The European multinational aerospace pioneer Airbus (EPA: AIR) was ordered to pay a fine of 104 million euros for a missile sale of 60 Mirage fighters to Taiwan in 1992.
This constitutes simply the most recent settlement with French arms companies over disputes stemming from large arms sales.
Taiwan sought the 104 million euro sum in arbitration. The sum is second only to a record-setting fine for bribery placed by the French court on the French government and Thales, a radar supplier. In the Thales case, Taiwan alleged that French state-owned oil giant Elf Aquitaine (now merged with Petrofina to form Total, which has American depositary receipts that trade in New York (NYSE: TOT)) paid bribes in the form of commissions and kickbacks through Thales to gain approval of the sale of the warships in 1991.
The sales of missiles from France to Taiwan in the early 1990s resulted in corruption accusations against then-President Francois Mitterand and a years-long chill in Sino-Chinese relations. Airbus's fine was issued three months after three aeronautics companies, Dassault Aviation (EPA: AM), Thales, and Safran (EPA: SAF) claimed to have been fined a combined 227 million euros by the Taiwanese government. The 25-year-old dispute centers over the "wrongful use of commissions in the sale of 60 Mirage fighters" to Taiwan. Airbus representatives have insisted that the dispute was wholly commercial, and not due to corruption.
Airbus also sought to end investigations into allegedly corrupt sales of Eurofighter combat jets to Austria in 2003 by talking with prosecutors in Munich. This investigation is one of multiple corruption cases facing Airbus. Airbus refrained from disclosing the status of a concurrent Austrian investigation, and Airbus's company and leaders are currently being investigated over industrial deals built into the Eurofighter sale. All parties involved with Airbus have denied wrongdoing. Airbus is simultaneously being investigated by the U.K. and France for the use of middlemen in commercial airliner sales. Overall, experts predict that Airbus may face fines of several billion euros in total.
The specific rules that Airbus admittedly flouted were meant to give America control over sales of equipment containing sensitive technology to foreign armed forces. To Airbus's credit, they have voluntarily disclosed inconsistencies in protocol, which may help lighten the fines. Airbus's management is also now facing pressure to prove it is putting an end to its past questionable practices. This includes fixing its Sales and Marketing Organization, which was internally referred to as a "bullshit castle," and which was put in charge of managing the third-party agents.
Fortunately for Airbus, analysts believe that such fines are typically viewed as one-time occurrences by investors, and are not likely to impact a company's longer-term earnings capability.