In November 2014, Airbus chief executive Thomas Enders sent an anxious email message to members of the aerospace and defence group’s executive committee in which he warned that “there’s simply too much shit hitting the fan right now to continue with business as usual”.
The message was prompted by the news that, two years after the opening in Austria of an investigation into alleged fraud and corruption by the group in a 1.7-billion-euro contract for the sale to the country of 18 Eurofighter Typhoon aircraft, German police had again raided the offices close to Munich of the defence arm of Airbus as part of a their own separate probe.
In his email, Enders wrote: “Alleged bribery cases have been intensive as probably never before in our Group […] Recent police raids in some of our sites, press reports, court actions, all have heightened the concerns of our Board about the compliance situation and practices inside our businesses.”
The situation has only worsened for Enders and Airbus since, with investigations also opened in Britain and France since 2016 into claims that hundreds of millions of hidden commissions were paid out in the sale of the group’s civil aircraft. In June this year, “Tom” Enders as he is more familiarly called, addressed his senior management at a meeting at Airbus headquarters in Toulouse, southern France. "If there are still people in this room that believe we should put the shit under the rug,” he told them, “then I would have to say, I give up on these people."
Between 2000 and 2005, Enders was head of the German-based defence and security arm of EADS, the pan-European aerospace and defence giant that was re-named Airbus Group in January. As one of the three aerospace industry partners in the consortium which builds the Eurofighter (the others being Britain’s BAE Systems and Italy’s Alenia Aermacchi, now renamed Leonardo), the EADS – now Airbus – defence arm was actively involved in the sale to Austria of the fighter aircraft, one of the first contracts to be signed with a nation outside of those represented by the consortium.
The industrial partners which make the Eurofighter Typhoon are grouped together in a holding company, Eurofighter Jagdflugzeug GmbH, based in Hallbergmoos in Germany. The Airbus Defence and Space division owns 44% of the company (33% is held by its headquarters in Germany, and 13% by its sub-division in Spain), while BAE Systems owns 33% and Italy's Leonardo holds 21%.
The fraud and corruption allegations surrounding the deal with Austria revolve around a London-based company called Vector Aerospace LLP, which was finally wound down in July 2012. Vector Aerospace was controlled by the Airbus (then called EADS) defence arm based at Ottobrunn, close to Munich, which provided it with funds totalling 114 million euros. According to a summary by German prosecutors of their investigations, led in Munich, Vector Aerospace LLP was “a mere shell company” that served as a “slush fund” which pumped, via fake contracts, a total of 104 million euros into dozens of offshore companies based in tax havens including the British Virgin islands, Singapore, the Isle of Man, Hong Kong and Cyprus.
The prosecutors found that the money was used “for the most part for corruption purposes, in particular to influence decision-makers” in the negotiations for the Eurofighter deal with Austria.
The Austrian investigation into the alleged corruption is also examining whether the cost of the aircraft was deliberately inflated and whether Vienna was misled over what are called “offset deals” that are supposed to boost the local economy by involving Austrian companies in work connected to the contract. Austria's defence ministry claims it was overcharged by some 183 million euros.
The huge costs of the Eurofighter deal led Austria to renegotiate the number of Typhoons it would buy, and in 2007 the total order was reduced from 18 aircarft to 15. In July this year, the Austrian government announced it will replace all 15 Typhoons in 2020 with other aircraft, which it said would save money compared to the cost of maintaining the Eurofighter jets over their lifespan.
Meanwhile, the German investigation suspects that Vector Aerospace was also used to pay out secret commissions in negotiations for the sale of airbus civilian aircraft, which if proved true would mean that the Airbus defence arm close to Munich provided slush funds for the wider group. While the German probe has found no evidence directly implicating Enders, head of the defence arm for five years until 2005, Austrian prosecutors announced in April that the Airbus boss was among those suspected of personal involvement in the alleged fraud in the Eurofighter negotiations. Both Airbus and Enders immediately dismissed the claims, and Enders denounced an “abuse” of the Austrian judicial system for “political motives”, adding: “These allegations are unfounded and unsubstantiated.”
After his appointment as CEO of the entire Airbus group, Enders launched a series of internal investigations into past business practices, ostensibly to put an end to legal and ethical irregularities. In March 2015 he named Briton John Harrison as Group General Counsel, covering the responsibilities of Corporate Secretary, General Counsel and leading the Ethics and Compliance programme, in charge of cleaning up past business practices. The two men already knew each other well. Harrison had served as general counsel at Airbus Defence and Space when Tom Enders was in charge of that division. Harrison was also familiar with the Eurofighter contract with Austria.
Among the revelations to emerge from documents obtained by Mediapart and German weekly news magazine Der Spiegel is evidence that Enders was personally involved in the creation of Vector Aerospace LLP, described by German investigators as a "slush fund", and also that Harrison subsequently instructed intermediaries used to obtain the 2003 Eurofighter deal not to testify before an Austrian parliament commission of inquiry into the affair in 2006.
In 2002, the defence arm of what was then EADS, and which was then run by Enders, called upon the services of the group’s Paris-based corporate marketing department EADS International (renamed SMO in 2007), to help in its bid for the Eurofighter sale to Austria. Within EADS International, and largely made up of French staff, was an “International Operations” (IO) branch, dedicated to helping the separate EADS divisions bidding for contracts of a sensitive nature. IO engaged the services of influential intermediaries, distributed what are often euphemistically called commissions, and was involved in the organisation of industrial offset agreements.
The IO unit, with a team of about 15 people, was eventually disbanded by Enders in 2016 after the emergence of allegations of corruption in Airbus commercial aircraft sales. Enders pointed to the entity as sole responsible for business malpractices within the group, notably that it paid hundreds of millions of euros in secret commissions to agents and middlemen for the sale of its passenger planes. In April 2016 Airbus reported to British export agencies the findings of what it called “misstatements and omissions” that emerged from an internal probe into its business practices, part of Harrison's 'clean-up' mission. The UK Export Finance agency subsequently froze export credits for Airbus, which are used for aircraft deliveries to airlines with restricted access to funding. Export financing agencies in France and Germany also suspended credit payments. The British and French investigations are ongoing.
Back in 2002, EADS International head Jean-Paul Gut turned down the request for help with the Eurofighter sale to Austria. This was because the Eurofighter programme was a direct commercial rival to the Rafale jet fighter built by France’s Dassault. The industrial stakes were such that French staff at EADS International, a marketing division of the European consortium, were barred from taking part in promoting sales of a jet in which France had no part.
As a result, the EADS defence arm engaged the services of two German nationals who were part of EADS International, Manfred Wolff and Klaus-Dieter Bergner. The latter was moved to a post within the Eurofighter consortium, with the task of lobbying for sales of the fighter. Internal company documents seen by Mediapart show that Tom Enders personally approved Bergner’s appointment.
Bergner set up a base in Vienna, where he soon became closely acquainted with Major General Erich Wolf, then head of the Austrian air force. After it was revealed that an intermediary recruited by Bergner paid 87,600 euros to a company run by Wolf’s wife for the organisation of an air show that would never take place, Wolf was suspended from duty and later resigned.
At the time, the Austrian government was made up of a coalition between the conservative ÖVP party and the far-right FPÖ party led by the late Jörg Haider, which was in power between 2000 and 2005. In January 2002, Bergner paid for Haider and cadres of his party to spend a weekend in a hotel in Brussels and two days after the sojourn an internal EADS document marked up as “strictly confidential” listed the conditions laid down by Haider for his support for the Eurofighter deal; EADS was to transfer several million euros in separate payments to both a PR-communications firm with close links to the FPÖ and to the SK Rapid Wien football club (several management figures of the club were members of the FPÖ), and also to part-fund a project to develop a technology hub in Jörg Haider’s political fiefdom Carinthia, the southern Austrian state of which he was governor.
The Eurofighter contract was officially signed in 2003. Part of the deal included the pledge by the Eurofighter consortium to provide offset contracts to local firms worth a total of 4 billion euros to the Austrian economy, which was double the sales value of the aircraft themselves.
The Eurofighter consortium handed the defence arm of EADS based in Germany and run by Tom Enders the task of managing the offset deals, providing it with 183 million euros. A company, Euro Business Development (EBD), was created in Vienna dedicated to establishing the offset deals with Austrian suppliers, and which was run by EADS lobbyist Klaus-Dieter Bergner. But intriguingly, EADS also decided that EBD would be placed under the umbrella of another firm which was also officially tasked with organizing the offset deals.
It was at first intended that this second company would be created under the name Omesco and registered in Cyprus, but it was finally decided that Vector Aerospace LLP in London would take on the role. According to internal documents seen by Mediapart, the choice of the British capital was made for tax reasons and also for maintaining the confidentiality of "the names of the final beneficiaries of Vector".
Officially, Vector Aerospace LLP belonged to two shell companies run by Austrian intermediaries specialized in arms sales. But secret agreements in fact gave EADS full control of the London firm. Klaus-Dieter Bergner and his colleague Manfred Wolff, no longer with EADS International, were actively involved in the operations of the London company. If ever Vector Aerospace LLP became an embarrassment, it was unlikely to directly implicate the management of EADS.
An internal company document obtained by Mediapart details the structure of the relations between EADS and Vector Aerospace LLP, the company created in Vienna, and how the “partner” parties paid by the London company are separated by what it calls a “Chinese wall” (see below).
Tom Enders, as head of the EADS defence arm, was both personally aware and approving of the initial plan to create Omesco in Cyprus to steer the offset deals. The British and Italian partners in the Eurofighter consortium, meanwhile, were against the idea. In the minutes of a May 2004 meeting by the consortium’s management, it is recorded that Enders supported the Omesco plan. When, finally, it was decided to create Vector Aerospace LLP, registered in London on July 14th 2004, Enders was also aware of the project.
As outlined above, the French employees of the Paris-based EADS marketing unit EADS International were prevented from helping with the commercialisation of the Eurofighter because it was a direct rival to France’s Dassault-built Rafale jet fighter (the Rafale programme was begun after France withdrew in the mid-1980s from the early pan-European development of a fighter aircraft that would become the Eurofighter Typhoon). But the head of EADS International, Jean-Paul Gut, did finally agree to help with setting up Vector Aerospace LLP. His staff became involved in approving the legal paperwork surrounding the company’s creation, although they had no involvement with the intermediaries it used nor the payments it made.
In an email dated November 19th 2004, Johann Heitzmann, the head of the Eurofighter programme within the EADS defence arm in Germany, referred to a request made by Enders to Jean-Paul Gut that one of his staff, Jean-Claude Cadudal, should manage Vector Aerospace LLP. Cadudal played a key role in setting up offshore company structures for EADS Internatonal’s “International Operations” (IO) branch, which Enders would later, as Airbus CEO, denounce as the department responsible for the corruption scandals now hanging over the group. Enders’ request for the services of Cadudal was relayed to the EADS group’s then joint chief executives, Germany’s Rainer Hertrich and France’s Philippe Camus.
In his email, Heitzmann explained that the request by Enders was turned down, and that as a result, Heitzmann “prepared with Tom [Enders] the necessary steps to establish our own clearing house". Vector Aerospace LLP thus became a structure for payments managed by EADS defence arm in Germany, independent of the commercial services in Paris.
Contacted by Mediapart, Tom Enders refused to comment on the events reported here. However, Airbus has previously set out its position that the money transiting through Vector Aerospace LLP was properly and solely intended to establish its offset deals negotiated with the Austrian authorities, and as such Enders had no reason to be concerned about its activities.