European aircraft manufacturer Airbus (AIR.PA) has already admitted guilt and accepted deferred prosecution agreements (similar to “probation”) with prosecutors from the US, UK and France. Airbus has agreed to accept culpability and pay over $3.9 billion USD in penalties.

Larger than Odebrecht: According to the US Department of Justice, this is the largest bribery resolution in history.

According to the approved judgement in the United Kingdom’s Crown Court at Southwark, case number U20200108, The SFO’s (UK’s Serious Fraud Office) investigation related to bribery offenses in Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana. The PNF’s (Parquet National Financier of France) investigation related to bribery and corruption offenses in China, Colombia, Nepal, South Korea, the United Arab Emirates, Saudi Arabia (Arabsat), Taiwan and Russia. The JIT (Joint Investigation Team) investigation into Airbus’ conduct in Colombia was led by the SFO but the SFO agreed that this conduct should be included in the French CJIP (Judicial Public Interest Agreement) to reflect French primacy in the JIT investigation. The DOJ investigation relates to bribery and corruption offenses in China and violations of parts 126.1, 129 and 130 of the US International Traffic in Arms Regulations (ITAR) concerning a number of jurisdictions. The DOS’s investigation relates to civil violations of ITAR concerning various jurisdictions.

The French CJIP is the potentially most damning document against Airbus regarding Avianca. In it, starting on page 18, it goes into detail on Airbus’ clandestine arrangements with an Avianca executive, and then controlling shareholder Synergy Group, controlled by Germán Efromovich.

(Translated from French): Aerovias del Continente Americano S.A. Avianca (“Avianca”) is the national airline of Colombia. It was part of Synergy Group, a South American conglomerate, which owns several other airlines operating mainly in South America. Avianca Holding SA (“Avianca Holdings”) is the parent company of Avianca.

Between 2006 and 2014, Airbus concluded several consultant contracts with an intermediary salesperson operating through a company headquartered in Colombia to assist it in its campaigns with Avianca and the companies of the Synergy group. Some of these contracts provided in particular for the payment of a performance commission to the intermediary, representing either a lump sum per aircraft sold or per campaign, or a percentage of the price of aircraft sold. Part of the total compensation due to this intermediary for services rendered in campaigns with Avianca and Synergy was to be paid through these consultant agreements and another part through investment projects.

The investigation revealed that from the end of 2014, it was envisaged that part of the remuneration due the commercial intermediary, which was then the subject of a global renegotiation, be secretly transferred to an executive of Avianca Holdings. This person was an interlocutor for Airbus, and key in the ongoing commercial negotiations between Avianca and Airbus on the sale of the Airbus A320neo aircraft that Avianca purchased.

According to an email from an Airbus employee sent in November 2013, company officials were instructed to provide “AAA treatment because we are campaigning with Avianca / Synergy”.

In October 2014, an Airbus manager thus sent an email to an SMO International employee to ask him if he had been able to speak to the manager of Avianca Holdings. This employee has confirmed, during the internal investigation conducted by Airbus, that the manager of Avianca Holdings had requested a commission for the role he had played to support the sales campaign of the Airbus A320neo to Avianca, already in progress.

On November 17, 2014, the employee of SMO International sent an email to two executives, leaders of SMO International, informing them that discussions with the commercial intermediary with regards the fees still due. He was progressing and that he had proposed to the intermediary a “Global negotiation for the past and the future”. This email also mentioned that the Aforementioned Airbus official had agreed to this negotiation.

On November 25, 2014, the same Airbus manager sent an email to two employees of SMO International in which he indicated: “What (X) said is that, for the past, instead of 20 we do 15, including 5 å (Y). And, for the new contract, 4 for (Y) and 2 for the other 6.” 6 X here designates a senior executive of Airbus commercial. and Y designates the executive officer of Avianca Holdings.

According to paragraph 18 of the UK judgement, SMO International (Strategy & Marketing Organization) was set up by Airbus back when it was still EADS France SAS for “Business Partner appointments and International Market Development projects.”

Avianca lawyers up

Finance Colombia immediately reached out to contacts within Avianca for a response. The airline shared a written statement that reads as follows (verbatim):

Subsequent to the recently announced settlement between Airbus SE (“Airbus”) and authorities in France, the UK, and the United States regarding corrupt business practices at Airbus, Avianca announced today that it has retained the services of Ropes & Gray, a leading international law firm, to conduct an independent internal investigation into its relationship with Airbus and whether it has been the victim of wrongdoing.

Avianca will take all legal actions necessary to defend the interests of the Company and its shareholders, and will fully collaborate with all of the relevant authorities in France, the United States, the United Kingdom and other countries as appropriate.

“Airbus’s disclosure contains deeply concerning information regarding alleged actions by an individual at Avianca in the period prior to March 2016. Our current management team strongly rejects any conduct that does not reflect integrity and transparency in business in general, and in particular towards Avianca. We will take all steps necessary to defend the Company’s interests, working together with the relevant authorities,” emphasized Anko van der Werff, President and CEO of Avianca Holdings.

It should be noted that if the allegations are true, Avianca would actually be a victim of the scandal, and not a perpetrator. The legal documents appear to implicate at least one high level Avianca and/or Synergy Group executive taking actions for personal again and against the interests of the airline.

“Airbus SE, the second largest Aerospace company world-wide, engaged in a systematic and deliberate conspiracy, that knowingly and willfully violated U.S. fraud and export laws,” said Special Agent in Charge Peter C. Fitzhugh of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) New York.  “Airbus’s fraud and bribery in commercial aircraft transactions strengthened corrupt airlines and bad actors worldwide, at the expense of straightforward enterprises.  Additionally, the bribery of government officials, specifically those involved in the procurement of U.S. military technology, posed a national security threat to both the U.S. and its allies.”

According to admissions and court documents, beginning in at least 2008 and continuing until at least 2015, Airbus engaged in and facilitated a scheme to offer and pay bribes to decision makers and other influencers, including to foreign officials, in order to obtain improper business advantages and to win business from both privately owned enterprises and entities that were state-owned and state-controlled.  In furtherance of the corrupt bribery scheme, Airbus employees and agents, among other things, sent emails while located in the United States and participated in and provided luxury travel to foreign officials within the United States.

For its part, Denis Ranque, Chairman of the Board of Directors of Airbus, stated: “The settlements we have reached today turn the page on unacceptable business practices from the past. The strengthening of our compliance programs at Airbus is designed to ensure that such misconduct cannot happen again. The agreements also reflect that the decision to voluntarily report and cooperate with the authorities was the right one. The commitment from the Board, and its Ethics and Compliance Committee, to provide full support to the investigation and the implementation of globally recognized compliance standards have paved the way to today’s agreements.”

• The US Deferred Prosecution Agreement can be viewed here.
• The US Charging document can be viewed here.
• Avianca’s 6-K filing in response to the US Securities & Exchange Commission can be viewed here.
• The UK judgement against Airbus can be viewed here.
• The French Anticorruption Agency CJIP mentioning Avianca can be viewed here.

Photo credit: Loren Moss

From September 2, 2015, PayPal will suspend the possibility of utilizing online payments for national transactions in Colombia. Periodically, PayPal revises its terms and conditions, and always acts in compliance with local requirements. Colombia is a very important market, and the users of PayPal that reside in Colombia will in every way, be able to send and receive international payments utilizing PayPal. The PayPal customers in Colombia still may use PayPal for international transactions in more than 200 markets worldwide. Customers of PayPal that have questions about this change in terms and conditions should contact PayPal customer service.

The move set off waves of speculation regarding the motives of the payment giant that has over 100 million user accounts in 190 countries. As PayPal clarified, it is not completely leaving Colombia, but Colombians will not be able to use PayPal for domestic Colombian peso transfers between users or businesses.

Also see published updates subsequent to this article: 

• Breaking News – Paypal Returns To Colombia Via Exclusive Davivienda Alliance
• Exclusive: PayPal Reveals Its New Colombia Strategy & Embrace Of Small Exporters

For the sake of clarity, Finance Colombia reached out to PayPal for clarification regarding this move, and to get an understanding of why PayPal felt a need to retrench from Latin America’s third largest economy.  PayPal Latin America’s Financial Services and Market Development Director Arnoldo Reyes took the time to answer Finance Colombia’s written queries.

Finance Colombia: Why did PayPal decide to cease domestic online payments in Colombia?

Reyes: Colombia is an important market for PayPal. However, today we can’t offer services that meet the specific needs of the domestic Colombian market. For instance, users are not able to make transactions in their local currency and our platform is 100% operated from outside Colombia. Therefore, we took the decision of limiting our services to make international payments for goods and services, while evaluating to improve our product offers.

Arnoldo Reyes is PayPal’s Latin America’s Financial Services and Market Development Director

Finance Colombia: Will Colombians who open new PayPal accounts be able to link those accounts to their Colombian banks?

Reyes: Colombia is an important market for us. As such, we continue to work to provide new solutions to our customers there.

Finance Colombia: How does this affect Colombian retailers that have accepted, or wish to accept PayPal?

Reyes: PayPal’s users or merchants residing in Colombia will be able to send and receive international payments through PayPal services.

Finance Colombia: Have fraud, AML (Anti Money Laundering), or compliance concerns prompted this move?

Reyes: No, these were not the reasons for taking this decision. In fact, our current offer in Colombia better adjusts to improve International purchases and sales and to help promote Colombian exports. For example, in the case of domestic transactions in Colombia, we do not currently offer users the possibility to operate in the local currency and our platform is 100% operated from outside Colombia. The national offer varies depending on the country. And we have decided to limit our services to international payments in Colombia while we assess how to improve our product offer in the country.

Finance Colombia: Colombia’s PSE online payment platform is seen by some as a domestic industry defensive move against PayPal’s incursion into the Colombian market. Has PayPal faced industry or regulatory resistance in Colombia?

Reyes: No, in fact we have always been supported and welcomed by all Colombian institutions. Colombia is a very important market for us and we always search for the best solutions for each market. This is our priority. Today we are not able to continue offering this service for national transactions, but we always evaluate how to broaden our services.

Photos of PayPal’s San José headquarters building and Arnoldo Reyes provided courtesy of PayPal.