On January 31, 2020, the Department of Justice ("DOJ") agreed to resolve allegations that Airbus SE ("Airbus"), a France-based aerospace company, used third-party business partners to bribe government officials and airline executives to obtain certain business advantages, including lucrative aircraft contracts, in violation of the anti-bribery provisions of the Foreign Corrupt Practices Act ("FCPA").1 Airbus agreed to pay approximately $4 billion in combined penalties to the United States, France, and United Kingdom to resolve eight years of investigation, making it the largest resolution in FCPA history.2
Airbus entered into a three-year deferred prosecution agreement ("DPA") with the DOJ related to a two-count criminal information filed in the District of Columbia.3 The information charged Airbus with one count each of (1) conspiracy to violate the anti-bribery provisions of the FCPA, and (2) conspiracy to violate the Arms Export Control Act ("AECA") and the International Traffic in Arms Regulations ("ITAR").4
The DOJ's investigation proceeded in parallel with a joint investigation conducted by the UK Serious Fraud Office ("SFO") and the French Parquet National Financier ("PNF").5 The DOJ and State Department also investigated the ITAR-related conduct.6
In its lengthy DPA, the DOJ Criminal Division, Fraud Section ("the Fraud Section"), DOJ National Security Division ("NSD"), and United States Attorney's Office for the District of Columbia ("DC USAO") agreed to file a two-count criminal information and forfeiture action in the District of Columbia.7
Airbus did not receive voluntary disclosure credit for reporting the FCPA-related conduct because it only did so after the SFO's investigation became public, but Airbus did receive full cooperation credit for assisting the investigation by: (1) gathering evidence and performing forensic data collections in multiple jurisdictions; (2) proactively identifying issues and facts that would likely interest the Fraud Section and DC USAO; and (3) presenting relevant facts to the Fraud Section and DC USAO.
The Company also received remediation credit, and the DPA noted the rapid remedial measures taken by Airbus, focusing in particular on steps taken to quickly terminate relationships with business partners involved in the alleged bribery-related conduct. Specifically, Airbus froze payments to business partners, terminated relationships with them, and applied enhanced due diligence procedures to vet future business partners. The DPA also emphasized efforts to implement a more robust compliance program and to take disciplinary action against former employees.8
Airbus did receive voluntary disclosure credit for reporting ITAR-related conduct and credit for cooperating with the investigation. The DPA details Airbus's efforts to engage in remedial measures and to enhance its compliance program and internal controls.
The resolution of parallel investigations by French and British authorities and the State Department impacted the penalties imposed by the DOJ. For example, Airbus will be subject to oversight by French authorities rather than an independent monitor under the DPA. In addition, despite imposing a total criminal fine of $2.3 billion—$2.1 billion for FCPA violations and $237.7 million for ITAR violations—the DOJ reduced this amount to $527 million ($294.5 million for the FCPA charges and $232.7 million for the ITAR charges), and an additional $55 million as part of a civil forfeiture agreement for the ITAR-related conduct, after crediting amounts paid to France and the UK.
The PNF agreed to suspend prosecution of Airbus for three years.9 Airbus must submit its compliance program to targeted audits by French anti-corruption authorities and pay a $2.29 billion fine.10
The SFO launched an investigation into Airbus in 2016 after the Company reported inaccuracies in its disclosures to the country's export credit agency. The SFO agreed to enter a three-year DPA with Airbus. Because French authorities will monitor Airbus, the SFO, like the DOJ, declined to impose an independent compliance monitor.
The SFO indictment, which is suspended for the term of the DPA, includes five counts of failure to prevent bribery involving Airbus's Commercial and Defense & Space divisions.11 The indictment focused on conduct occurring between 2011 and 2015 in Sri Lanka, Malaysia, Indonesia, Taiwan and Ghana.
Under its agreement with the SFO, Airbus must pay $1.09 billion to British authorities, including disgorgement of profits.12 The $1.09 billion payment to British authorities is the largest ever UK settlement.13
State Department Settlement
The State Department entered into a Consent Agreement with Airbus, under which the State Department agreed to a $10 million settlement for civil violations of ITAR. In exchange, Airbus agreed to retain an independent export control compliance officer to ensure that Airbus's export control systems comply with ITAR. The State Department agreed to suspend $5 million of the total settlement amount, provided these funds are used for remedial compliance measures.
THE RELEVANT CONDUCT
The FCPA charge stemmed from an alleged scheme to direct bribes to foreign officials to obtain and retain business from both privately-owned entities and entities owned and controlled by foreign governments.
Between 2008 and 2015, members of the Company's Strategy and Marketing Organization ("SMO") allegedly used consultants to pay bribes to government officials and executives at various state-owned airlines to purchase Airbus aircraft and satellites. The SMO concealed the bribes by creating fraudulent contracts, receiving fake invoices for services never performed, and creating false activity reports for business partners. The alleged conduct spanned multiple countries—including Japan, Russia, China and Nepal.
Over the course of the entire period under review by the United States and other enforcement authorities, Airbus, among other things, allegedly paid (1) $50 million to AirAsia Group directors through the sponsorship of a sports team owned by two AirAsia executives to induce more plane orders; (2) $2 million to the wife of a Sri Lankan Airlines executive through a shell company; (3) $3.3 million to senior staff at Indonesia's national airline; and (4) millions to secure orders for military aircraft from the Ghanaian government.
The United States' investigation centered on an alleged bribery scheme in China. Between 2013 and 2015, Airbus allegedly paid business partners in China who used these payments as bribes to government officials in China. To conceal these transactions, Airbus made payments into a bank account in Hong Kong in the name of a company that was controlled by another business partner instead of paying the business partner directly. Airbus, through its employees, executives, and agents, also invited executives from Chinese airlines and their families to the United States for all-expense-paid events in Park City, Utah, and Maui, Hawaii.
Airbus China and a Chinese government entity established a monetary fund in 2011 in which Airbus China made contributions to the fund in exchange for speeding up the allocation of aircrafts to airlines in China. According to the DPA, the stated purpose of the fund was to support projects "related to services for the Chinese commercial aviation industry, including but not limited to aviation related management education, seminars, and pilot educational facilities." However, from 2012 to 2017, the fund was used to, among other things, pay event agencies to host social events such as golf retreats and leisure events for Chinese government officials.
The ITAR charge arose from Airbus's failure to report political contributions, commissions or fees paid to third-party business partners relating to the sale or export of defense articles or defense services.14 Airbus also retained third-party business partners who had failed to register as required by ITAR.
This settlement—the largest international resolution of an alleged bribery scheme—is notable for several reasons. Specifically:
- The Combined Fines Exceed Amounts Paid in Prior International Bribery-Related Settlements. In total, Airbus agreed to pay approximately $4 billion to resolve all enforcement actions, breaking records for the largest international settlement of an alleged bribery scheme.
- DOJ's Voluntary Disclosure Credit Decisions Prove Consistent with DOJ Guidance. The DOJ's decision to not give Airbus voluntary disclosure credit for the alleged bribery-related conduct but to give credit for its disclosure of the ITAR violations is consistent with the DOJ's guidance under the FCPA Corporate Enforcement Policy ("CEP") and the AECA. To qualify for voluntary disclosure credit under the CEP, the disclosure must (1) occur "prior to an imminent threat of disclosure or government investigation"; (2) be communicated to the DOJ "within a reasonably prompt time after becoming aware of the offense"; and (3) include "all relevant facts known to it at the time of the disclosure, including as to any individuals substantially involved in or responsible for the misconduct at issue."15 The timing of a voluntary disclosure under the ITAR is also relevant here because a company may only receive voluntary disclosure credit when it provides information to the DDTC prior to the time that either the State Department or "any other agency, bureau, or department of the United States Government obtains knowledge of either the same or substantially similar information from another source and commences an investigation or inquiry that involves that information."16 As discussed above, Airbus only disclosed the bribery-related conduct to the DOJ after the investigation began by the SFO, but it sent an initial notification concerning the alleged ITAR violations to DDTC prior to any other agency.
- When Making a Resolution Decision, DOJ Will Consider Whether Foreign Authorities are Actively Investigating Misconduct and Have a Strong Jurisdictional Nexus to Illegal Activity. The DOJ acknowledged that France and the UK have stronger jurisdictional bases for a resolution with Airbus, which "is neither a U.S. issuer nor a domestic concern."17 Despite this acknowledgment, the DOJ demanded a significant settlement payment and did not defer entirely to foreign authorities. DOJ noted that while "the United States' interests are significant enough to warrant a resolution," the UK and France have substantial interests over Airbus's corruption-related conduct.18 The DOJ deferred to France and the UK to resolve the investigation and "to vindicate their respective interests as those countries deem appropriate."19 While the DOJ continues to pursue FCPA violations, this settlement signals that the DOJ appears to be following its "no piling on" policy and may in the future also defer to foreign jurisdictions where those jurisdictions have a stronger interest and are, in the DOJ's view, adequately pursuing enforcement action.
- The Provision of Luxury Travel to the United States for Foreign Officials Impacted the Resolution. Consistent with other enforcement actions that have involved the corrupt payment of travel and entertainment expenses or the giving of gifts to foreign officials or third parties, these benefits appeared to significantly affect the DOJ's view of the conduct. The DPA emphasized that Airbus executives treated foreign officials, including executives of Chinese state-owned and state-controlled airlines, to "lavish travel and entertainment" and discussed business with those officials via email and in person while on US territory.20 Companies must continue to be proactive about addressing gifts, travel and entertainment expenses and should create systems to monitor these expenses.
- Companies Must Strengthen Their Compliance Programs to Ensure that Employees and Third Parties Comply with Anti-Bribery Provisions. Airbus maintained and periodically updated written policies governing payments to and contractual relationships with third parties during the relevant period. However, the UK DPA describes Airbus's policies and procedures as being "easily bypassed or breached." Airbus also had a "corporate culture which permitted bribery by its business partners and/or employees to be committed throughout the world." Indeed, the wrongdoing at issue involved senior Airbus employees and other employees with compliance responsibilities, was widespread geographically, and spanned many years. Companies must be certain to periodically review their policies and procedures and conduct periodic assessments of their internal controls to ensure compliance by employees and third parties. The DOJ's 2019 Guidance on Corporate Compliance Programs ("2019 Compliance Guidance") expressly emphasizes the importance of appropriate policies and procedures, including appropriate assignments of responsibility, training programs, and systems of incentives and discipline.21 Companies should conduct frequent reviews of company policies to increase the likelihood of early detection of potential violations of anti-corruption and other laws.
- Guidance on Remediation. This case illustrates the importance DOJ places on remediation following violations of the FCPA and other laws. DOJ's 2019 Compliance Guidance explains that a hallmark of an effective compliance program is the extent to which a company is able to conduct a thoughtful root cause analysis of misconduct and timely and appropriately remediate to address the root causes.22 Where third-party businesses were involved in the alleged misconduct, the DOJ's Compliance Guidance specifically instructs prosecutors to evaluate the company's process for vendor selection and whether the third-party underwent that process.23 The 2019 Compliance Guidance also instructs prosecutors to consider any specific changes the company has made to reduce risks that similar issues will occur in the future.24 The DPA notes that Airbus engaged in several remediation measures, including (1) taking disciplinary action against former employees; (2) ceasing to retain business partners involved in the misconduct; (3) freezing payments to business partners and applying enhanced due diligence procedures; (4) hiring new legal and compliance leadership; (5) training employees on compliance policies and export controls; (6) making enhancements to the Company's internal controls and compliance program; (7) implementing procedures to ensure accurate ITAR reporting and adopting an overarching Company export compliance directive; and (8) engaging multiple external auditors to perform assessments and testing of the Company's export compliance program. As noted above, the State Department suspended Airbus's total settlement amount by $5 million to allow Airbus to use these funds for remedial compliance measures. Companies would be well-served by focusing on strengthening remedial measures following violations of law.
1. Press Release, U.S. Department of Justice, Airbus Agrees to Pay Over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (Jan. 31, 2020).
3. Information, United States v. Airbus SE, No. 1:20-cr-00021-TFH (D.D.C. Jan. 28, 2020); DOJ Deferred Prosecution Agreement (Jan. 30, 2020); Press Release, U.S. Department of Justice, Airbus Agrees to Pay Over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (Jan. 31, 2020).
4. Information, United States v. Airbus SE, No. 1:20-cr-00021-TFH (D.D.C. Jan. 28, 2020).
5. Press Release, Airbus.com, Airbus reaches agreements with French, U.K. and U.S. authorities (Jan. 31, 2020).
6. DOJ Deferred Prosecution Agreement (Jan. 30, 2020).
8. The UK Judgment details extensive remedial measures and cultural change at the Company that "transformed Airbus into . . . effectively a different company to the one that it was at the time of the offences." The change of the Company's management team is emphasized, noting that a new CEO, CFO and General Counsel have been appointed and that the Board of directors is largely a different board from that which presided over Airbus during the relevant period.
9. Press Release, Airbus.com, Airbus reaches agreements with French, U.K. and U.S. authorities (Jan. 31, 2020).
10. Press Release, U.S. Department of Justice, Airbus Agrees to Pay Over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (Jan. 31, 2020).
11. Press Release, Serious Fraud Office, SFO enters into €991m Deferred Prosecution Agreement with Airbus as part of a €3.6bn global resolution (Jan. 31, 2020).
12. Press Release, U.S. Department of Justice, Airbus Agrees to Pay Over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (Jan. 31, 2020); Press Release, Serious Fraud Office, SFO Enters Into €991m Deferred Prosecution Agreement with Airbus as Part of a €3.6bn Global Resolution (Jan. 31, 2020).
13. Gaspard Sebag, Franz Wild, and Charlotte Ryan, Rogue Airbus Unit the Focus of Record $4 Billion Settlement, BLOOMBERG (Jan. 31, 2020), https://www.bloomberg.com/news/articles/2020-01-31/airbus-to-pay-4-billion-fine-to-settle-bribery-probes.
14. DOJ Deferred Prosecution Agreement (Jan. 30, 2020).
15. 9-47.120 – FCPA Corporate Enforcement Policy, https://www.justice.gov/jm/jm-9-47000-foreign-corrupt-practices-act-1977.
16. 22 C.F.R. § 127.12(b)(2).
17. DOJ Deferred Prosecution Agreement (Jan. 30, 2020).
21. U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs Guidance Document (updated April 2019); WilmerHale Client Alerts, DOJ Issues Updated Guidance on Evaluation of Corporate Compliance Programs (May 9, 2019).
22. U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs Guidance Document (updated April 2019); WilmerHale Client Alerts, DOJ Issues Updated Guidance on Evaluation of Corporate Compliance Programs (May 9, 2019).
23. U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs Guidance Document (updated April 2019).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.