Bribery Scandal(s)

Airbus Rocked by Corruption Allegations

A Beluga transport plane belonging to Airbus is pictured in Colomiers near Toulouse, France
It's for plane parts, not bribes. Source: Reuters

Aircraft maker Airbus was rocked with fresh corruption allegations this weekend, centering on an alleged system of outside advisers and secret slush funds. Both military and civil aircraft orders are said to have been tainted and investigations are under way in the UK, France, Austria and Germany.

Public prosecutors in Munich confirmed to Handelsblatt that they will soon press charges against a number of Airbus managers following reports in Der Spiegel and the Internet platform Mediapart. The case centers on embezzlement accusations related to the sale of 15 Eurofighters to Austria but do not reach as high as CEO Thomas Enders, the Munich prosecutor confirmed.

The charges are just the latest in a string of corruption allegations that could ground Europe’s flagship planemaker, the main rival of Chicago-based Boeing. The fear is that the accusations could reach US courts, where billion dollar judgments have hobbled European industrial companies in the past – a move Austrian defense minister, Hans Peter Doskozil, has threatened as he excavates new corruption charges.

“Tom wants to save Airbus, and if necessary will sacrifice himself.”

Company insider

A decade ago, Munich-based Siemens was prosecuted there on more than 1,000 charges. The company ended up paying fines close to $2 billion. Siemens also had to agree to give full access to US legal monitors – there are fears something similar could take place at Airbus.

The company has already lost access to some export credits in the UK, France and Germany, but there may be even more at stake: in its 2017 report, Airbus admitted that “it could be excluded from government or other contracts for some time.” In short: the company could take a major financial, reputational and legal hit, affecting aircraft sales, cash flow and the bottom line.

The Austrian case comes after Britain’s Serious Fraud Office, or SFO, opened investigations into “fraud, bribery and corruption in Airbus’s civil aircraft business” in 2016. Airbus then launched an internal investigation, as a result of its own doubts about information submitted to British export authorities. In March of this year, Airbus confirmed that the PNF, France’s financial prosecutors, were also conducting an investigation.

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Sources within Germany’s Economy Ministry confirmed that the firm is “fully cooperating with the authorities” but CEO Thomas Enders took a more combative tone in a message last Friday to the company’s 130,000 staff, saying the firm was “going through turbulent times” and could be hit with “substantial fines” but pledging to work with the company’s attorneys to clear up the matters.

Mr. Enders, CEO since 2012, has been a very public voice in favor of a new Airbus corporate culture, looking to draw a line under the murky dealings of the past. Airbus claims it is working tirelessly to root out corruption, emphasizing that it made voluntary disclosures in 2015 after CFO Harald Wilhelm discovered accounting discrepancies.

However, some observers remain skeptical, pointing out that the French investigations in fact began in March 2013. Bribery suspicions have focused on a 2010 deal which saw Kazakhstan buying Airbus helicopters. Mediapart also claims to have seen documents revealing that Mr. Enders was partly responsible for setting up a London office, known as “Victor”, used to funnel bribes.

Erstauslieferung von Airbus Helicopters an DRF
Model helicopters but not-so-model corporate governance. Source: DPA

Another Paris-based Airbus office is also implicated in doubtful dealing: The so-called “Sales and Marketing Organization” was led by Jean-Pierre Talamoni, under the supervision of Marwan Lahoud. Mr. Lahoud was Airbus head of strategy until February of this year, and a close associate of Mr. Enders. Mr. Talamoni is alleged to have paid €12 million ($14.1 million) in bribes to Kazakhstan. While this was once standard industry practice, today any hint of murky dealing is severely frowned on.

Although the Kazakh case is bad enough, there may be worse to come as investigators turn their attention to civil aviation deals with China and Turkey. In the latter case, Mr. Lahoud is alleged to have signed off on $250 million in bribes. Airbus denies the allegations, but some say Mr. Lahoud’s sudden departure from the firm last February now appears in a new light.

Within the company, Mr. Enders is fondly known as “Major Tom,” after the David Bowie song. He’s been with the company for 17 years but the chief executive’s vast experience may turn out to be a problem. Mr. Enders is a former head of the EADS defense unit, a former head of Airbus civil aviation, and has now served five years as CEO. He may be too deeply involved. “Tom wants to save Airbus, and if necessary will sacrifice himself,” said one insider. It’s not a question of that – yet.

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Thomas Hanke is Handelsblatt’s correspondent in Paris. Silke Kersting reports for Handelsblatt from Berlin, focusing on consumer protection, construction, environmental policy and climate change. Hans-Peter Siebenhaar is Handelsblatt’s correspondent in Vienna and specializes in media and telecommunications coverage. Volker Votsmeier is an investigative reporter with Handelsblatt. To contact the authors: hanke@handelsblatt.comkersting@handelsblatt.com, siebenhaar@handelsblatt.com and votsmeier@handelsblatt.com

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