ON Wednesday November 15, in the closing moments of the Dubai airshow, champagne corks began to fly faster than the fleet of 430 Airbus planes the company's ace sales shark had managed to steer past murky torrents of corruption scandals, to close the biggest deal in commercial aviation history. US investment firm Indigo Partners is buying the planes in a $49.5-billion contract brokered by Airbus' chief commercial officer, John Leahy.
As the camera's clicked away and Leahy touted this latest and greatest deal to the BBC as a personal triumph, the scores of other media reporting the bonanza also neatly sidestepped a looming elephant – how such a sales titan has managed to stay so clean amid the shady third-party intermediaries Airbus uses to close deals in nearly every corner of the globe.
However, The New York Times noted that Indigo Partners, a US-based parent company of several low-cost carriers – including Hungary's Wizz Air, Frontier Airlines, Mexico's Volaris, and Chile's JetSmart – had received an undisclosed "fee" for every aircraft "sold" to each subsidiary airline. In this deal, 146 aircraft go to Wizz, 134 to Frontier, 80 to Volaris, and 70 to JetSmart, according to the website www.flightglobal.com.
This new deal indeed crowns the career of Leahy, the Airbus sales titan who took the company's market share from 18 percent in 1993 to 57 percent a decade later. Over his 20-plus years at Airbus, Leahy closed deals on more than 15,000 jets worth an estimated $1.7 trillion. But his latest sales triumph is a reminder that kickback isn't called a kickback when it's structured openly into a sales contract between two Western firms.
Airbus' use of third-party contractors to secure deals in corrupt and autocratic countries has in the past been dismissed as simply necessary for doing business in such areas. Today, however, this "normal" practice is being investigated in a few countries around the world, bringing some optimism to the global struggle against corruption.
Leahy's name has been largely absent in media coverage of the several investigations, but this does not rule out the possibility of it arising later – after his retirement, perhaps – given the unfolding depth and scope of the corruption.
Meanwhile, Airbus CEO Tom Enders has pointed a finger at the Paris sales office as the source of many of the illicit sales practices that have drawn the scrutiny of British, French, and Austrian investigators. For example, the Paris sales office approved a €700-million payment to a Turkish national for securing a $10-billion sale of 160 aircraft to China.
There is also an investigation of several executives in the national airline SriLankan, over massive irregularities during the purchase of 10 Airbus planes in 2013. In Mauritius, the former head of government was bribed to buy six Airbus jets.
The French PNF is investigating Kazakhstan's then-prime minister and current chief of intelligence, Karim Massimov, who received millions in kickbacks for signing a deal with Airbus/ EADS to buy 45 helicopters for the Kazakh government in 2009. In addition to the Kazakh case, the French are also investigating a €70-million payment Airbus made to the son-in-law of Tunisia's ousted president, Zine El Abidine Ben Ali, following the purchase of 16 aircraft.
It's possible that Leahy, based at Airbus HQ in Toulouse, had no idea what was going on at the Paris office. Even in such a benefit-of-the-doubt scenario, Leahy, as head of sales and operations should be held responsible for such gross negligence. But we should also question why the media are now loudly applauding what is essentially the same behaviour in a slightly different context.
Der Spiegel, on October 6, outlined several cases of Airbus corruption that are proving catastrophic for the company.
Our Airbus sources confirm that London-based Vector Aerospace received 114 million pounds from EADS, which was transferred to shell companies in Hong Kong, Singapore, and the British Virgin Islands. The money paid commissions for the sale of 18 Eurocopter helicopters to Austria, but also provided a slush fund for more kickbacks to come.
The sources say Tom Enders, Airbus CEO, was aware of the purpose of Vector and a Cypriot company, Omesco, which delegated offset deals to international clients.
Enders' strategy of acting as an anti-corruption superhero touting full transparency sets his sullied reputation against his knowledge of dirty payments to officials in the past.
The question is, will the CEO's strategy enable a plea bargain between Airbus and the investigators - the U.K.'s SFO and France's PNF? Or will these alleged watchdogs sink their teeth into proven corruption and start aggressive prosecutions in the multiple countries involved?
As we've previously reported, the French PNF has good reason to avoid such a crackdown. The corruption goes all the way to the Elysee - officials who have been implicated in Airbus kickbacks. Look no further than the sales of satellites to Kazakhstan.
Our confidential sources within Airbus have told us that company payoffs to government officials in target countries was common practice. If the PNF and SFO fully investigated Airbus, they would uncover numerous instances in which high-level foreign government officials were receiving kickbacks from Airbus. Our Airbus sources have also stated that senior French government officials were receiving payments, in addition to a slew of European lobbyists acting as intermediaries between the company and foreign governments.
Airbus has admitted in very general terms to paying kickbacks. The company alluded to “misstatements and omissions” in its half-yearly financial report published July 27, and confessed to inaccurately reporting the involvement of independent consultants in April (see The New York Times: https://www.nytimes.com/2016/08/09/business/international/airbus-britain-corruption-investigation.html?_r=0 ).
Our Airbus sources claim that if the company makes such a broad apology and pays a public fine, then the details of larger-scale corruption will go unrevealed. In our September 28 post, we highlighted numerous examples of Airbus corruption worldwide. In 2010, for instance, sources tell us that then Kazakh Prime Minister Karim Massimov received 12 million euros, confirmed by Mediapart, as part of a deal of 45 Airbus helicopters to Almaty. The sources also reiterated that senior company officials were fully aware and permissive of payoffs being made worldwide during that period.
As we also previously stated, senior French government officials were receiving payments from Airbus to leverage their political influence in Almaty to help win the helicopter contract with Kazakhstan. Both Aymori de Montesquiou, a Senator in the Elysee, and Etienne Des Rosaies, former assistant to President Sarkozy, met with lawyer Catherine Degoul, who was facilitating commission payments.
What remains unclear is why the PNF and SFO are allowing corruption between Airbus and French officials and other instances of wrongdoing to go uninvestigated.
ARE France's PNF (Parquet National Financier) and the U.K.'s SFO (Serious Fraud Office) trying to cooperate with Airbus to cover up its many cases of gross corruption? The aerospace giant might be close to settling for a 1 billion pound payoff to bury many cases of fraud and corruption it is involved in globally. Airbus has paid large commissions in Saudi Arabia, Romania, Austria, China, Turkey, Kazakhstan, the Philippines, Indonesia, and Mauritius. Its illegal activity is egregiously prolific, and its behavior should be embarrassing to any reputable company.
In Turkey, Airbus hid commissions on 34 of its products through a fictitious plan to construct a pipeline in the Caspian Sea. In Kazakhstan, it paid Karim Massimov--the country's former Prime Minister--12 million euros in kickbacks, all channeled through bank accounts in Singapore.
To add a gloss to Airbus' shadiness, the American firm Dechert is representing its interests against the SFO and PNF. Lawyer Neil Gerrard works for Dechert--and he formerly worked for the SFO, so is no doubt using his former contacts and expertise with the SFO to help Airbus at the negotiating table. This may look like a conflict of interest, but conflicts of interest have never stopped Airbus from practicing its business methods.
Insider sources we contacted claim that a French investigation into Airbus' activities in Kazakhstan, which has not happened yet, would open "a Pandora's box of accusations" and force the PNF to confront Airbus' past record of extreme corruption. A small settlement in the shape of 1 billion pounds would, of course, be no more than another shade of corruption drawing a veil over corporate greed and misbehavior.
So why would France be willing to play along with a tack settlement for Airbus? Have some Elysee officials also been getting kickbacks? Our sources suggest the answer to that is a hard "Yes". Lawyer Catherine Degoul met with two Elysee officials in August 2010 and at the first meeting, Degoul discussed "contracts of interest to Thales and Eurocopter" with Senator Aymori de Montesquiou, an Elysee representative. In a second meeting with Montesquiou, which another Elysee official, Etienne des Rosaies, attended, Degoul discussed commission percentages on multiple contracts, including "Eurocopter/Agusta 4%". This was the percentage commission Eurocopter later agreed to on a sale to Kazakhstan. Eurocopter is a subsidiary of Airbus.
A joint SFO-PNF settlement with Airbus would be preposterous and make a mockery of official attempts to rein in corruption in Europe and elsewhere. The aerospace giant should be investigated down to the last euro of misappropriated fund and so finally open that Pandora's box containing dozens or hundreds of cases of widespread corruption.