-operate with the JIT investigation and provided an open invitation for the JIT to discuss any concerns directly with the Committee; (ix) coordinated and cooperated with the JIT in all respects regarding the conduct of investigative interviews; (x) provided the first accounts of all relevant individuals (xi) provided extensive and detailed presentations with supporting documentation, organograms and chronologies detailing relevant emails, contracts, interview accounts, contextual background, invoices, payments and accounting records; (xii) deployed predictive coding technology to assist in the prioritization and identification of relevant contemporaneous documents; (xiii) facilitated access to 30.7 million documents collected from custodians relevant to the JIT investigation, and enabled the JIT to perform a review of these documents independent of Airbus. Independent investigation by the SFO did not identify any company document not identified by Airbus’ own investigation; (xiv) provided all contemporaneous documents requested (subject to applicable laws) and adopted a co-operative position in respect of privilege and French secret professionnel (the French equivalent of legal professional privilege) within such contemporaneous documents; (xv) provided a schedule of contemporaneous documents withheld on the basis of privilege, including the reasons for asserting privilege, which were verified by the SFO; (xvi) set up the International Market Development task force with a mandate to identify non-core subsidiaries that were of potential concern and notified the JIT of International Market and Development Projects that were of potential concern from a compliance perspective and the actions that Airbus wished to take in respect of those projects to ensure they did not conflict with JIT actions; (xvii) provided key documentation and information concerning bank accounts into which Airbus monies flowed at an early stage of the investigation to facilitate swift access to mutual legal assistance by the SFO; (xviii) revised the top management of Airbus and parted with a substantial number of individuals by dismissal, voluntarily or in compromised circumstances permitted by French law; (xix) stopped using BPs to assist with sales in the Commercial Division, and greatly restricted the use of BPs in other divisions, leading to a 95 percent reduction across the Group by 2015; (xx) provided reports of the Independent Compliance Review Panel’s assessment of Airbus’ compliance processes, organisation and culture; (xxi) made external accountants and internal personnel available to present and explain financial processes and money flows; (xxii) consulted with the JIT regarding the
deployment of sensitive evidence in Arbitration proceedings with former BPs so as to ensure no prejudice was caused to ongoing investigations; (xxiii) liaised with the JIT regarding media strategy and (xxiv) kept the JIT abreast of the implementation of Airbus’ new compliance program, including instances where it has detected activity that causes concern.
I have already referred to the weaknesses in oversight within Airbus that existed in the years under consideration. However, starting in late 2014 Airbus implemented a number of measures. It is submitted that these have transformed Airbus into what is, for present purposes (in relation to issues of 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. I am satisfied this is the case.”
Airbus has changed its management team, appointing a new Chief Executive Officer, supported by a new Chief Finance Officer and new General Counsel (the latter was present in court during the hearings before me). None of the new Executive Committee or Board of Directors is implicated in the conduct set out in the Statement of Facts. The Board of Directors is largely a different board (8 of the 12 positions being held by directors appointed after the relevant conduct occurred) from that which presided over Airbus during the indictment period. The SFO has confirmed it has no evidence that the current Executive Committee members knew of the corrupt practices or culture of Airbus. Airbus has also conducted disciplinary investigations against existing and former employees. Since 2015 it has parted with sixty three of its top and senior management employees: thirty one have been dismissed, and thirty two have left voluntarily or retired.
In addition, Airbus has made significant changes to its internal processes. As with co-operation, in view of the weight I attach to this factor in the overall assessment of the interests of justice, it is necessary to identify precisely what has occurred. Airbus has commissioned an Independent Compliance Review Panel (ICRP) to complete an independent review of Airbus’ ethics and compliance procedures. The members of this panel are Lord Gold, a former partner at Herbert Smith Freehills; Noelle Lenoir, a former member of the Conseil Constitutionnel (the French Constitutional Court) and Theo Waigel, a former German Federal Minister of Finance. The ICRP’s instructions have included reviewing Airbus’ policies and procedures, conducting site visits with employees and carrying out focus groups with employees. The ICRP has produced two reports to date. The first report in 2018 noted the considerable progress made by Airbus and made fifty five recommendations. The second report, in 2019, noted that “the company is now in a very different place than it was two years ago”. The ICRP is due to issue another report later this year. Further, the Airbus Ethics and Compliance teams have been restructured to ensure functional independence from the business. Amongst other things, there has been a merger of legal and compliance functions and the change of the reporting line to the newly appointed General Counsel; the creation of a subcommittee of the Board, entitled the Ethics &Compliance Committee to provide independent oversight of the company’s Ethics & Compliance programme; and appointed a new Ethics & Compliance Officer with changed reporting lines directly to the General Counsel and the Ethics & Compliance Committee.
In addition, Airbus has (i) created numerous new compliance roles and extensively recruited highly experienced senior compliance professionals; (ii) revised its Anti-Bribery and Corruption policies and procedures in response to recommendations by external stakeholders, the ICRP, PwC and Agence Francaise Anticorruption (AFA), the French state anti-corruption agency which is positioned within the Ministry of Justice and headed by a Magistrate; (iii) launched a company-wide, systemic and comprehensive ABC Risk Assessment; (iv) significantly reduced the use of external consultants across the Airbus group of companies, and has stopped the use of consultants in relation to sales of aircraft within the Commercial Aircraft Division; (v) redesigned the `onboarding’, due diligence and ongoing monitoring for all third parties with a business relationship with the Airbus group; (v) implemented a targeted ABC 24 month training plan under the supervision of the Ethics and Compliance Engagement Team for all employees identified in high and medium risk exposed positions; (vi) redesigned the internal financial controls under the guidance of the new Chief Financial Officer; (vii) commissioned the independent review and testing of its compliance structures and procedures by the ICRP, PwC and the AFA; and (viii) taken steps to remove all wrongdoers from employment with Airbus.
The current Board is to be commended for the process of remediation it has undertaken. It is important to note that in light of the changes to which I have referred, and the appointment of the AFA, as a term of the French CJIP, the SFO is not recommending the appointment of an external monitor as part of the DPA in this case.”
After noting that “no company is too big to prosecute” and that “national economic interest is irrelevant to the analysis of the question whether or not a DPA is in the interests of justice,” Judge Sharp nevertheless observed under the heading “Collateral Effects.”
“On the issue of the potential disproportionate consequences of a conviction, on behalf of Airbus, it has been said that a criminal conviction would have a number of materially adverse consequences. There is nothing I have seen in the evidence that has been placed before me which suggests that these consequences are not accurately described. These consequences include the following. A conviction for a section 7 bribery offence could result in discretionary debarment from tendering for UK public sector contracts under the Public Contracts Regulations 2015, which implement the EU Procurement Directive (it is not an offence which requires mandatory exclusion in the Regulations) thus excluding the company from participation in procurement procedures. It could also occur in other EU jurisdictions. Further, Mr Keith QC identified that it would be likely that a conviction would result in a mandatory debarment from tendering for public sector contracts in the Netherlands, India, Turkey and the UAE amongst other jurisdictions; and that discretionary debarment in this jurisdiction, would, in any event, increase the risk of discretionary debarment in many other jurisdictions.
What matters here is not the potential loss of contracts per se, but the effect this will have on the company financially and on its (innocent) employees, and the wider effects this will have on innocent third parties. Airbus has undertaken an analysis of the value of contracts which it might be precluded from tendering for if debarred, the effects of which could last up to fifteen years. On a worst case scenario, the estimated future revenue at risk globally across the Commercial, Defence and Space and Helicopter divisions could exceed €200 billion, which could decrease the value of production of Airbus in the United States, the UK, France, Germany, and Spain by over €200 billion.
Secondly, there are obvious associated risks to debarment on the scale contemplated, including to the financial position of Airbus, its financing arrangements, and to the internal health of the company caused by the loss of key revenue streams and the loss of market presence in the duopolistic marketplace in which Airbus operates. These would inevitably affect Airbus’ thousands of employees in the United Kingdom, its share price, and thus pensioners and the thousands of companies and jobs which rely on Airbus, as part of its supply chain. The collateral effects spread more widely, however. A Deloitte report, commissioned by Airbus, has estimated for example that if Airbus was debarred from public procurement for five years, the ongoing effects over fifteen years, could put many thousands of jobs at Airbus at risk. Across that time frame, and absent debarment, many thousands of jobs could be sustained, in the UK, the United States, Germany, France and Spain. The indirect impact on the economies of these countries could be substantial: Deloitte estimates it could lower the Gross Domestic Product in each of those countries by over €100 billion. In addition, there could be adverse consequences for the reduction in competition in future public tenders, leading to additional public spending of many billions of euros..”
Under the heading “Conclusions on the interests of justice,” the Approved Judgment notes:
“Notwithstanding the seriousness of the conduct in this case, I consider the public interest factors against prosecution clearly outweigh those tending in favour of prosecution. In particular, I have had regard to the exemplary co-operation of Airbus in the manner identified, including its submission to the SFO in respect of conduct overseas and of which the SFO would not otherwise have known. Airbus has, to use a colloquial phrase, truly turned out its pockets and is now a changed company to that which existed when the wrongdoing occurred. In addition, on the evidence before me, the effects of a prosecution on Airbus and the collateral effects on thousands of innocent third parties, corporate and individual, would be disproportionate notwithstanding the egregious nature of the conduct engaged in.”
In conclusion, the Approved Judgment states:
“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.”
FCPA Institute - Denver (May 4-5)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.