Paris: Shares in European aerospace group Airbus tumbled on Thursday after a French publication reported that US authorities are investigating the firm for suspected bribery and corruption, exposing it to billions of dollars in potential fines. It was the latest blow to Airbus as it tries to recover from several corruption probes before a new CEO takes the helm next year.
French daily Le Monde reported that the US Department of Justice had opened an inquiry into "improper practices" at the end of 2017, but only informed Airbus it was under investigation at the end of the summer. In a statement, the company said it was cooperating with US authorities.
The inquiry stems from Airbus's disclosure in early 2016 that it had neglected to inform authorities about payments to middlemen in securing several contracts, in particular in Asia.
Such third-party payments are allowed under anti-corruption guidelines set by the Organization for Economic Cooperation and Development, as long as the recipients are clearly identified and the compensation fully reported.
But in 2013 the company began finding discrepancies in the amounts recorded for several contracts over previous years, and middlemen who had not been reported to national export agencies. Britain's Serious Fraud Office opened a fraud, bribery and corruption inquiry in 2016 over the alleged "irregularities concerning third-party consultants."
It has been cooperating with France's Financial Prosecutor's Office (PNF), which also launched an inquiry into the deals. In late trading Airbus shares were down 4.6 percent at 83.23 Euros, having lost 9.6 percent at one stage on the Paris stock exchange, which was 1.5 percent lower overall.
The US inquiry has the potential to be highly damaging, since a corruption conviction could effectively lock Airbus out of international contracts for several years. That would be a boon for its US arch-rival Boeing as well as China, which wants to break into the American market, Le Monde said.
Airbus is already trailing Boeing in new orders this year, with just 380 firm orders booked so far compared with 690 for Boeing. In October 2017, the aircraft maker revealed that it had told US officials of "inaccuracies" over its payments to middlemen covered by the US International Traffic in Arms Regulations (ITAR).
Le Monde reported that Airbus had recently dissolved its Strategy and Marketing Organisation (SMO) department, whose directors oversaw the management of middlemen used to facilitate the deals from 2009 to 2013 being probed.
By showing authorities it is taking drastic action in response to the alleged irregularities, it is hoping the US Justice Department will join the British and French inquiries, Le Monde said. In that case, Airbus might be able to spread the fine among the three agencies, instead of facing a huge US penalty as well as potentially crippling court cases.
That was the strategy pursued by British automaker Rolls-Royce, which paid a 763-million-Euro fine to British, US and Brazilian authorities to settle a foreign fraud inquiry. It had informed Britain's Fraud Office of the offences in 2012.
Turbulence at the top
Airbus has been wrestling with a series of corruption probes in recent years, most recently paying 81 million euros to settle a German inquiry into the suspected kickbacks in sale of Eurofighter jets to Austria. Its offices were also raided last year as part of an inquiry into alleged influence-peddling related to helicopter sales to Kazakhstan.
The company has shaken up its top management in recent months after CEO Tom Enders failed to win board backing for a new term. It has also faced challenges with the A380 superjumbo passenger jet, which has struggled to attract as many clients as hoped, as well as with the over-budget military transporter A400M.
France, Germany and Spain all hold significant stakes in the aerospace group, which is considered a strategic player in transport and defence. In October the board said Enders would be replaced next year by Guillaume Faury, currently head of the commercial aviation branch.
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Updated Date: Dec 21, 2018 09:23:08 IST