Within two weeks of the announcement of its record EUR 3.6 billion penalty for widespread bribery, Airbus had reportedly paid up in full to all three authorities involved. The penalty was levied to resolve allegation into alleged bribery and failure to prevent unlawful payments by agents in 16 countries, including Malaysia, Indonesia, Sri Lanka, South Korea and Taiwan.
Companies that have been hit with severe penalties have often been granted repayment schedules that stretch for years. Yet, Airbus has settled its penalty payments comfortably inside the 30-day deadline set in its DPAs.
In her judgement at the Southwark Crown Court, Dame Victoria Sharp has gone to length to analyse the interests of justice – the seriousness of the offense, public interest factors, the collateral effects of prosecution – and the fairness, reasonableness and proportionality of the terms of any DPA in arriving at and justifying the level of the penalty. She concludes by stating about the DPA that it “… requires Airbus to pay a significant financial penalty, thereby sending an important deterrent message to corporate wrongdoers.”
While the quantum of the penalty is undoubtedly eye-watering by any standards, Airbus’ settlement of it in full within a matter of weeks raises a number of questions, all relating to the size of the penalty itself, but two of which stand out. Primary among these is that of whether basis of computing the penalty has taken into account the complete extent of the wrongdoing.
Firstly, a total of 5 indictments was put before the courts, all relating to periods from 1 July 2011 (i.e. the going into force of the UK Bribery Act) onwards. The UK DPA indicates that the penalty relating to it was calculated based on a “representative sample of the markets and concerns involved”. Does this suggest that the full extent of the profits derived from the wrongdoing in relation to the 5 indictments was not computed? Or does it mean that a computation was performed on a representative sample and then extrapolated to all the sales relating to the 5 indictments? Given the known vagaries of airframe manufacture and supply, in which prices are thoroughly negotiated and held closely confidential, how reasonable is it that a sample could be “representative”?
The UK Judgement goes on to explain (if not detail) that the computed penalty and disgorgement were in effect discounted for various reasons, including Airbus’ cooperation and demonstrated procedural remediation. While there is ample precedent and argument for doing just this, if the basis on which the illegally gained profits were computed was not sufficiently sound or complete, then the level of “discount” calculated could also be questionable.
Secondly, why only five indictments? A thorough reading of the UK DPA, Judgement and Statement of Facts reveals a picture of prevalent and pervasive use of third parties to channel dubious payments. These documents also paint a picture of prevalent disregard for, and bypass of, internal controls designed to identify and prevent such payments. In this environment, it seems odd that only five customer relationships were subject to the dubious practices described. Again, one cannot help but wonder whether the true extent of wrongdoing has been quantified.
As a one time auditor and an investigator, I am only too familiar with the process of such a large investigations and the limitations that come into play. Yet, those same experiences beg the questions above. What do you think?