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After Soaring Settlement, SFO Propels Corruption Charges Against Airbus Subsidiary

After Soaring Settlement, SFO Propels Corruption Charges Against Airbus Subsidiary Background Decorative Image

Mere months after Airbus entered into a record-breaking, nearly $4 billion resolution with the U.S., U.K., and France to settle foreign bribery allegations, the U.K.’s Serious Fraud Office (“SFO”) moved on July 30, 2020, to bring additional corruption charges against Airbus. This time, the charges are against subsidiary GPT Special Project Management Ltd. (“GPT”) and three individuals in connection with GPT’s Saudi Arabian operations and alleged corruption by GPT’s former Managing Director when he was an official at the U.K. Ministry of Defense. The SFO’s second-go at Airbus, and the resulting media scrutiny, demonstrate the danger of resolving distinct corruption probes separately, rather than as part of a single resolution.

Airbus acquired GPT, an electronic communications developer based in the U.K., in 2007.1 After it was acquired, GPT allegedly paid approximately £14 million in bribes between 2007 and 2012 to obtain a £2 billion contract with Saudi Arabian National Guard (“SANG”).2 The contract was the result of a government-to-government agreement between the U.K. and Saudi Arabia, meaning that payments under the contract were approved by the U.K. Ministry of Defense.3 The payments were allegedly disguised as legitimate payments for “bought-in services” to two Cayman Islands-based companies that allegedly did not provide any legitimate services.4 GPT also allegedly provided luxury vehicles to SANG staff and paid hundreds of thousands of pounds up front to lease a villa owned by a SANG general for five years.5

Although these charges were only filed recently, SFO has been investigating GPT for years. SFO formally launched its criminal investigation of GPT in August 2012 after a whistleblower alerted the authorities to suspicious payments and gifts related to GPT’s business in Saudi Arabia.6 After a six-year investigation, the case stalled for another two years pending the U.K. Attorney General’s decision to approve criminal charges.7 In the meantime, GPT had already wound down its business operations after the U.K. government declined to renew its contract, ceasing operations in April 2020.8

The charges against GPT are notable because they come just months after Airbus entered into a separate, record-setting $3.9 billion resolution to settle allegations that it paid bribes to secure foreign aircraft sales and violated the International Traffic in Arms Regulations by failing to report certain payments connected with the sale of defense articles.9 SFO’s investigation of GPT was carved out of its deferred prosecution agreement with Airbus, which requires Airbus to cooperate with all SFO investigations and prosecutions,10 including the prosecution of GPT.

Takeaway

It is somewhat unusual that SFO and Airbus did not include a resolution of the GPT matter in Airbus’ much larger corruption settlement. It may be that Airbus did not want to drive up its already high settlement amount by including the GPT allegations in its global resolution—especially given the size of the £2 billion contract with SANG that was at issue. Or it’s possible Airbus chose to settle the GPT allegations separately to contain the size of its joint resolution with the U.S., U.K., and France, or that it determined that dealing with the SFO alone after resolving all of the other investigations was simply easier than dealing with three separate enforcement authorities in distinct jurisdictions. It may also be that the company feared that the long delay in obtaining the U.K. Attorney General’s consent to the new charges could hold up the rest of the resolution indefinitely. Indeed, for a company like Airbus that relies on its ability to participate in public and military contracts, expeditiously reaching a resolution that allowed the company to avoid criminal charges and continue with its business may have been more important than waiting to settle all outstanding allegations at once.

That said, the SFO’s handling of the GPT case highlights the risks involved with not endeavoring to resolve all outstanding allegations at once, whenever possible. As we have noted before, from a public relations standpoint, it is easier for companies to manage a single “bad news day” rather than a series of damaging announcements that lasts for several months.11 Although this result was perhaps unavoidable, Airbus is now in the unenviable position of potentially facing yet another fine, as well as months of intense media and investor scrutiny, to resolve this second set of corruption charges with the SFO.

The case also highlights the importance of ensuring that acquisitions fully implement their parent company’s compliance program. The best way to defend against allegations like those facing GPT is to prevent the conduct from occurring in the first place.

1 Press Release, Airbus reports Half-Year (H1) 2020 results, Airbus (July 30, 2020), https://www.airbus.com/newsroom/press-releases/en/2020/07/airbus-reports-halfyear-h1-2020-results.html.

2 Press Release, SFO charges GPT and three individuals following corruption investigation, Serious Fraud Office (July 30, 2020), available at https://www.sfo.gov.uk/2020/07/30/sfo-charges-gpt-and-three-individuals-following-corruption-investigation/ [hereinafter SFO Press Release]; GPT and the Saudi National Guard, Compendium of Arms Trade Corruption, available at https://sites.tufts.edu/corruptarmsdeals/gpt-and-the-saudi-national-guard/ [hereinafter Arms Trade Compendium].

3 Rob Evans & David Pegg, Is the government turning a deaf ear to arms deal bribes?, The Guardian (Nov. 18, 2019), https://www.theguardian.com/commentisfree/2019/nov/18/attorney-general-geoffrey-cox-gpt-arms-deal-corruption.

4 Arms Trade Compendium, supra note 2.

Id.

6 SFO Press Release, supra note 2; Agence France-Presse, Airbus Ex-subsidiary Facing Corruption Trial In Britain, Barron’s, July 30, 2020, available at https://www.barrons.com/news/airbus-ex-subsidiary-facing-corruption-trial-in-britain-01596123305.

7 Dylan Toker, U.K. Charges Airbus Subsidiary Over Saudi Deal, The Wall Street Journal, July 30, 2020, available at https://www.wsj.com/articles/u-k-charges-airbus-subsidiary-over-saudi-deal-11596139415.

8 Id.

9 Jessica S. Heim, Brandon Stein, & Morgan A. Kelley, Flying High: Airbus Settles Bribery Charges with Record-High Global Penalty, The V&E Report (Feb. 5, 2020), available at https://www.velaw.com/insights/flying-high-airbus-settles-bribery-charges-with-record-high-global-penalty/.

10 Deferred Prosecution Agreement, R. v. Airbus SE [2020] Crown Court at Southwark U20200108, ¶¶ 8, 12 (Jan. 31, 2020), available at https://www.sfo.gov.uk/download/airbus-se-deferred-prosecution-agreement-statement-of-facts/.

11 Ephraim (Fry) Wernick & Peter T. Thomas, How Companies Can Respond to the Boom in FCPA Enforcement Fueled by International Cooperation, Anti-Corruption Report (Oct. 30, 2019), available at https://media.velaw.com/wp-content/uploads/2020/01/28175830/d5c60702-7af0-4a61-96e4-46fc12554630.pdf.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.