Police Probes Into Airbus Set to Claim CEO's Head

The heat generated by police investigations into the use of intermediaries at Airbus is set to claim the head of its CEO Tom Enders.

Boeing, the leading US plane maker and Airbus's key global rival, will greet the news with private satisfaction. It has been widely reported that the aggressive boss of Europe's biggest civil aircraft and airborne military equipment was close to a controversial 'sales and marketing organisation' (SMO) that was at the core of the controversial payments.

Yesterday (December 12) Enders refused to comment on a report in a French newspaper that he would not seek a third term as CEO at Airbus. The report followed weeks of speculation at the company, that Enders might not survive the remaining 18 months of his term in office.

He had earlier offered his head as the price of the repeated scandals. He said on October 15, "I'm not glued to my chair. You can be assured: Once I am no longer part of the solution, and I hope I would realize myself when that is, I will accept the consequences (and step down). But for now, I don't think we're at this point."

Yesterday, Enders said via his spokesman: "The decision about my future as CEO of Airbus is not taken by the French press or the French government or any government. It is taken either by the board ... or by me and ideally in consensus between the board of directors and me. My current mandate runs until April 2019 and this is the timeframe I work against." The French and governments each own 11 percent of the plane maker.

Investigations are targeted at multi-billion dollar sales of aircraft to, among other countries, Tunisia, China, Greece, Turkey, Kazakhstan Indonesia, Mali, Sri Lanka and Austria. Law enforcement in the U.K. and in France have taken the lead with the Parquet National Financier (PNF) also setting up three separate investigations into Airbus.

Tom Enders Airbus CEO
Airbus Chief Executive Tom Enders attends a ceremony during the delivery of the new Airbus A380 aircraft to Singapore Airlines at the French headquarters of aircraft company Airbus in Colomiers near Toulouse, France, December 13, 2017. REUTERS/Regis Duvignau

In rare cross-border cooperation, the British SFO and the PNF are working together on some of the Airbus cases. They are focused on breaches of anti-bribery governance codes. International corporations are invariably required to disclose the use of agents in major deals as a means to prevent bribery. However, Airbus failed to make such disclosures.

This follows a number of large scale scandals where agents were found to be conduits for bribes. Agents were notoriously used by Lockheed Martin when selling fighter aircraft to Germany in the 1970s, by Elf Aquitaine in buying oil from African countries in the 1990 and by British Aerospace in selling fighter planes to Saudi Arabia in 1980s.

The omission of the use of agents in documentation infringed rules imposed by United Kingdom Export Finance as a prerequisite to obtaining financial guarantees. This failure was reported to the U.K.'s Serious Fraud Office in April 2016, when Airbus admitted it had found "certain inaccuracies relating to applications for export credit financing for Airbus customers."

Airbus is also under scrutiny from the Department of Commerce for failing to notify use of agents when completing documentation needed to meet US International Traffic in Arms Regulations. Some Airbus components have dual military and civil uses and so are subject to ITAR requirements. "Certain inaccuracies" were found in past declarations to the US State Department under part 130 of the US International Traffic in Arms Regulations (ITAR), a section of US law covering the use of commissions to sell arms, said the company.

Anna Bradshaw, business crime partner at London law firm Peters & Peters, said, "European investigations have been focused on corruption allegations. But there is often a link between export control violations and bribery and corruption matters. The two tend to go hand in hand. There may be scope to examine whether European export control violations have also taken place."

While regulatory disclosures represent the bulk of Airbus breaches, one investigation is understood to be targeted at a clear-cut bribe. Shakr el-Materi, the son-in-law of the notoriously corrupt former Tunisian president Zine el Abidine Ben Ali, is widely reported to have received an Airbus A-340 for his personal use as a sweetener for the purchase of $2 billion worth of 16 large civilian planes for TunisAir, his country's airline. These included ten A-320s, three A-330s, and three A-350s. Airbus agreed, as part of the deal, to build an aircraft assembly plant in Tunisia.

An investigation by Nessma TV, and subsequently reported in Huffington Post, alleged that Al-Materi accompanied the Tunisian Minister of Transportation to see Airbus at their Toulouse headquarters in 2008 and came back with the offer of the private plane.

The Tunisian Minister of Transportation explained the highly unusual visit to France by someone who had no professional role in the Tunisian government as a means of giving the young man business experience.

The Airbus annual report in 2016 said it was cooperating with French judicial authorities, "pursuant to a request for mutual legal assistance made by the government of Tunisia in connection with historical aircraft sales." Neither Airbus nor the French magistrate investigating the case has made a further disclosure about the allegation.

In fact Ben Ali was toppled in January 2011, amid allegations that he had made a 5 to 6 billion Tunisian dinar payment to former French President Nicolas Sarkozy, and fled to Saudi Arabia. El-Materi, who had built up a substantial business in Tunisia is understood to have taken refuge in the Seychelles.

The use of intermediaries in the sale of satellites to Kazakhstan in 2009 has also attracted the attention of investigators in France. The Tunisian intermediary, Lyes Ben Chedli has told Newsweek that Airbus had failed to pull off the sale until he arrived. "I did something that they had been trying and failing to do for years. I did it in eight months."

The former Airbus agent is a highly confident and stylish international jet-setter who divides his time between Paris, Dubai and New York and is rarely seen without a large Cuban cigar protruding from his left hand. Ben Chedli, a relative of the former Tunisian President Habib Bourguiba, flashes his wealth with alacrity, driving a Rolls Royce with his initials in the number plate while he is in Paris.

Ben Chedli said he used contacts among businessmen close to the President of Kazakhstan to make the deal, building a "political and economic relationship between France and Kazakhstan. I had a close friendship with the President of Kazakhstan and was responsible for €1.3 billion worth of contracts between the two countries between 2008 and 2010."

Ben Chedli told Newsweek he had a contract to act as a consultant for Airbus, for which he received a monthly payment of €30,000. He says he also received a commission—which was within the allowed limits set by the OECD—on the price of the satellite deal. For example, he made a €10 million commission on the sale of the satellites, a just reward he says for "many months of hard and stressful work."

Tom Enders Airbus CEO
Airbus Chief Executive Tom Enders makes a sign as he attends a ceremony during the delivery of the new Airbus A380 aircraft to Singapore Airlines at the French headquarters of aircraft company Airbus in Colomiers near Toulouse, France, December 13, 2017. REUTERS/Regis Duvignau

He says he is owed $10m by the company for his role in a subsequent sale of 45 Airbus helicopters to Kazakhstan in 2010. This is denied by Airbus which offered Chedli €4m for his part in the deal which he rejected.

The string of disclosures arising from the use of intermediaries by Airbus as well as a number of lawsuits has resulted in the closure of the company's "sales and marketing organisation" whose multi-million euro slush fund allegedly provided funding for the intermediaries.

The global extent of the use of agents by Airbus was further exposed when German police raided the Airbus subsidiary Altas Electronik. The payment of £24 million to Greek officials to win a submarine sonar contract was discovered during the course of the raid and Airbus was fined €48m. Other deals that prompted investigations involved sales to Turkey and Pakistan.

Sales of border security systems to Saudi Arabia and Romania have also triggered investigations and Stefen Zoller the German director of EADS, a predecessor company to Airbus, was indicted. A $10 billion contract to China, a $2.3 billion sale of planes to Sri Lanka and a sale of six Airbus aircraft to Air Mauritius are also being probed.

Sales of military equipment by an Airbus company to Mali reportedly involved a €10 million payment through a non-operational Malian goldmine. The funds had reportedly passed through Luxembourg, Geneva, and the United Arab Emirates before reaching the goldmine.

The sharp eye of a British whistleblower working in Saudi Arabia first put Airbus into the frame. The alleged culprit was a predecessor company of the French/German combine called GPT, which was making, so the whistleblower alleged, suspicious payments to local Saudi princes.

GPT's "special project management department" used a company in the Cayman Islands to make secret payments.

This prompted an SFO investigation of payments of £11.5 million made between 2007 and 2009 but so far no prosecutions have been announced. One former senior SFO official said that the investigation had been "buried for national and political reasons."

Here, as in so many of the cases described, Airbus is on the hook. U.K. media have indicated the company might be prepared to make a £1 billion settlement deferred prosecution agreement with the Serious Fraud Office. Lawyers close to Airbus have said that this may be "premature."

While the risk of billions worth of looming fines haunt it, one Paris lawyer who preferred not to disclose his identity, claimed the French prosecutors were using the Airbus investigation to tarnish the name of the former president Nicolas Sarkozy. Sarkozy was an eager advocate of Airbus sales abroad, visiting Tunisia to promote the €2 billion aircraft sale.

The lawyer continued, "the PNF investigations into Airbus are mostly for show. They are more interested in protecting the French company than they are in getting to the bottom of the corruption and putting the culprits behind bars."

That view alone may be shared by the US Department of Justice who, along with Boeing, are watching European developments with great interest. Airbus have said that the investigations are continuing. A spokesman said that "investigations are at an early stage and nowhere near the point of settlement. We cannot comment on specific cases."