Airbus case shows France’s new-found anti-corruption drive

Via Financial Times

France long had a reputation for being lax on global corruption and outsourcing its juiciest cases to US prosecutors — Airbus’s record €3.6bn settlement in an international bribery probe shows this era may be over.

Paris prosecutors took the driving seat in the international investigation armed with a new set of anti-corruption laws introduced in 2016. Last month, the Toulouse-based aircraft maker signed the historic three-way agreement with French, UK and US prosecutors to draw a line under more than a decade of corruption involving bribes, fraudulent contracts and fake invoices that boosted the company’s profits by up to €1bn over the course of its wrongdoing.

The final sum — revealed after simultaneous court cases in all three countries — handed €2.1bn to France, almost €1bn to the UK and about €530m to the US.

The anti-bribery laws introduced under socialist president François Hollande “have changed everything in France and the (financial prosecutor) has demonstrated that it’s a real player on the international scene”, said one lawyer involved in the case.

The law, dubbed Sapin II, was meant to “lift France to the best European and international standards”, then finance minister Michel Sapin said when parliament passed it in 2016. The legislation introduced US-style plea bargains and took inspiration from the UK’s deferred prosecution regime, which allows companies that confess to wrongdoing the chance to avoid criminal conviction in return for an agreement to mend their ways and pay an often hefty fine.

Mirroring the UK’s bribery act passed in 2014, it introduced criminal penalties for large companies that failed to prevent corruption. It also demanded businesses write codes of conduct and set up whistleblowing procedures.

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Before the Sapin legislation, France had never convicted a company of corruption, leading to what Transparency International called an “unacceptable state of near impunity in the last 15 years”. Paris had also been criticised by the OECD.

Meanwhile, the US Department of Justice (DOJ) was punishing French groups using its extraterritorial powers: Telecoms company Alcatel-Lucent was fined $137m in 2010. Oil company Total was required to pay $398m in 2013 to the DOJ and Securities and Exchange Commission and train company Alstom was fined $772m in 2014 for corruption.

“France had almost no record when it came to corruption cases,” said Daniel Kadar, co-managing partner of law firm Reed Smith’s Paris office.

Airbus “were a political response from the French” to US extraterritorial powers, said another City lawyer. “There was a sense that France had to be able to deal with its own corporates or that would continue to happen.”

France joined the probe in 2017, a year after Britain’s Serious Fraud Office opened its investigation into discrepancies in disclosures about third-party consultants. The possibility of a plea deal in the UK, US and France meant that Airbus had an incentive to co-operate with regulators to avoid a criminal conviction.

The company’s general counsel John Harrison set up a “virtual law firm”, with lawyers in each country. The team unearthed and handed over some 30.7m documents to investigators, which in turn formed the only pieces of evidence in the case.

Lawyers involved in the probe said there had been a new degree of co-operation between global prosecutors. For French prosecutors, who were less used to companies conducting in-depth investigations into wrongdoing in order to seal a plea deal, it was an eye-opener.

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“We all understood — and advocated strongly with our respective authorities — that there was a universe of issues that the authorities needed to sort out among themselves, and not send external counsel scurrying back and forth like children of divorced parents,” said Robert Luskin, partner at Paul Hastings and one of the advisers to the French state.

The level of co-operation was not the only unusual aspect of the probe. It was also the first such case to be conducted entirely using machine learning technology.

Predictive coding software technology sifted the millions of emails, contracts, invoices and other documents in order to dig up the strongest evidence of wrongdoing and speed up the investigation.

The SFO was versed in the use of the technology: in 2017 it had turned to East-London AI start-up Ravn for help on its bribery case into engine maker Rolls-Royce.

French prosecutors, who had never used “technology assisted review” before, were nervous that important documents might be missed. In Easter 2017 Dechert lawyers, who advised Airbus in the UK, travelled to Paris to persuade the Paris investigators to embrace the tool.

The use of code names employed by Airbus executives to cover up discussion of illicit payments made human scanning also important. Airbus directors and business partners peppered emails with references to medicine, dosages and famous art, according to the SFO.

One senior executive at TNA, a Taiwanese airline implicated in the fraud, was given the alias “Van Gogh” and emails referred to the sale of his paintings. Emails seen by the SFO referenced “medications and dosages” — code for some $430,000 in illicit rewards funnelled towards the TNA executive, “prescribed by Dr Brown”, code name for a senior Airbus employee.

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Campaigners and lawyers said France’s role in the Airbus settlement signalled a new phase for the country on the global stage, but said the next test would be whether France could convict individuals guilty of wrongdoing.

Another test is whether they will weigh on companies to use the whistleblowing procedure or confess to prosecutors first, as is more frequent in the UK and the US.

The Sapin legislation “is an efficient tool” facilitating international co-operation, said Marc-André Feffer, chair of Transparency International France. “However, we regret that no company has ever spontaneously come forward to denounce their illicit wrongdoing to French authorities. We will remain on the lookout.”

Additional reporting by Michael Pooler in Paris