Airbus to Pay $3.9 Billion to Settle FCPA, Export Control Violations
Airbus agreed to pay more than $3.9 billion in combined penalties for violations of the Foreign Corrupt Practices Act, the Arms Export Control Act and the International Traffic in Arms Regulations, the Justice Department said Jan. 31. The bribery charges, levied by U.S., French and United Kingdom authorities, stem from Airbus’s scheme to bribe non-governmental airline executives and government officials, including officials in China, to retain aircraft contracts.
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Among the ITAR violations were “the failure to maintain records involving ITAR-controlled transactions; and the unauthorized re-export and retransfer of defense articles,” according to a State Department news release. A proposed charging letter further details the allegations.
From at least 2008 through 2015, Airbus bribed foreign officials and “other influencers” through third-party business partners to secure business advantages, the Justice Department said. The company bribed both private and state-owned businesses, including a Chinese company between 2013 and 2015 that secured a contract for Airbus aircrafts with Chinese state-owned airlines. To hide the payments, Airbus avoided making direct payments to the Chinese company, instead making payments to a Hong Kong bank account in the name of a company “controlled by another business partner,” the Justice Department said.
Throughout the scheme, Airbus omitted information in its export applications to the Directorate of Defense Trade Controls relating to “political contributions, fees or commissions” involved with the sales, which violated the AECA and the ITAR. Specifically, Airbus omitted the commissions paid to third-party brokers who secured the contracts for exports of defense items on Airbus’s behalf.
In its charging letter, the State Department said Airbus’s omissions in the export documents were “systemic,” adding that employees knew their actions could lead to ITAR violations but did not report them due to confusion over which employees were responsible for reporting the violations. Airbus said its export compliance personnel believed the Part 130 requirements -- which deal with disclosing fees, political contributions or commissions -- were “outside of export compliance,” while its employees responsible for “broader” compliance issues believed the violations were an export control issue. Because Airbus did not have clear policies about which compliance officers were responsible for Part 130 requirements, its employees “relied upon their own standards,” which led to the false filings, the charging letter said.
Airbus applied for export license authorizations for a range of goods, including items relating to a “twin turboprop tactical military transport aircraft” and technical data for advanced medium range air-to-air missiles. Airbus applied for the authorizations without providing accurate Part 130 statements, the charging letter said. Airbus only disclosed its fees and commissions to the State Department under the Part 130 requirements after it investigated and discovered its compliance “shortfalls.” Airbus failed to provide accurate information on export authorization applications for helicopters to Israel; satellite parts to the United Kingdom, Brazil, Japan, France, Italy, Canada and Russia; retransfers of defense-related technical data in Spain; and more.
The State Department said the settlement highlights the importance of securing DDTC authorization before exporting controlled goods while also providing a “timely and accurate” report of any fees paid to a foreign country in relation to exports. The Justice Department said it reached the FCPA penalty based on Airbus’s “cooperation and remediation” and the “strength of France’s and the UK’s interests over the Company’s corruption-related conduct. The agency decided on the penalties for the AECA and ITAR violations while taking into account Airbus’s “timely nature of its disclosure” of the violations and its cooperation.
As part of the consent agreement, Airbus agreed to extensive compliance measures, including appointing an external compliance officer, conducting external audits and ensuring “adequate resources” are dedicated to ITAR and AECA compliance. Within 120 days, Airbus must allow a State Department designated officer to review its compliance program, policies and reporting procedures. In addition, Airbus agreed to strengthen its “corporate compliance procedures” within 18 months, which includes training for employees.
Airbus agreed to pay $527 million to the U.S. for FCPA and ITAR violations and $55 million as part of a civil forfeiture agreement for the ITAR conduct. The Justice Department said it will credit a “portion” of the amount Airbus pays to France’s Parquet National Financier under its agreement with France, which calls for a $2.29 billion penalty. The Justice Department is also crediting $5 million of the $10 million penalty Airbus will pay to the State Department. Airbus will pay about $1.09 billion to the U.K.’s Serious Fraud Service for bribes paid in Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana.