As previously noted in this column ("Buy American," Jan. 19, 2007), EADS and Airbus have been cited numerous times for irregularities in aircraft manufacturing and sales. In a 2003 investigative report, The Economist singled out EADS/Airbus for massive fraud and bribery designed to boost sales to airlines in Switzerland, Belgium, Saudi Arabia, Kuwait, India, Canada and Syria.
EADS/Airbus managers vowed then that they had improved the ethical culture at the European aerospace giant, but The Atlantic Times, an English-language newspaper published in Germany, maintained that EADS/Airbus was still being wracked by delays and turbulence. One industry insider told me at the time, "If anything, the use of schmiergelder ('grease monies') to facilitate sales became more rampant as Airbus sales tanked in 2006 and the vaunted Airbus 380 white elephant collapsed amidst design flaws and faulty wiring."
Now, more than eight months later, it appears that the corruption at EADS was even worse than critics imagined. Last week, while Waxman and his fellow Democrats in Congress were attempting to pillory Prince and Blackwater USA, the Autorite des marches financiers, France's stock market regulator, sent a criminal referral to a Paris prosecutor about possible insider trading by the former managers and top shareholders at EADS.
According to the French daily Le Figaro and The Associated Press, AMF regulators believe that 21 of EADS' senior officers and shareholders engaged in massive insider trading once they became aware of production delays, technical difficulties and profitability problems with the new Airbus A380 superjumbo and their mid-range A350 passenger jetliners. German prosecutors also are said to be investigating suspected insider trading at EADS.
The company filed a profit warning on June 13, 2006. Importantly, this is the same time frame in which EADS/Airbus was maneuvering to bid for the U.S. Air Force KC-X contract.
Those of us with long memories recall it was France that denied the U.S. Air Force overflight rights in April 1985, when we attacked Moammar Gadhafi's terror bases in Libya. While President Nicolas Sarkozy's new government in Paris is certainly more amenable to America than those of his predecessors, we have no assurances about his successors.
Do we really want our next generation of aerial tankers to be built in a place that could cut off the flow of parts in the midst of a crisis? Do we want a company with a dubious ethical culture such as EADS getting such a contract? If Waxman is sincere about government reform, he needs to adjust his sights and put EADS/Airbus in his crosshairs.