On January 31, 2020, the European aerospace manufacturer Airbus agreed to pay nearly 3.7 billion euros in fines to settle bribery charges stemming from a four-year investigation by French, British, and US authorities. The investigations found that for more than a decade the firm bribed officials in 16 countries through intermediaries to buy its aircraft and satellites. France will receive the largest settlement, 2.1 billion euros, while the UK will receive nearly 1 billion, and the United States more than 500 million.
The case shows that European authorities have finally decided to make credible justice decisions against firms that use bribery and other forms of corruption to maintain and develop their business. It is also a learning opportunity for anyone interested in white-collar crime, and a number of theories developed by criminology researchers allow us to better understand how Airbus was able to operate so long with such impunity.
Headquarters in Netherlands, Airbus has key operations in France, Germany, Spain and the United Kingdom. It’s one of the world’s largest manufacturers of commercial aircraft, helicopters and other high-tech products in the defence and space sectors. According to documents from the US Department of Justice, from 2008 to 2015 Airbus used its Strategy and Marketing Organization (SMO) branch to funnel millions of bribes to decision-makers and influencers to obtain business deals. Countries involved included the United Arab Emirates, China, South Korea, Nepal, India, Taiwan, Russia, Saudi Arabia, Vietnam, Japan, Turkey, Mexico, Thailand, Brazil, Kuwait, Colombia, South Korea, Indonesia, Sri Lanka, Malaysia, Taiwan, Ghana and Mexico.
When categorising white-collar crimes, a key factor is the separation between those involving individuals or a few people, and corporate cases. Given the SMO’s role, the Airbus case was clearly one of an organisational crime. SMO was a significant business unit for Airbus, with around 150 employees and an initial annual budget of 300 million US dollars. The branch was created to compile and appraise applications from potential business partners for the purpose of compliance risk assessment. As a corruption machine SMO operated from 2008 to 2015, and long-term fraud implies internal learning systems in the fraudulent firm, with former employees transmitting fraud techniques to new recruits.
Indeed, Donald Sutherland’s theory of differential association shows that certain crimes are not innate at all, but learned through contact with experienced criminals. The individuals involved in white-collar crimes are nominally respectable, or at least respected, making the crimes themselves ones that are committed by elites. That was the case with the Airbus case: the documents involve behaviour by senior executives, government and foreign officials, a board of directors, businessmen, an international-compliance officer and a general counsel.
A particularity of economic crime is its technical difficulty. Criminals in organisations are experts in developing systems to conceal their frauds. The techniques used by SMO could be easily included in a manual for how to pay bribes:
Acquisition of a company belonging to an airlines executive at inflated price.
Acquisition of luxury estate properties for the use of an influential individual.
Purchase by a subsidiary based in a foreign country of shares in an entity belonging to the son of a commercial intermediary through money transferred via another country.
Sponsoring a sport team belonging to an airline executive.
Recruitment of the spouse of a key executive as a business partner using a straw company (despite the fact that the spouse had no relevant expertise).
To cite a specific example, Chinese officials were invited to a business trip to Hawaii in 2013 with a 30-minute daily briefing about business information followed by “more important” activities such as golf, scuba diving, horseback riding, and surfing lessons.
SMO: the corruption machine
In addition, the criminologist Donald Cressey explained the emergence of of organisational crime by the existence of an opportunity. A typical opportunity was further described by Cohen and Felton as the insufficient surveillance system. Thus, SMO produced fake documents and invented stories to fit international compliance requirements. SMO executives developed different techniques to look like following the best due-diligence practices without actually doing them. In a Russian case, SMO instructed an external company to conduct due diligence to evaluate the quality of a potential business partner, which in fact was in charge of paying approximately 9 million euros of bribes. To prepare the audit, the SMO International manager wrote to the commercial intermediary in charge of paying bribes:
“Compliance is buying the story, we now only need to ‘justify’ your past experience”, to which the commercial intermediary replied: “Sir, Yes Sir! […] I am going to try to find something to write for you ;-)”
The external audit raised red flags about the Russian business partner: no registered office, no financial account, no ability to provide the services offered to SMO. Still, a contract was signed and money transferred.
In his “anomie” theory, French sociologist Emile Durkheim explained the importance of punishment in fixing norms of behaviour for a society. The fines Airbus paid are a “stick” that will teach the aircraft manufacturer that compliance must be respected, and they will follow now the best compliance practices.
In a press release, Guillaume Faury, chief executive officer of Airbus, stated:
“The agreements approved… with the French, UK, and US authorities represent a very important milestone for us, allowing Airbus to move forward and further grow in a sustainable and responsible way. The lessons learned enable Airbus to position itself as the trusted and reliable partner we want to be.”
At the same time, Durkheim explained that a penalty is particularly important for all members of a society, who become aware of what is admissible or not. In the case of the competitors of Airbus, they too are aware that engaging in corrupt practices can have extremely painful consequences.