If a government enforcement agency makes an allegation in a bribery enforcement action and a risk averse corporation agrees to resolve the enforcement action in the absence of any meaningful judicial scrutiny, does that mean the allegations are true?
As highlighted in this prior post, a portion of the U.K. enforcement action against Airbus concerned a sports sponsorship in Malaysia. As alleged by the Serious Fraud Office:
“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.”
Shortly after the enforcement action, AirAsia issued this press release stating:
“AirAsia vigorously rejects and denies any and all allegations of wrongdoing.
The entering into of each aircraft purchase agreement was never made by any single individual decision, but instead arrived at through careful evaluation, deliberation and the collective decision of the board members after taking into account technical specifications, aircraft flight performance and operating economics. The superiority and reliability of the aircraft and increasingly attractive pricing being offered to maintain our competitive edge in the airline business were key considerations. As a customer of Airbus since 2005, AirAsia never made purchase decisions that were premised on an Airbus sponsorship.
We also wish to emphasise that all negotiations and dealings leading to the signing of any aircraft purchase agreement have been undertaken directly with Airbus on an arm’s length basis, and without the involvement of any third parties or intermediaries. AirAsia executives negotiated rigorously in the interests of the company and had at all times acted in good faith. In any event, AirAsia is aware that correspondence between the company and Airbus dating back more than a decade has been reported in the press without proper context or review, and we are concerned that views and opinions on the matter may have been formed unfairly and prematurely.
Furthermore, the involvement of Airbus in the sponsorship of the sports team was a well-known and widely-publicised matter bringing branding and other benefits to Airbus. AirAsia’s own sponsorship of the sports team went through due internal assessment and approvals before being considered and approved by the board.
As AirAsia and its executives have no visibility on Airbus’ internal processes, we cannot comment on or be associated with any alleged failures or lapses on the part of Airbus to comply with its own policies or applicable legal requirements.
AirAsia is deeply concerned that these allegations will have an adverse and negative impact on the AirAsia brand, reputation and goodwill. AirAsia is monitoring developments in this matter and will review any allegations or negative inferences concerning or affecting AirAsia and/or any of its executives and will fully cooperate with the Malaysian Anti-Corruption Commission and the relevant authorities where required.”
Thereafter, AirAsia announced that its Board of Directors formed a Non-Executive Independent Board Committee to “review the allegations” and that BDO Governance Advisory Sdn Bhd. was appointed as an independent expert to assist the Committee.
Recently AirAsia issued this press release stating:
“BDO has on 19 March 2020 presented their report on the findings of the independent internal inquiry conducted by BDO to the Committee. The Committee has, upon review of the said report from BDO, accepted the final report issued by BDO. In summary, the findings of BDO are as follows:
AirAsia Berhad (“AAB”) has a robust aircraft procurement process. The process was complied with and AAB’s aircraft acquisition was justifiable and at prices favourable to AAB.
AAB’s sponsorship of the sports team was approved in compliance with its procedures.
The sponsorship of the sports team by Airbus was disclosed to and supported by the Board of Directors of AAB at the relevant time. The sponsorship showed demonstrable benefits to the AirAsia Group and was not linked to any purchase decisions by AAB.
The two Executives (Tan Sri Anthony Francis Fernandes and Datuk Kamarudin bin Meranun) had properly disclosed their interests to the Board of Directors of AAB and abstained from discussions and/or decisions relating to the said sponsorships.
The report has now been presented to and accepted by the Board (which conducted its meeting without the presence of the two Executives) and arising from this, the Board has resolved to reinstate the executive positions of Tan Sri Anthony Francis Fernandes and Datuk Kamarudin bin Meranun. Consequently, the appointment of Tharumalingam a/l Kanagalingam as the acting chief executive officer has been rescinded.
Further updates in respect of any material development on the matter will be made from time to time in compliance with the requirements of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.”
So where does the truth lie?
The public will likely never know, but this much is true.
The SFO allegations, while accepted by a risk averse company, were not subjected to any meaningful judicial scrutiny. Moreover, there are no consequences to the SFO should the allegations not be accurate and there is no accountability for untrue statements.
On the other hand, AirAsia is a publicly traded company making statements to the market. The consequences to AirAsia should its statements not be true can be securities fraud.
See here for a previous post also titled “Where Does The Truth Lie?”
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