Airbus Faces Probe into Compliance Irregularities

It has been reported that Airbus of Toulouse, France, faces legal difficulties regarding its failure to notify U.S. authorities about the use of outside sales agents to broker defense equipment and services deals; this presents a compliance lapse and could lead to financial penalties and perhaps a criminal investigation.

According to The Guardian of London, the problems stem from the use of so-called “commercial agents” who act as intermediaries in “difficult” territories where they sometimes assist large companies in securing contracts. In some cases these intermediaries act as legitimate consultants on technical matters, while in other cases they are really nothing more than individuals who know whom to bribe for a government contract. This kind of action is contrary to Part 130 of U.S. International Traffic in Arms Regulations (ITAR) concerning political contributions, fees, and commissions involved in the export of military equipment.

Airbus’ Chief Financial Officer Harald Wilhelm briefed reporters on October 31 regarding these legal issues. He would not speculate on the company’s potential financial or criminal exposure. Both the U.S. State Department and the Justice Department are looking into the matter.

Failure to comply with regulations can lead to large penalties. Airbus engine manufacturer, Rolls-Royce Holdings PLC , recently agreed to settle allegations of corruption to the tune of an $800 million dollar penalty. Because Rolls-Royce agreed to the settlement, the company avoided prosecution.

The compliance lapses at Airbus came to light during an internal review and were first reported at the end of 2016. After discovering irregularities in certain foreign transactions, Airbus came forward to report the problems it had found. The company’s hope is that by self-reporting, the penalties might be less punitive.

Suzanne DeCuir, Global Trade Expertise