EADS, the pan-European aerospace and defence company, has launched an external assessment of its compliance systems after finding itself at the centre of two criminal probes over whether it bribed foreign officials to win defence contracts.
The company also admitted on Thursday that it had reacted too slowly to an internal whistle-blower’s concerns about questionable payments made by its subsidiary operating in Saudi Arabia, though it said internal audits found no impropriety.
Ethic Intelligence, a certification agency specialising in anti-corruption compliance programmes, is to conduct the review and initial results could become public as early as February, EADS said in a statement.
EADS said it had a strict “zero tolerance” policy with respect to fraudulent or unethical behaviour. But last month a report byTransparency International, the campaign group, ranked EADS well below peers such as BAE Systems of the UK, Lockheed Martin of the US, and Thales of France, in a study using publicly available information to compare the vigilance against corruption of 138 defence companies worldwide.
In August, the Financial Times reported that senior executives at EADS had been warned as early as five years ago about questionable payments made by one of its subsidiaries in Saudi Arabia to an account in the Cayman Islands that are now the subject of a criminal probe by the UK’s Serious Fraud Office.
Mike Paterson, then financial controller of GPT Special Project Management, an EADS subsidiary that supplies communications and surveillance equipment, alerted his superiors about the payments as early as 2007, according to emails seen by the FT.
He repeatedly voiced his fears between 2007 and 2010. They centred on unexplained payments to the Cayman Island bank accounts of Simec International and Duranton International, which totalled £11.5m between 2007 and 2009. Mr Paterson also queried the gift of four cars valued at £201,000 to members of the Saudi royal family and military — as well as a £278,000 payment for the rental of a villa owned by a Saudi National Guard general. The payments were part of a government-to-government programme in which GPT’s payments were processed by the UK’s Ministry of Defence, GPT’s sole customer.
EADS said on Thursday: “The group acknowledges not to have reacted swiftly enough when the allegations were first brought forward internally at a subsidiary level. EADS has committed to improving processes that will speed up responsiveness when concerns are raised.”
However, the company said separate internal audits conducted by KPMG and PwC, the auditors, between 2010 and 2012 found no violations or illegal payments had been made or sought by EADS.
The PwC report was given to the UK’s Serious Fraud Office in March. In August, the SFO launched its criminal probe into the matter.
The probe comes on top of investigations by Austrian prosecutors into whether EADS bribed Austrian officials while selling the country a fleet of Eurofighter Typhoon jets in the late 2000s.
Tom Enders, EADS’s chief executive, said: “I take these allegations very seriously and EADS is fully co-operating with the public prosecutors on this matter. However, before having the full picture of what seems to be a very complex matter, we should not rush into conclusions and communication.”
German state prosecutors and police this month raided several EADS offices in Germany as part of an investigation into alleged bribes paid between 2005 and 2008 to smooth the €1.6bn sale of 15 Typhoon fighter jets to Austria. The Austrian prosecution is set to begin calling witnesses in the middle of next month.
Philippe Montigny, the founder of Ethic Intelligence, likened what Ethic will do for EADS to an MOT check on a car.
“If the pilot of a car wants to drive safely we check that he can do that,” he said, noting that the process would assess the risks, the procedures EADS had in place and the implementation of those procedures. Ethics last year performed a similar service for Alstom Group, the French engineering group.