By Emmanuel Samarathisa
AS investigators slowly move to probe staff of AirAsia Group Bhd (AAGB) and AirAsia X Bhd (AAX) for fraudulent business transactions with European airframer Airbus SE, among the documents that will be scrutinised are the emails as recorded in Regina v Airbus SE.
The SFO document reveals details of e-mails and agreements which appear to implicate senior AAGB and AAX officials in soliciting and payment of bribes.
The email trail is found in the UK crown court document, titled Statement of facts prepared pursuant to paragraph 5 (1) of schedule 17 to the Crime and Courts Act 2013, serves as a “statement of facts” in relation to the deferred prosecution agreement (DPA) about the “alleged commission by Airbus SE of offences of failure to prevent bribery.”
The document spells out the SFO’s findings as well as Airbus’ admissions for businesses in Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana are detailed.
The trail involves AirAsia Executive 1, AirAsia Executive 2 and a few Airbus employees. While no names were mentioned, AirAsia founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun had been implicated due to their past ownership of the now-defunct Caterham Formula One team.
The duo’s relationship with the racing team is at the centre of the investigations as Airbus admitted to Britain’s Serious Fraud Office (SFO) that it bribed executives from AAGB and AAX as a reward for an order of 135 planes.
SFO said Airbus paid US$50 mil (RM205 mil) in sponsorship to a sports team jointly owned by the two AirAsia executives. These were among the details Airbus divulged to authorities as part of a US$4 bil settlement.
The Malaysian Anti-Corruption Commission (MACC) said on Feb 1 that the agency was still waiting for documents from the SFO. AAGB and AAX have also appointed BDO Governance Advisory Sdn Bhd as an independent expert to assist the non-executive independent board committee in reviewing the matter.
Fernandes and Kamarudin have stepped down from their executive posts for two months from Feb 3 to make way for investigations. Both men remain on the board as non-executive directors.
Here, the relevant email extracts, or paragraphs 51 to 72, pertaining to AAGB/AAX are reproduced verbatim.
Note: these paragraphs serve as “background material” to the purchase orders, offers and payments. According to the document, “these paragraphs do not form the basis upon which the financial and other terms of the DPA have been formulated.”
The email and document trail
11 March 2005: AAB signed a purchase agreement with Airbus to supply 60 A320-200 aircraft. That purchase agreement was amended a number of times to increase the number of aircraft.
1 July 2011: Orders had been placed for: 10 A350 aircraft and three A330-200 aircraft (for AAX); and 60 A320 aircraft and 200 A320neo aircraft (for AAB).
The total number of aircraft purchased were as follows (the contracts that are the subject of the agreed wrongdoing are contracts 5-8):
16 June 2009: A Memorandum of Understanding (“the 2009 MoU”) was signed by: (1) Airbus employee 1 [senior] (Airbus SMO International Division) on behalf of Airbus; and, (2) AirAsia Executive 1 on behalf of AAB, whereby US$16 million was to be paid to:
“…further strengthen the relationship between the industrial, research, educational and economic patterns in Malaysia and play a determining and favourable role in the enhanced penetration of [Airbus] products in Malaysia”.
15 July 2010: There were discussions between Airbus employee 1 [senior] and AirAsia Executive 1. Airbus employee 1 [senior] emailed AirAsia Executive 1, saying:
“Resending previous self-explanatory mail with all details attached.Could be further discussed when I will be early next week in KL, should it be convenient to you.”
To which AirAsia Executive 1 replied [sic]:
“Honestly [Airbus employee 1 [senior]] I’m fed up. You owe me 4 million already and I’m owed 16 million in total. This shd have been pauid ages ago when I bought thre first 60 aircraft. I want my money and I want compensation … pay up. I want my whole 16 million now..”
27 September 2010: The CDSC considered a proposal to sponsor the Sports team for US$6 million, in respect of which Airbus would pay for AAB advertising. AirAsia Executive 1 complained to Airbus employee 2 [senior] about the delay. This led to internal correspondence between Airbus employees where Airbus employee 1 [senior] wrote to Airbus employee 2 [senior] on 8 November 2010 as follows:
“I am sure that you will understand that paying USD 16 m on [Sports team] need some minimum engineering!!!”
In an email to AirAsia Executive 1, Airbus employee 2 [senior] stated:
“I have not seen all the papers relating to the sponsorship but in general, we need to have some internal link to AirAsia as we can’t get board approval simply to sponsor.
Externally there is probably no need to link the two.”
There was no legal relationship between AAB, AAX and the Sports team, albeit the association between them was utilised by both parties to generate publicity. The common denominators were AirAsia Executive 1 and AirAsia Executive 2, according to the court document.
27 December 2010: Pursuant to the concluded sponsorship agreement (the “First Sponsorship Agreement”) Airbus made a payment of US$3 million to the Sports team. On 9 February 2011 Airbus employee 2 [senior] emailed AirAsia Executive 1 asking for an invoice: “…for the next 3 million.”. On the same day Airbus employee 2 [senior] emailed Airbus employee 1 [senior] forwarding the email chain and wrote:
“[Airbus employee 1 [senior]] as discussed yesterday, please can you pay immediately. It will help me close my deal.”
24 February 2011: A payment of US$3 million was made to the Sports team. At that stage, US$10 million of the 2009 MoU commitment remained outstanding and was split into two separate payments of equal amounts, according to the court document.
12 July 2011: An amendment to the First Sponsorship Agreement was signed by Airbus employee 3 [very senior] pursuant to which Airbus agreed to pay the Sports team US$5 million. This payment was made on 26 July 2011 from the SMO International budget. The remaining US$5 million was not coming out of the SMO International budget but, instead, from Airbus providing a rebate to the aircraft purchase price, according to the court document.
US$70 million payment (payments 5-9 in table )
16 June 2011: A draft MoU was prepared between Airbus, and the holding company of AAB (“the 2011 MoU”). Its stated purpose was as follows (sic):
“In the context of its international operations, and in accordance with its policy as regards the development of local footprint, [Airbus] is willing to assist in the development and implementation of projects in support of the operations of AIRASIA where it operates…It is anticipated that in the mid and long term, such support would further strengthen the relationship between the industrial, research, educational and economic patterns in Malaysia and play a determining and favourable role in the enhanced penetration of [Airbus] products within AIRASIA fleet.”
The 2011 MOU described Airbus’ financial commitment as follows:
“…overall Contribution to Projects as per the MOU has been established as a maximum amount of USD 40,0 million (US dollar forty millions) to be invested between year 2016 and 2026. It is understood that such Contribution may be reassessed from time to time in the light of the effectiveness of the development of its business with AIRASIA.”
16 June 2011: Airbus employee 2 [senior] emailed Airbus employee 1 [senior] with subject “Air Asia” that:
“… [AirAsia Executive 1] …insists that we clear the 10m on signing the PA (purchase agreement) for 200 (aircraft orders for A320neo) and that we have a written commitment for the 40m.”
A year later, this commitment had not been satisfied. The delay was due to attempts by Airbus to adhere to its internal compliance procedures. In response to a chaser from Airbus employee 2 [senior] , Airbus employee 1 [senior] replied:
“To invest potentially up to USD 40 million (NOT NOW), it’s mandatory to follow a minimum governance and receive information from the partner…We have to be serious.”
Shortly thereafter, the US$40 million commitment was discussed at the April 2012 CDSC (Company Development and Selection Committee). The minutes of that meeting state:
“Following the presentation of the status, and difficulties to gather information and financial data, [Airbus employee 4 [very senior] (Airbus SMO)] confirms that the process to invest has to be followed with no deviation. The agreement in principle has been made and now it is about implementing the agreement in respecting the procedures in terms of documentation, valuation of the activity and assets to be contributed…”.
May 2012: Airbus employee 2 [senior] informed colleagues in an e-mail including Airbus employee 1 [senior], Airbus employee 4 [very senior] , Airbus employee 5 [very senior] and Airbus employee 6 [very senior]:
“if we want to sign 50+50 A320 CEO deal… 40m + another 10m (new deal)…
“I believe [Airbus employee 1 [senior]] and his team have done a correct and proper job of building a structure that complies with our Internal rules. The problem is that it is difficult to see how we will complete the obligation using this structure…
“I would like to suggest that in order to close this subject and move forward with AirAsia we propose the following.
“Under the structure proposed by SMO we commit 10m for the seats over the next 12months.
“In addition, we offer a simple sponsorship of [the Sports team] for 10m per year for the next 4 years. The structure for the sponsorship is also in place as we used this method for previous obligations with [AirAsia Executive 1].”
The US$40 million referred to the above commitment and an additional US$10 million was being offered for the purchase of “50+50” (50 confirmed, 50 optional) further aircraft. The US$10 million sum was increased to US$20 million taking the total payment for both deals to US$60 million.
June 2012: Airbus employee 2 [senior] emailed AirAsia Executive 1 and said:
“We will sign for 60m even though we have not signed for 100 more planes.
“First 40 will be 20 now and 20 next year. Remaining 20 will be 10+10 as we are not sure if we sign for 50 or 100 planes. They will keep a get out clause in the contract in case we don’t sign for any further aircraft but the clause for obvious reasons will not refer to aircraft orders.”
Also in June 2012, the CDSC considered the proposed sponsorship (which included publicity and advertising for Airbus/EADS) of the Sports team for US$60 million over four years and approved it.
2 July 2012: The sponsorship agreement was signed (the “Second Sponsorship Agreement”).
Later that year, AirAsia Executive 1 requested an additional US$10 million for the purchase agreements at items 5 and 6 of Table 1 before they were signed. Airbus agreed, bringing the total payment for that deal to US$30 million, according to the court document.
13 December 2012: The purchase agreements were signed. The following day, the Second Sponsorship Agreement was amended to increase the total sponsorship amount from US$60 million to US$70 million. These payments were made as follows: 6 July 2012 – US$20 million; 16 November 2012 – US$10 million; 11 January 2013 – US$20 million; 25 October 2013 – US$10 million; and 4 November 2013 – US$10 million.
25 October 2013: The payment and the payments made thereafter, were intended by Airbus employees to influence AirAsia Executive 1 and AirAsia Executive 2 to act improperly according to the court document.
US$30 million payments (payments 10-11 in Table)
September 2013: Discussions began with AAX regarding the purchase of 25 A330-300 aircraft. Having met with AirAsia Executive 1, Airbus employee 6 [very senior] reported back to Airbus employee 5 [very senior], Airbus employee 4 [very senior], Airbus employee 2 [senior] and others that (sic):
“We have had some good meeting with [AirAsia Executive 1] this week-end in Singapore. AirAsia X is willing to take 25 A330-300s starting in 2015. …
“But as you can imagine. [AirAsia Executive 1] is insisting on the early payment of his sponsorship. We owe 10 musd in both jan 2014 and 2015. He wants it paid now…
“The incremental A330s will generate a follow-on sponsorship so we need SMO involvement…”
The new sponsorship was discussed amongst the Airbus employees the day before a CDSC meeting.
25 September 2013: Airbus employee 2 [senior] wrote:
“At the request of SMO I will summarise our deal with [AirAsia Executive 1]. AirAsia X will place an order for 25 A330-300 with deliveries starting in early 2015 …
“As part of the deal, EADS will advance the 10m of sponsorship due to be paid in Jan 14 and the 10m due to be paid in Jan 2015, both to be paid on A330 PA signature and PDP payment. These two payments were due as part of the A320 deal.
“The A330 deal will create a new obligation to pay 15m in jan 14 and 15m in jan 15. I trust that this deal meets with your approval…”
The CDSC was presented with the proposed sponsorship deal, including the new additional US$30 million, which took total payments under the Second Sponsorship Agreement to US$100 million when added to the payments detailed above. The CDSC minutes record that the CDSC “suspends approval of this project until Compliance receives from SMO/IO an updated assessment of the value of the sponsorship”.
External analysis was obtained regarding the value of the sponsorship, which was considered by Airbus employee 7 [very senior] (Airbus Compliance), who advised:
“This is helpful. However, I strongly advise that our contribution to [the Sports team] becomes transparent to the management of Air Asia. For instance, the MD or another legal rep of the airline can acknowledge the contribution. The purpose is to mitigate the risk of being accused of conspiracy on transfer value from the airline to the majority shareholder private interests.”
15 October 2013: Airbus employee 2 [senior] wrote an email to Airbus employee 1 [senior] and another SMO International employee:
“We need to get this done. If not we don’t have a 25 A330 deal. We won’t get any letter from Air Asia x.”
November 2013: AAB had signed the purchase agreement for the A330 aircraft but would not proceed until the US$30 million of sponsorship was finalised. Airbus employee 2 [senior] wrote to Airbus employee 1 [senior] :
“I know we still have some compliance issues on the 30m for [the Sports team]. When can we expect a solution. My PA for A330 is now signed but not dated. They will only release when we sign with [the Sports team].”
The following month Airbus employee 2 [senior] emailed Airbus employee 4 [very senior], Airbus employee 6 [very senior] and Airbus employee 1 [senior] regarding announcing the 25 A330 aircraft deal to say that:
“[AirAsia Executive 1] has agreed we can announce this month if it is important for Airbus. However, he wants his contract for the 30m in sponsorship before he agrees.”
12 December 2013: Airbus entered into an amendment to the Second Sponsorship Agreement with the Sports team, increasing sponsorship by US$30 million.
16 December 2013: Airbus made a US$15 million payment to the Sports team’s bank account.
18 December 2013: AAX announced its purchase of 25 A330 aircraft and an agreement was signed. The purchase order has been since amended to 7 A330 aircraft.
The Sports team sold the remaining US$15 million debt to a third party bank in order to receive advance payment, according to the court document.
9 January 2015: Airbus paid the third party bank US$15 million.
US$55 million offer (not paid)
15 July 2014: Airbus announced that it had signed an MoU with AAX for the purchase of 50 A330-900neo aircraft. Four days later, on 19 July 2014, AirAsia Executive 1 emailed Airbus employee 2 [senior] about payments stating that:
“Instead of sponsorship we want to put it as a Grant…”
On the same day, in relation to the grant, Airbus employee 2 [senior] wrote to AirAsia Executive 1:
“I just need to show something serious for auditors. To be honest [Airbus employee 5 [very senior]], and [Airbus employee 6 [very senior]] and I don’t care what it is”
24 November 2014: a contract was signed and on 15 December 2014, AAX confirmed an order for the purchase of 55 A330-900neo aircraft. The Airbus press release stated:
“AirAsia X…has placed a firm order with Airbus for 55 A330neo aircraft. This is the largest single order to date for the best-selling A330 Family and reaffirms AirAsia X’s position as the biggest A330 airline customer worldwide…The announcement covers the firming up of a Memorandum of Understanding (MOU) for 50 A330neo signed during the Farnborough Air Show in July 2014, plus an additional five aircraft.”
The next day, AirAsia Executive 1 emailed Airbus employee 2 [senior] stating that:
“We have kept our side of the deal…Pls don’t let us down…”
Airbus employee 2 [senior] responded on the same day saying:
“Now if I bend the rules any more I hope you will see I will end up in trouble…I [sic] standby my commitment of 50m and increase to 55m”.
18 December 2014, Airbus employee 2 [senior] wrote to AirAsia Executive 1 stating that:
“the payments will follow the new delivery schedule 1m per ac from airbus. I would prefer that Airbus provides the money for PR and events or sponsorship related to developing your network. We will not require any proof or invoice for these payments”.
In September 2014, Airbus had initiated a review of third-party relationships which led to a freeze of all SMO International payments on behalf of the commercial division. By December 2014, SMO International was no longer in a position to fulfil any commitment. The US$55 million payment was never made. – Feb 12, 2020