Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Airbus faces record $4 billion fine after bribery probe

Stock MarketsJan 28, 2020 05:53PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. An Airbus A350 takes off at the aircraft builder's headquarters in Colomiers near Toulouse

By Sudip Kar-Gupta and Tim Hepher

(Reuters) - Airbus faces a record $4 billion fine and lower 2019 profits after unveiling a preliminary deal with French, British and U.S. authorities following a crippling three-year probe into allegations of bribery and corruption over jetliner sales.

The deal, believed by anti-corruption experts to be the largest ever in a bribery case, ends an almost four-year crisis that led to a sweeping management overhaul and delayed plans to redeploy the plane giant's cash surplus.

If approved by courts, the deal is expected to allow Airbus to avoid criminal charges that risked banning the company from public contracts in the United States and European Union - a massive setback for one of Europe's top defense and space firms.

The European planemaker has been investigated by French and British authorities for suspected corruption over jet sales dating back over a decade. It has also faced U.S. investigations over suspected violations of export controls.

Announcing the tentative agreement, Airbus - which dominates the commercial jet market alongside U.S. rival Boeing (NYSE:BA) - said it would take a provision of 3.6 billion euros ($3.96 billion) in its 2019 earnings if the deal won approval in court hearings in the United States, Britain and France on Jan 31.

"To my knowledge, an approximate $4 billion global settlement amount would be the largest global bribery settlement amount in history," said bribery law expert Mike Koehler, a professor at Southern (NYSE:SO) Illinois University School of Law.

That compares with analyst expectations of 3-5 billion euros and dwarfs an $809-million multinational settlement in 2017 over the use of middlemen by aero-engine maker Rolls-Royce (LON:RR), which included the biggest ever corruption fine in Britain.

Airbus said the charge would affect 2019 results due on Feb 13. Analysts had expected 2019 net profit of 4.638 billion euros against 4.405 billion in 2018, according to Refinitiv data.

Despite the hit, Airbus shares rose 1% on what appeared to end one of the most damaging chapters in its history.

"Sorting out the fraud investigation is likely to remove a major overhang for the company," said Vertical Research Partners analyst Rob Stallard. Others noted plans for a new share buyback had been postponed as Airbus faced uncertainty over the fines.

British and French investigations began after Airbus alerted regulators to misleading and incomplete declarations it had made to Britain’s export credit agency over payments to sales agents.

Britain's Serious Fraud Office (SFO) launched its probe in August 2016, followed seven months later by France's Parquet National Financier (PNF).

It was not immediately clear to what extent the U.S. part of any settlement would stick to the infringement of export control violations or include the broader corruption case.

The U.S. Department of Justice has signaled a close interest in the bribery affair while mainly allowing Britain's SFO to take the lead, say people familiar with the matter.

It was also not clear whether a deal would lead to individual prosecutions, which are not covered by corporate plea bargains. Britain's SFO abandoned individual prosecutions over the Rolls-Royce case last year.

AGENT NETWORK

At the center of the Airbus case was a decades-old system of third-party sales agents run from a now-disbanded headquarters unit which at its height involved some 250 people in parts of the world and several hundreds of millions of euros of payments a year, sources familiar with the matter have said.

In 2014, then finance director Harald Wilhelm ordered a halt to all third-party payments, triggering a massive internal probe and claims from unpaid consultants.

The investigation, which racked up legal bills of around 100 million euros a year, led to a board-driven clearout of the company's top management and plunged the company into years of self-examination, hampering its sales efforts.

Nobody has been accused of wrongdoing but Airbus acted to clear out its senior ranks to improve its chances of winning a U.S.-style deferred prosecution agreement (DPA), insiders said.

In a landmark 2017 ruling setting the bar for future settlements, a British judge had described Rolls-Royce as "dramatically changed" with a new leadership and culture.

Airbus has fired more than 100 people over ethics and compliance issues as a result of its own probe into the allegations, which widened to other divisions.

But the internal probe led to anger within the Franco-German firm and its jet sales teams who denied any influence over the tightly controlled agent system, which political sources have described as part of a wider French influence network abroad.

It also threatened to reopen Franco-German tensions over Airbus as French sources complained the row diverted attention from a separate probe into fighter jet dealings with Austria, partially overseen by German-born Tom Enders who later served as chief executive. Enders has denied any wrongdoing.

A further German probe into potential misuse of client documents is ongoing.

Airbus faces record $4 billion fine after bribery probe
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Rony Trade
Rony Trade Jan 30, 2020 6:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
@ Kody Kni - (M1) Not going anywhere son. There is nothing new on all of this mascarade. However factual you might think that report was, the point that you should be retaining , is how much of a transition law and regulations have undertaken in France but also in Europe in the past 25 years. 30 to 20 Years back brings you to a completely different set up in term of International trade principles and regulations. Do also remember that all of this " investigations " starting point, was a logical technicality, well anticipated by Airbus in a full intent to fulfill all of its compliance duties and defend the position that it occupy today as THE ethical strategist and undisputed multicultural business transparency advocate for this entire industry. Airbus with its unique structure, also try to adapt and deliver in an ever evolving, ever demanding compliance, ethical and corporate responsibility framework
Rony Trade
Rony Trade Jan 30, 2020 6:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
@ Kody Kni - (M2) This, always in the fastest possible manner for the benefit of a global and sound organization that still deliver success to all of its partners.
Kody Kni
Kody Kni Jan 28, 2020 8:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rony where are you buddy? I have a feather for your hat.
Rony Trade
Rony Trade Jan 28, 2020 8:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Right here and good afternoon to you.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email