Class Action Netherlands
A class action lawsuit from a group of 130 investors who claim to have been duped by misleading publications about the manufacturer’s involvement in and financial settlements involving corruption, bribery, and other forms of fraud, was filed in the Netherlands.
The Dutch foundation Stichting Investor Loss Compensation (SILC) filed the lawsuit against Airbus at The Hague District Court earlier this month, alleging they incurred damages worth at least EUR300 million euros (approx. USD340 million) as a result of company misconduct.
On its website, the foundation which aims to protect and represent the interests of investors and participants, claimed Airbus “materially misrepresented and omitted key facts during the height of its scheme to offer and pay bribes via its employees, executives, and business partners to government officials and airline executives around the world in order to obtain illegal business advantages and win orders on hundreds of aircraft.”
As per the SILC “the case follows Airbus’ scheme from at least 2008 to 2016 to offer and pay hundreds of millions in bribes” and relates to its “failure to adequately disclose these events in its financial statements over the period from at least February 2014 until January 2020.”
Consequently, as per the SILC, investors in Airbus purchased shares at an inflated price and suffered “significant damage.”
Interestingly, the suit is also naming accounting firms KMPG and Ernst & Young (EY) as defendants (it seems big4s have been in the news for all the wrong reasons these last few years).
SILC is seeking to hold Airbus SE, members of its audit committee, current and former executives, and its auditors KPMG and Ernst & Young accountable for their actions.
“Airbus was enmeshed in one of the largest bribery and corruption schemes in recent history, as evidenced by the record fines it agreed to pay. Even though Airbus’ top management and its external auditors were aware of this scheme, they failed to disclose the scheme and its consequences in Airbus’ financial statements,” said Karl Puszkajler, chairman of the foundation’s supervisory board.
Investors had bought or sold Airbus shares unaware that a conviction or a multi-billion dollar settlement was imminent.
The amount of EUR300 million comes from a calculation the foundation made based on transactions, inflation, exchange rates, and other factors.
A second foundation, Airbus Investors Recovery Stichting (AIRS), is also seeking to represent investors against the manufacturer.
The foundation was established in Amsterdam last summer specifically to represent those investors.
In a statement on its website, AIRS argues:“Airbus may be liable for any economic and financial loss or damage Investors have incurred that is related to and/or the result of – inter alia – fraud, misrepresentations, disclosure of inaccurate, misleading and/or incomplete information, the (untimely) disclosure of facts, circumstances and information, failure to adequately discharge fiduciary duties towards investors and/or any (other) improper performance of duties or infringement of obligations.“
It is unclear whether that lawsuit has been filed at this time.
Class Action USA
In August 2020, Airbus SE was sued by shareholders in the US who accused the plane maker of securities fraud for misleading them about its ability to avoid and manage corruption accusations over nearly 4-1/2 years.
The class action was filed by shareholder Andrew Kornecki in the federal court in Newark, New Jersey, and seeks unspecified damages for Airbus’ alleged violations of U.S. securities laws.
Chief Executive Officer Guillaume Faury and his predecessor, Tom Enders, as well as Chief Financial Officer Dominik Asam and his predecessor, Harald Wilhelm, were named as defendants in the lawsuit (Kornecki v Airbus SE et al, U.S. District Court, District of New Jersey, No., 20-10084).
In its third-quarter 2021 financial report, Airbus reported under Litigation and Claims a putative class action lawsuit, related to the bribery settlement, that was filed in a New Jersey court against Airbus and members of its current and former management.
Airbus stated that it “received notification in August 2021 of two separate claims alleging similar facts as the US class action. The two claims have been filed or threatened in the Netherlands purportedly on behalf of Airbus investors.”
Last year, we reported that SriLankan Airlines was suing Airbus for a whopping $1 billion claiming compensation relating to the bribery consequences surrounding an order of six A330s, four A350s, and a further four A350s to be leased. The airline, which is a client of Airbus, is seeking to recover damages due to loss of income, loss of reputation and the reimbursement of costs and interests.
The true cost of Bribery
Whilst it is common in the United States for shareholders to sue companies over investment losses they attribute to false, misleading or inadequate disclosures, it is is interesting to note that class actions and derivative lawsuits in response to corporate misconduct (such as bribery), are on the rise elsewhere.
This latest suit reminds us that although it is the huge settlements for corporate misconduct that usually grab the headlines, the true cost of a bribery scandal can be much higher for companies, once you also add up the costs of litigation and derivative lawsuits .
If being sued by your shareholders or being sued by your clients was not damaging enough, companies that have won corrupt contracts thanks to the bribing of foreign officials must now also contend with further risks – private lawsuits by their competitors (as reported in Ericsson vs Nokia in Sweden).
The rise of these private lawsuits underscores the damage bribery can do to a business beyond scrutiny and enforcement from government authorities.