It is the biggest financial scandal since the Elf oil company affair 20 years ago. According to Mediapart's information the ongoing parallel French and British corruption investigations into the European aerospace and defence group Airbus are examining claims that hundreds of millions of hidden commissions were paid out in relation to the sale of jet airliners, allegations brought to light by the group's own internal probes. In the Elf affair, France's largest corruption scandal to date, some 300 million euros of funds were misappropriated.
Since the story broke in 2016 Airbus – formerly EADS – has sought to play the affair down. When the Serious Fraud Office (SFO) in England and Wales and then its French counterpart the Parquet National Financier (PNF) began their investigations, the group spoke simply of “inexactitudes and omissions” in declarations of the amounts paid to “consultants” or middlemen who helped clinch the lucrative export deals.
It took nearly a year for the company to recognise, discreetly, the scale of the affair. In its 2016 annual report, published in April this year, Airbus started to concede the affair was perhaps a bit more serious than had been anticipated. The group recognised that it risked a heavy “monetary penalty” in relation to the French and British investigations. The affair could also block access to certain public markets, cause “damage to Airbus' business or reputation”, undermine its sales, reduce financing options for export deals and even lead to its shareholders taking legal action for prejudicial damages in relation to the alleged corruption.
In a sign of how seriously the issue has now being taken, Mediapart reveals that the board of directors at Airbus, which until now had just taken the views of the senior executives, has decided to ask an independent firm of lawyers to assess the scale of the risks and the measures that should be adopted.
In late May Airbus also announced it was setting up an independent panel to evaluate the extent to which group practices conform with anti-corruption rules. It will be under the control of three senior figures, one from each of the three leading countries involved in the European aerospace group. The British 'representative' is David Gold, a lawyer and member of the House of Lords who worked on behalf of British firms Rolls-Royce and BAE Systems when they were being investigated by the SFO. For France there is Noëlle Lenoir, a former member of France's two leading judicial and administrative bodies, the Conseil d'État and the Constitutional Council, a minister for European business affairs under President Jacques Chirac, the former ethics commissioner at the National Assembly and a lawyer with the law firm Kramer Levin Naftalis & Frankel. The German involvement comes in the form of Theodor Waigel, who was finance minister under Chancellor Helmut Kohl and a leading figure in the Christian Social Union (CSU) party in Bavaria.
According to outside observers the panel's purpose is to prove to the British and French authorities - oddly, the German justice system has not opened an investigation into the affair – that the group's culture has changed, and that Airbus no longer uses middlemen to clinch its sales. “We have been cooperating fully with the investigations that ensued and further improving our compliance system is obviously our number one priority now,” Airbus Chief Executive Officer Tom Enders said in a statement in May this year.
There is indeed a risk that Airbus will live under the shadow of these judicial threats for a long time. The affair could thus have a terrible impact on this strategically-important European industrial flagship, in which France and Germany each have 11% stakes. It makes Airbus passenger jets plus Eurofighter military jets, civilian and military helicopters, missiles, satellites and the Ariane rockets. Nor is this affair the only threat the group faces. Mediapart has calculated that in addition to this one, Airbus is linked to nine affairs involving alleged corruption, of which seven are the object of judicial proceedings in six different countries.
The tension inside the Airbus groups is not made any easier by the knowledge that the Americans are watching the situation closely. They could launch judicial action outside their territory – a practice the Europeans have never opposed – into alleged corruption with devastating effect, as they have already shown with European firm Alstom, which was bought soon afterwards by General Electric. People close to the Airbus affair say that it was to block such a move by the Americans that the British and French started their investigations as a matter of urgency.
Neither France's PNF financial prosecutors nor Britain's SFO would speak to Mediapart, a sign of how sensitive the case is. In a written response Airbus itself told Mediapart that they could not comment on the detail of the case because an “investigation is in course”. Instead the group highlighted its new “reinforced anti-corruption policy” implemented since the affair came to light. This has been on its website since this spring.
Some internal sources say that at the beginning the group's German CEO Tom Enders monitored the case at a distance, and that it was only in recent months that he realised just how much was at stake and took direct control. The German boss is, according to several sources, “worried”. Even more so as he faces proceedings against him directly in another case, involving alleged bribes in a Eurofighter deal with Austria.
From 2000 to 2005 Enders was head of the group's Defence Division which makes the Eurofighter, and Austria bought 18 of them in 2003. According to Austria's Defence Ministry, they were overcharged by some 183 million euros over the deal. Out of this sum, the Austrians says 100 million euros was paid out in kickbacks via front companies managed by an Italian middleman for Airbus.
The German prosecutors based in Munich, who are also investigating the affair, did not include Airbus CEO in their list of indicted people. But to the great anger of Tom Enders, the Austrian authorities saw things differently. The Airbus CEO has rejected the claims as “unfounded” and accuses the Austrian authorities of having leaked details of his alleged involvement for “political reasons”. While he has insisted the group will cooperate fully with the Austrian authorities, he has also indicated that he will defend himself very vigorously.
Tom Enders, aware of the high stakes for him and the group, has adopted the mantle of Mr Clean. He has launched internal inquiries and anti-corruption reforms and makes much of his “cooperation” with the PNF in France and the SFO in London. He has promised the group will get to the bottom of what has happened. “If even more serious errors or facts are discovered we will systematically take the appropriate measures,” he has said. The brutality of the clean-up measures have, however, caused some disquiet within the group. Some have attacked the unparalleled concentration of power now in Enders' hands, against an existing backdrop of gloom among French executives at the growing influence of Germany inside the group.
One of the first measures taken by the group CEO was to dismantle the department which is today at the centre of the French and British investigations: the Strategy and Marketing Organisation (SMO). Since the creation of Airbus's forerunner EADS in 2000 this department has been intimately involved with the most sensitive export contracts. “It was the equivalent of the secret services, with people whose job was to carry out dirty tricks,” says one former executive at the group.
In concrete terms the department was in charge of selecting, dealing with and paying all the middlemen – the “commercial agents” - used to win contracts, both civil and military. Airbus has the right to pay people who are influential provided they are not paid as bribes. “But in some difficult countries, you have to oil the wheels,” says the former executive. “So you find an agent who has the contacts and you oil the machinery. That's how the business works and Boeing [editor's note, the European group's US competitor] does the same even if they operate differently.”
The SMO was very much a French show and was based in the old Paris headquarters of EADS on Boulevard Montmorency. It reported directly to the group's number 2 in charge of commerce and strategy, first of all Jean-Paul Gut – who used to work for the Lagardère Group – and then the man who replaced him in 2007 Marwan Lahoud.
The SMO did its job to the group's satisfaction for nearly 15 years, working in complete anonymity, right up to the moment the first affairs broke. The first warning came in 2012 when prosecutors in Europe started investigating military contracts in Saudi Arabia and Romania and the Austrian Eurofighter deal. But the veil of secrecy was only torn away two years later.
The Kazakh helicopter affair broke in September 2014. During a search at the premises of Airbus helicopters – formerly the Eurocopter Group – French investigators found emails, revealed by Mediapart, showing the group had agreed in principle to hand over 12 million euros in hidden commissions to the Kazakh prime minister to help the sale of helicopters. The emails show the key role of the SMO and its director Jean-Pierre Talamoni. Mediapart later revealed that the Airbus group's number 2 Marwan Lahoud had, on several occasions, met the middleman chosen to move the alleged commissions.