Exploring the 'Bullshit Castle' Airbus Corruption Scandal May Lead Straight to the Top
Part 2: A New Company from the Bullshit Castle
The extras that the Eurofighter consortium used to sweeten the deal for Austria came in the form of so-called "offset deals." To get the contract, Eurofighter had to guarantee that it would ensure 4 billion euros worth of business for Austrian companies -- deals that didn't necessarily have to do with airplanes. The main thing is that they were good for the Austrian economy. If Eurofighter failed to live up to its end of the bargain, it was liable for a 200-million-euro penalty.
That's where things got weird. At the end of 2004, EADS Germany, under the leadership of Tom Enders, took this risk off Eurofighter's hands. In exchange, however, Eurofighter had to pay EADS Germany 183 million euros. Investigators, though, find it odd that, by the time the payment was made, offset deals worth 1.8 billion euros were already in the works, leading internal analysts to assume that the penalty in the Austrian deal would be 35 million euros at the most. That assumption is documented in EADS records that investigators presented to one of the defendants in the case. If that is true, they want to know, why would EADS take 183 million out of the Eurofighter consortium?
The answer leads to Paris -- to the notorious sales division EADS International. The French division was initially supposed to keep out of the Eurofighter deal with Austria, but the Germans asked for its help -- and Paris didn't leave them hanging. Klaus-Dieter Bergner and Manfred Wolff became involved to help with the offset deals in Austria, two Germans who had learned how to do things the French way.
It was Wolff who ultimately negotiated with the Eurofighter consortium on behalf of EADS Germany to take over responsibility for the offset deals. Bergner, meanwhile, took care of the deals themselves. To do so, he established a company in Vienna called Euro Business Development (EBD). And it was, in fact, able to generate contracts for Austrian companies - just as the Eurofighter consortium had done before responsibility for the offset deals was transferred to EADS Germany. So far, so good.
Payment of Bribes
But Bergner and his Paris-based team didn't just come up with the idea of establishing EBD in Austria. They also decided to set up a second company, the dubious London-based firm known as Vector. EADS Germany had hardly taken over the offset deals and received the 183-million-euro payment before it transferred the task -- and the vast majority of the money -- on to Vector. The company claims that it secured deals for Austria and was paid a commission of 114 million euros from EADS for doing so. But state prosecutors believe that Vector had almost nothing to do with the offset deals and that the money was needed for something else, including the payment of bribes.
Airbus has a different version of events, and as much as CEO Enders complains about the "shit" in general that should no longer be swept under the rug, he doesn't see anything wrong with Vector at all. "Neither the years of investigations by public prosecutors in Munich and Vienna nor our own extensive investigations have produced indications of bribery in connection with the sale of Eurofighter planes to Austria," reads a statement provided by the company to DER SPIEGEL. The same applies to slush funds, the statement makes clear. Nothing, it is alleged, has been proven and Vector did what it was founded to do: which is to produce offset deals. And Enders definitely didn't know about any potentially illegal activities. The company speaks of "character assassination."
But the founding of Vector is well documented, it is an episode that continues to bedevil Enders to the present day. Furthermore, it has been alleged that Vector wasn't the first dubious company charged with producing offset deals. In early 2004, a company for the purpose, called Omesco, was established in Cyprus. It was owned by Manfred Wolff, the German sales expert who was to exchange his job with EADS for a job at Omesco. The idea for this Cyprus-based company came from the "Bullshit Castle" in Paris.
But if the Eurofighter consortium had been successful in producing offset deals, what was the purpose of setting up the company? Why Cyprus? Externally, the company was supposed to look like an independent entity, but in truth, EADS Germany ensured that it would always have the last word.
It stank. Other Eurofighter partners, like the Italians and the British, were against it because it gave the Germans too much influence. But it didn't stink to Tom Enders. He was supportive of the Cyprus model. In fact, he was the one who pushed it through. In a May 2004 meeting about Omesco, a senior EADS executive said: "Dr. Enders again approves" of commissioning Omesco with setting up offset deals. The exchange is documented in minutes from the meeting.
A short time later, the company dropped the Cyprus idea. But instead, the company founded Vector in London. The name was different, but the pattern was the same -- only with an Italian at the helm instead of Wolff.
'Appropriate Financial Means'
Airbus CEO Tom Enders also knew of Vector. In December 2004, he received a "strictly confidential" memo directly from the "Bullshit Castle" in Paris. Officially, the office may have had nothing to do with the Austrian deal, but at the Germans' request, the French did review the Vector construct. After all, people were always happy to help. The memo to Enders states that EADS International recommends that offset deals be transferred to third parties "including Vector." EADS Germany, the memo recommended, should provide Vector with the "appropriate financial means."
But was that really all that Enders knew? Did he not also know that money at Vector would be disappear -- possibly as part of long-laid plans -- in the form of bribes paid around the world.
If not, then he at least should have recognized how much "bullshit" could be found in this model. At the time, London was considered something of an insider tip, a place where investigators didn't tend to scratch too far beneath the surface. At one point, the memo notes that Vector had been set up in London for "reasons of confidentiality" in order to protect the "name of Vector's ultimate beneficiaries," two weapons dealers in Austria. Today, Airbus claims that "Vector wasn't headquartered in London for confidentiality, but rather for tax reasons."
In one part of the Paris memo, it states that although EADS Germany did receive 183 million euros from the Eurofighter consortium, that sum may not be sufficient. Sufficient for what, though? It was surely enough to cover the offset deals in Austria; at the time, the presumed penalty was far lower. Was it for other debts the company had to pay? For bribes? Airbus claims nothing has been proven. The Paris-based sales division may have developed all manner of constructs for the payment of bribes, but Vector, the company insists, wasn't one of them.
The path back to Romania, to Bacau and Constantin Ster, leads through a four-story apartment block with graffiti on the door. The walls used to be yellow. Two-and-a-half years ago, Ster purchased an apartment here for 30,000 euros that was partly financed through a government loan program for first-time homebuyers. A train depot is located in the industrial area next door. It's not the kind of place where people with money tend to live.
Ster is a bookkeeper at a high school. "I'm an honest, friendly man with a big heart. I like talking with people from all over the world," he wrote of himself on the internet. But when you get him on the phone, he quickly loses interest. He says he has already told public prosecutors everything and he'd rather not talk to journalists. But there is a lot that he could talk about. The time he spent in the United Arab Emirates, for example, and about Manfred Wolff, the German man he got to know there.
From 1997 to 2009, Ster lived in the Gulf region. He worked at a school and became acquainted with a nephew of the leader ultimately growing close to the family, he told investigators. That apparently made him a person of interest for the man from the EADS sales team. At the time, Ster says, the sales team member had wanted to sell Airbus passenger jets in the emirate. "So far as I understood it, Airbus was in competition with Boeing and he was interested in closing the contract." The Romanian says he brought Wolff together with the decision-makers on the order. In exchange, Ster says he received $40,000 from Wolff -- a claim that Wolff denied in his own questioning. He also disputed the claim that he ever even wanted to sell passenger jets.
Purely a Façade
The documents that investigators have in their possession feature much larger figures. And they focus on Vector, which had only recently been established at the time. On April 18, 2005, Vector wired 2 million euros to Ster in Abu Dhabi, part of a sum that would ultimately swell to 5 million -- ostensibly because Ster had attracted several offset deals for the Eurofighter deal in faraway Austria. But it was nonsense. The deals existed, but Ster had nothing to do with them -- and neither did Vector. The whole thing was purely a façade obscuring something altogether different behind it.
Before the remaining millions got to Ster, someone at either Vector or EADS suddenly had worries that wiring the money directly to the Romanian might prove too risky. So, the money went back to Vector and a new invoice was created a few days later. Now everything had been well-camouflaged. The invoice was no longer sent to Vector, but rather to the Isle of Man, a tax haven, addressed to an offshore company called Columbus. That company then paid 5 million to a company belonging to the Romanian and got its money back from Vector. Manfred Wolff had orchestrated the deal.
Ster claims no knowledge of any of this. And Columbus? He says he has also never heard of it. Five million to one of his company accounts? Never happened.
Considering the documents, it sounds like an excuse. But it doesn't necessarily have to be one. In England, recently, a tax consultant was left scratching his head over something that had his name on it, but that he guarantees he never signed. His name is even wrong in the paper alleged to have originated from him. And in another, the English was so bad that it made the Brit shudder. The phrase "heavy discussions" appears -- a locution that couldn't have come from him, the man said in questioning.
He said he had innocently set up an offshore firm for a customer and had signed a contract in Paris with EADS a short time later. Wolff and Bergner were present. Later, a million euros flowed from EADS via the offshore company to the client, who had good connections in Austria.
Both cases, the one in Romania and the one in England, seem to suggest that Manfred Wolff and co-workers in the Paris sales office may have stolen identities in order to make bribe payments -- for the Eurofighter fighter jets in Austria and for the sales of Airbus aircraft in the Emirates. Citing the ongoing investigation, Wolff refused to answer questions from DER SPIEGEL as did Bergner.
It's possible that things could have continued at Vector were it not for the fact that EADS had some bad luck. The Italian at the head of the company, Gianfranco Lande, also conducted a few other deals on the side as a financial adviser to the higher echelons of Romanian society and to other honorable company, such as the 'Ndrangheta in Calabria. Lande speculated, constructed a pyramid scheme, burned through just under a quarter-million euro and landed in jail in 2011. In prison, he preferred not to say anything about the mafia, but he was prepared to talk about EADS. He said he had run Vector for Bergner and Wolff. For EADS. To take care of dirty deals. That is, until 2008, when he got sacked.
An Epic Battle
EADS could have started cleaning things up at the point that Lande began talking. But it instead reverted to the kind of typical response that the public has come to expect: a gentle investigative report by a law firm that reads just as it was ordered. There were also calming words from Tom Enders, who in 2013 complained to the German financial daily Handelsblatt of a "criminalization and prejudgment" of his company. It was the usual, as previously seen at Siemens -- talk everything down, just don't do anything to jeopardize business.
The line taken by EADS in its effort to exonerate itself was that people like Lande, a fraud who had in fact embezzled 34 million from Vector, had stolen from the company. That is where the money had gone, into the pockets of corrupt executives. The company itself, EADS claimed, was clean -- the victim rather than the perpetrator.
As had been the case in the Siemens scandal, it was likely the government investigators who finally got things moving at Airbus.
The Airbus version of the story is a very different one. It is featured in an internal paper in which Enders is depicted as some sort of titan in an epic battle. On his side are Chief Financial Officer Harald Wilhelm and General Counsel John Harrison. They are pitted against the dark powers of EADS International in Paris, central sales, which was renamed to SMO in 2007.
As early as the beginning of 2014, after the renaming of the company from EADS to Airbus Group, CFO Wilhelm began wondering about some odd payments. He looked into it, which prompted some squirming in the Paris division. He says he wanted to conduct stricter monitoring of deals, and that the Paris division began circumventing him. He also says that alleged Airbus consultants suddenly turned up and began demanding millions. That is why, he says, Enders then took the tough measures of freezing payments to consultants, stripping SMO of responsibility for all foreign business deals and dissolving the division in 2016. Ultimately, he says, they discovered that SMO had provided false data about consultants and their fees in export documents. This realization was followed by a notification to British export authorities and then the voluntary disclosure to corruption investigators at Britain's Serious Fraud Office. German and French offices for state export guarantees also received mail from Airbus -- an admission that not all of the data that had been provided previously was correct.
But in this heroic story, Enders' staff seems to have forgotten the role that the boss himself appears to have played at Vector. And they appear to have forgotten one of the primary motivators for the anti-corruption push: outside pressure in the form of external investigations. Even if Airbus itself claims that it would have ultimately cleaned things up even without the authorities breathing down their necks.
The Airbus people had already been in the Serious Fraud Office's crosshairs in a separate case. In 2012, the agency had gone after Britain's Rolls-Royce, which also supplies engines for Airbus aircraft. It ultimately wound up being the biggest corruption case in the agency's history. Investigators presented a report that listed all the bribe payments that had been made in more than a dozen countries since 1989. Rolls-Royce was ordered to pay an $800-million fine.
The Same Intermediary
And what did Airbus have to do with it? In Indonesia, Rolls-Royce is alleged years ago to have paid millions via an intermediary to a company for whom a relative of the country's then-president worked. Airbus used the same intermediary. If bribes had to be paid for the engines acquired by national airline Garuda, then it seems reasonable to suspect that things weren't any different when it came to aircraft. The Indonesian case is thought to be at the center of the voluntary disclosure made by Airbus to the British, who have been investigating fraud, bribery and corruption allegations since 2016.
The way Enders is now pushing everything forward -- possibly even to the point of his own downfall -- is less of an epic tale than a race report: Who will get to the bottom of things faster? Government prosecutors or the company itself? Enders will gain points with everything that he uncovers himself. Everything the investigators dig up first and accuse him of, however, will count against him.
It's a race that leads around the world. To places like Sri Lanka, where an investigation is currently being conducted into executives at the national airline SriLankan. The country's prime minister believes there were massive irregularities surrounding the purchase of 10 Airbus aircraft in 2013. Or in Mauritius, which bought six passenger jets. Here, the former head of government is believed to have been bribed. Or Tunisia, which bought 16 jets. It's suspected that 70 million euros went to a son-in-law of former President Ben Ali. Public prosecutors in France and Tunisia are investigating. Or in Kazakhstan, where there were apparently bribes in the sale of 45 helicopters. Or China: In 2013, an earlier agent for the company in China, a Turk, demanded a 700-million-euro commission for the sales of 160 Airbus aircraft worth $10 billion. The sum, 700 million, was so enormous that Airbus allowed the dispute to escalate, but the company ultimately had to conclude that the Paris sales division had made previously unknown commitments to the man. The company has since settled with the Turkish national. But it remains unclear whether everything was on the up-and-up. In Mali, the company even purchased shares in a goldmine. With the exception of the cases involving Vector and Austria, Airbus would not comment on any ongoing proceedings.
General Counsel Harrison is now the most important person in CEO Enders' sphere. Head of both his defense and offense, all in one person. Harrison will have to defend the company against investigators, but he will also have to go on the attack inside Airbus, going after the old clans and old boy networks and the culture of unscrupulousness.
"I call it the red-face-test," he said in Toulouse during the meeting of top executives. "If a structure or something you're doing is on the front page of the Financial Times tomorrow morning, would you have a red face? It's got to be in your DNA, to want to do that test." The applause test at the end of his speech in the auditorium is indicative of how it was received: a tepid three seconds, no more.
Harrison is an Englishman. The voluntary disclosure he made was essentially a formal invitation to the investigators, and now he is hoping for a settlement. The idea is to put everything on the table and to then reach a deal with the authorities, as is customary in Anglo-American legal culture. But if Airbus engages in deals that fall "into the gray zone" before that settlement is reached, he has warned, then "we're dead."
A French insider with detailed knowledge of the situation believes that Enders and Harrison have badly miscalculated and have lost control of the situation since the voluntary disclosure. Because of the false data provided in export documents, Airbus is no longer able to obtain export guarantees in Britain, France or Germany. Airbus could also be placed on blacklists in many countries, meaning the company would no longer be able to bid on public tenders there. This could potentially result in billions in lost revenues. Archrival Boeing is waiting in the wings to fill the void left by Airbus, especially in the United States.
Lurking in the Books
The insider says the settlement that will ultimately be demanded by European authorities remains entirely incalculable. Even Enders' own team is nowhere close to being able to determine everything that happened in the past and what shady deals might still be lurking in the books.
If one believes the French insider, who does not want to be cited by name, the risks for Enders himself are also no longer calculable. Because the situation wasn't black and white, good or bad, or even German against French. "There was no state within a state here," the former senior executive from Paris said. When it came to bribes, the former executive said, the Germans and the French worked well together. The source said that a dual-control principle had applied evenly to all the dubious contracts, and that these controls allegedly included the colleagues in the EADS finance department in Ottobrunn, Germany -- even after current CFO Wilhelm took charge. But one source close to Enders disputes this account, saying that SMO in France had its own financial experts. The Paris division, he says, was impenetrable to EADS Germany.
Yet it was Enders himself who allowed the consultant contracts for the passenger aircraft division he had just taken over to be issued through SMO. By doing so, it would seem that he had strengthened the dubious unit at the time.
But those close to Enders say that he hadn't yet been aware of what was happening in Paris.
However, one of the French sources who knew the Paris unit well, disputes those accounts, saying that Enders had been informed of all major deals. Of course, there had always been countries where bribe money was necessary for deals to proceed. That had been clear to everyone, the source said. From the perspective of the French insider, the biggest sin committed by the Paris-based SMO was that it was located in France and that most staff were French. The source claims the Germans close to Enders are now merely seeking to cast blame on the French.
Regardless which account is correct, the atmosphere is so volatile that Enders has already forewarned the German Economics Ministry. Officials at the ministry did not provide a statement in response to a DER SPIEGEL query. Nobody, it seems, is willing to provide anything that could spark an explosion.
Those sparks, however, could now come from the old Vector story. After all, it was chief company investigator Harrison who insisted in 2007 that Airbus advisers adhere strictly to their nondisclosure agreements with the company in order to prevent them from being able to testify before an investigative committee in the Austrian parliament, one that he disparaged as a "kangaroo court."
"It is risky to have our consultants confronted with detailed questions that may be used later against us in court proceedings," he said.
And Enders? At the time he was the boss who either knew too much about Vector and its predecessor firm Omesco -- or didn't dig deep enough to find out more. A boss who was either privy to what was happening -- or completely clueless. If he was the latter, though, then he didn't have the company he ran under control.
The blueprint for Vector came from France. If Enders were to now fall as a result of Vector, it would be the perfect revenge for the angry French.
By Rafael Buschmann, Jürgen Dahlkamp, Dinah Deckstein, Gunther Latsch, Catalin Prisacariu, Jörg Schmitt and Gerald Traufetter
- Part 1: Airbus Corruption Scandal May Lead Straight to the Top
- Part 2: A New Company from the Bullshit Castle