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Even Though The Jurisdictional Basis For The Action Was “Limited,” Airbus Resolves $294 Million FCPA Enforcement Action In Connection With Broader Global Enforcement Action

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The DOJ recently announced that Airbus (a France-based global provider of civilian and military aircraft) agreed to pay $3.9 billion to resolve foreign bribery, as well as Arms Export Control Act and International Traffic in Arms Regulations, enforcement actions in the U.S., France, and the United Kingdom.

As the DOJ acknowledged, Airbus “is neither a U.S. issuer nor a domestic concern, and the territorial jurisdiction over the corrupt conduct is limited.” As the DOJ further acknowledged, both France and the United Kingdom have a “significantly stronger” jurisdictional basis for resolving related matters.

Nevertheless, a portion of the global settlement amount includes a $294 million Foreign Corrupt Practices Act enforcement action. This post summarizes the enforcement action in which the DOJ charged Airbus in this information with conspiracy to violate the FCPA’s anti-bribery provisions and conspiracy to violate the Arms Export Control Act and the International Traffic in Arms Regulations.

In summary fashion, the information alleges:

“From in or about and between 2008 and 2015, Airbus, through its employees, executives, and agents, including members of the Strategy and Marketing Organization (SMO) and others, engaged in and facilitated a massive scheme to offer and pay bribes to decision makers and other including to foreign officials in multiple countries, in order to obtain improper business advantages and to win business from both privately owned enterprises and entities that were state-owned and state-controlled. In furtherance of the corrupt bribery scheme, Airbus employees and agents, among others, sent e-mails while located in the United States and traveled to the United States.

[…]

In order to conceal and to facilitate the corrupt bribery scheme, Airbus engaged certain business partners, in part, to assist in the bribery scheme, and to offer and make the bribe payments to foreign officials.”

According to the information:

“In order to conceal the amount of money corrupt business partners received, among other things, Airbus Executive 3 and others funneled payments to business partners from bank accounts no directly affiliated with Airbus, including by making payments through other business partners and using loan schemes. The business partners that were used as intermediaries for payments to other business partners would keep a portion of the amount as payment for services that were falsely described in contracts and invoices and that were never provided. In certain instances, Airbus Executive 3 structured overall financial commitments to a single business partner using separate agreements with various business partners.

Airbus Executive 3 maintained internal spreadsheets with annotations that showed the actual and intended recipients of Airbus payments to business partners. Airbus Executive 3 shared these spreadsheets with certain Airbus employees.”

As detailed in the information, the SMO was created within Airbus in approximately 2008 and from at least 2008 to 2015, SMO International (a division of the SMO) had sole responsibility within Airbus for managing all third-party business partners that were engaged by various divisions.

The information alleges:

“SMO International disguised and concealed the true purpose of the engagement of the corrupt business partners in a number of ways, including by creating fake and fraudulent contracts, receiving fake and fraudulent invoices for services that were never performed, created fake activity reports on behalf of business partners, developing certain “special projects” and investment opportunities that were actually designed as an elaborate and secret way to fund business partners, and by concealing relationships with certain business partners by, among other things, only engaging in oral agreements, using fake non-reimbursable loans, and paying the business partners indirectly.”

According to the information, “certain employees and executives at Airbus that did not have an official role with SMO International and/or did not have direct oversight over SMO International’s activities were aware of and involved in SMO International’s bribery scheme.”

The information alleges:

“For example, Airbus Executive 5, who did not have an official role within or direct oversight over SMO International, personally requested SMO International’s assistance in certain sales campaigns where corrupt payments were discussed, had direct contact with certain business partners, and took certain acts in furtherance of the corrupt bribery scheme – including sending e-mails in furtherance of the scheme while located in the U.S.

In addition, Airbus Executive 5 and others provided lavish travel and entertainment to foreign officials and discussed business with them while located within the U.S., including with executives of Chinese state-owned airlines associated with the China sales campaigns …”.

According to the information, on July 24, 2014, Airbus Executive 5 – while in the U.S. – (i) sent an e-mail responding to the head of Compliance at Airbus Group and directing him to alter meeting minutes of the Company Development and Selection Committee regarding a certain Consultant; and (ii) e-mailed other Airbus executives about the alteration. In addition, on February 14, 2014, Airbus Executive 5 – while in the U.S. – e-mailed his approval of certain of the leisure events to another Airbus Executive.

Although the information generally refers to bribery schemes to “foreign officials in multiple countries,” the only specific bribery scheme alleged in the information involved China.

According to the information:

“In or about and between 2013 and 2015, Airbus employees and executives, including Airbus Executive 2 and Airbus Executive 5, caused Airbus to engage Consultant 1 to facilitate and conceal bribe payments intended to be paid to Chinese officials in order to obtain or retain business in China ….”.

[…]

In order to conceal the payments and to conceal its engagement of Consultant 1, Airbus did not pay Consultant 1 directly. Instead, Airbus made payments to a bank account in Hong Kong in the name of a company controlled by Consultant 3, and Consultant 3 then transferred a portion of the money to a bank account controlled by, or for the benefit of, Consultant 1.

The payments were intended, in part, for the purpose of paying bribes for the benefit of foreign officials employed by departments of the Chinese government that approved [certain business] with Airbus.

In addition, in furtherance of the bribery scheme, Airbus, through its employees, executives, and agents, invited executives from certain Chinese state-owned and state-controlled airlines, and occasionally their families, to travel to the territory of the United States to participate in all expense-paid events, including events held at Park City, Utah, and Maui, Hawaii. Airbus employees, including Airbus Executive 4, Airbus Executive 5, and Airbus Executive 6, and others, traveled to the United States and elsewhere to provide these benefits to the Chinese airline executives, to attend these events with them, and at times, to discuss business opportunities.

For example, executives from certain Chinese state-owned and state-controlled airlines, as well as executives from other airlines, attended an event hosted at a luxury resort in Maui, Hawaii, from 28 July through 2 August 2013 with Airbus Executive 4, Airbus Executive 5, Airbus Executive 6 and other Airbus executives. The event in Hawaii included golf, scuba diving, snorkeling cruises, horseback riding, ocean kayaking, surfing lessons, and cocktail and luau dinner receptions. A daily half-hour business related presentation was scheduled in the early mornings, along with side meetings with individual customer airlines, while the rest of the agenda was dedicated to leisure and entertainment activities.”

The criminal charges were resolved via this three year deferred prosecution agreement.

Regarding the FCPA portion of the enforcement action, the DPA was based on the following “relevant considerations.”

“a. the Company did not receive voluntary disclosure credit for disclosure of the FCPA-related conduct because it disclosed the corruption-related conduct to [the DOJ] after the corruption-related investigation being undertaken by the SFO in the United Kingdom began and was made public, however, the Company did disclose the conduct to [the DOJ] within a reasonably prompt time of becoming aware of corruption-related conduct that might have a connection to the United States.

b. the Company received full credit for its cooperation concerning the investigation of the FCPA-related conduct: by among other things, (i) gathering evidence and performing forensic data collections in multiple jurisdictions; (ii) proactively identifying issues and facts that would likely be of interest to the [DOJ]; and (iii) making factual presentations to the [DOJ].

c. the Company provided [to the DOJ] all relevant facts known to it, to the extent permitted under foreign law, including information about the individuals involved in the misconduct;

d. the Company engaged in remedial measures, including separating and taking disciplinary action against former employees, ceasing to retain business partners involved in the misconduct, freezing payments to business partners and applying enhanced due diligence procedures, hiring new legal and compliance leadership, providing additional compliance training to employees, making enhancements to the Company’s internal controls and compliance program;

e. the Company has enhanced and has committed to continuing to enhance is compliance program and internal controls, including by implementing heightened controls and additional procedures and policies relating to third parties, conducting a global risk assessment and ongoing reviews of its compliance program, and ensuring that its compliance program satisfies the minimum elements set in Attachment C [of the DPA].

f. based on the Company’s remediation and the state of its compliance program, as well as the fact that the Company will separately be entering into a resolution with the [French authorities] and will be subject to oversight by authorities in France … and the Company’s agreement to report to the [DOJ] … the [DOJ] determined that an independent compliance monitor is unnecessary;

g. the Company has agreed to enter into a resolution with [French authorities] related to the same conduct … and has agreed to pay 2,083,136,455 Euros in connection with the [French] resolution, a portion of which [the DOJ] are crediting in connection with the penalty in the Agreement;

h. the Company has agreed to enter into a resolution with the SFO related to the FCPA scheme described in the Statement of Facts, and has agreed to pay 990,963,712 Euros in connection with the SFO resolution, and the [DOJ] is deferring that conduct to the SFO resolution;

i. the Company is neither a U.S. issuer nor a domestic concern, and the territorial jurisdiction over the corrupt conduct is limited; in addition, although the United States’ interests are significant enough to warrant a resolution, France’s and the United Kingdom’s interests over the Company’s corruption-related conduct, and jurisdictional bases for a resolution, are significantly stronger, and thus the [DOJ] has deferred to France and the United Kingdom to vindicate their respective interests as those countries deem appropriate, and the [DOJ] has taken into account these countries’ determination of the appropriate resolution into all aspect of the U.S. resolution.

j. the nature and seriousness of the offense conduct, including the long duration of the bribery scheme, the involvement of executives at high levels of the Company, and the amount of bribe payments made to government officials;

k. the Company has agreed to continue to cooperate with the [DOJ] in any ongoing investigation.”

For the FCPA conduct, the DPA sets forth an advisory sentencing guidelines criminal fine amount of $2.8 billion – $5.6 billion based in large part of a “value of benefit received more than $550 million.” According to the DPA, the DOJ and Airbus agreed that an “appropriate” criminal fine amount was approximately $2.1 billion which reflects a 25% discount off the bottom of the applicable guidelines range.

For the FCPA conduct, Airbus agreed to pay a criminal penalty of approximately $294 million after the DOJ allowed credits for satisfaction of payments to other foreign law enforcement agencies.

As a condition of settlement, Airbus represented that it has implemented and will continue to implement a compliance and ethics program designed to prevent and detection violations of the FCPA and other laws and to report to the DOJ during the term of the DPA regarding remediation and implementation of the compliance measures.

In this release, the company stated:

“Airbus has taken significant steps to reform itself and to ensure that this conduct will not reoccur. Airbus has significantly enhanced its compliance system under the supervision of an Independent Compliance Review Panel. The Company is committed to conducting business with integrity.”

Denis Ranque (Chairman of the Board of Directors of Airbus) stated:

“The settlements we have reached today turn the page on unacceptable business practices from the past. The strengthening of our compliance programmes at Airbus is designed to ensure that such misconduct cannot happen again. The agreements also reflect that the decision to voluntarily report and cooperate with the authorities was the right one. The commitment from the Board, and its Ethics and Compliance Committee, to provide full support to the investigation and the implementation of globally recognised compliance standards have paved the way to today’s agreements.”

Guillaume Faury (Chief Executive Officer of Airbus) stated:

“The agreements approved today with the French, UK, and US authorities represent a very important milestone for us, allowing Airbus to move forward and further grow in a sustainable and responsible way. The lessons learned enable Airbus to position itself as the trusted and reliable partner we want to be.”

Paul Hastings attorneys Robert Luskin, Nathaniel Edmonds and Jennifer Riddle represented Airbus.

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