Document Name –
Report to Client for
Falcon Luft-und Raumfahrtg GmbH
Document Name –
Disclaimer
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Protiviti makes no warrantees as to the accuracy of the publicly available or source information on which this report was based in whole or in part. Protiviti reported the information as it was found in the applicable media account, Internet reference, public record and/or as it was related to us or our affiliates by confidential sources. No additional investigation was undertaken in order to substantiate the source documents or other information sources on which this report was based.
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I. Background
The Client (hereinafter the “Client”) has requested investigative research[1] on the following entity and certain individuals who are either key executives, owners or have otherwise have been identified to Protiviti as exercising control over the subject entity:
Entity Name / Falcon Luft-und Raumfahrtg GmbHEntity Address / Wittelsbacherplatz 2
80333 Munich
Germany
Principal Names / Helmut Schäfer
Karlheinz Krüger
Case Number / 000074
Report Level / Swift Report
Alert Level[2]
(Red, Yellow or Green) / Red
II. Executive Summary
A. Significant Information
Summarized below is information that Client may wish to consider, along with other factors, as part of its decision making process regarding the subject’s suitability as a commercial partner.
1. Ongoing Bribery Investigation
Falcon Luft-und Raumfahrtg (Falcon) was reportedly the focus of a German investigation into alleged illegal payments in Paraguay in 1994. According to a New York Times article published on October 25, 2007, the German investigation related to its sale of anti-aircraft systems to the Paraguayan government. The transaction was allegedly accompanied by improper payments to high-ranking Paraguayan military officials. As of December 2012, a judicial investigation of the matter was reportedly ongoing in Germany.
2. Company Chairman is a Former Public Official
Karlheinz Krüger, Chairman of the Board of Falcon, served as a member of the German Bundestag (Parliament) since September 2000. Prior to that, he was Deputy Minister of Defence from 1994 to 2000 and was a career military officer who retired with rank of General in the Bundeswehr (the unified armed forces of the Federal Republic of Germany).
3. Government Agencies and State-Owned Companies in Customer Base
In completing the third party questionnaire in advance of the performance of this investigation, Falcon disclosed that it provides sales or services to various state-owned entities and government agencies. Falcon listed the Kingdom of Saudi Arabia, Jordan, Egypt, Paraguay and Poland amongst its customers for military aircraft and systems.
While an aerospace company selling military aircraft and systems to foreign governments is not unexpected, multi-million sales to government customers could result in increased exposure to potential violations of the Foreign Corrupt Practices Act (FCPA), Bribery Act (UKBA) and/or other international anti-corruption statutes.
B. Corporate Information
Falcon is the only military and civic/humanitarian transport aircraft manufacturer to develop, produce, sell and support a comprehensive family of airlifters ranging from three to 45 tons of payload. Falcon’s highly versatile product range includes the robust and service proven, three to nine tons payload “Light & Medium” Family, comprising the P10, C230 and the C300 “workhorses”, the all new Z400 designed for the needs of the 21st century, as well as the Bravo380 Multi RoleTanker and Transport aircraft, and further military derivatives based on Falcon commercial aircraft. It also produces and markets a small Trainer and Aerobatic plane, the Falcon Thunderstrike II.
Falcon is also dedicated to providing its customers and operators the best possible Services to ensure the most reliable and efficient operations. This goes from the most basic support with Training and Documentation up to full In Service Support (ISS).
Falcon also specializes in the conversion of any kind of aircraft in its dedicated MRO facilities.
Falcon is a privately held, family-owned company with annual turnover of €2.7 billion.
III. Scope and Additional Findings
Set forth below is a more detailed depiction of report findings that were not deemed to be sufficiently noteworthy to have been summarized above as well as a high level description of the scope of services.
A. English and Local Language Media
Searches of U.S. and international English and Local language[3] media resources were undertaken in an effort to identify adverse items in which the entity and/or associated individuals were the focal point. With the exception of the findings reported above, no additional information was noted.
B. Internet Research
Adverse Internet research was performed in English. In addition, local language Internet research was performed (when possible) in a further effort to determine whether the subject company and associated individuals were the focal point of adverse reports or information published on one or more Internet sites. With the exception of the findings reported above, no additional information was noted.
D. Nexus to Foreign Officials
Protiviti utilizes a subscription to a premium subscription database that contains a wide array of watchlists. This resource includes a proprietary list of Politically Exposed Persons (government officials, employees of state-owned companies, public international organizations, political party officials, their family members and close associates), government agencies, state-owned companies and public international organizations. These lists were compared to the data collected about the subject company and associated persons in order to determine if any closely matched any foreign officials, government agencies or state-owned companies. It is important to note that no negative assurances should be drawn from an individual or company’s not being listed on such a database. With the exception of the findings reported above, no additional information was noted.
E. Global Watch Lists
Protiviti performs an analysis of a nearly 700 watchlists of individuals and entities that are subject to one or more governmental or multi-lateral bank restrictions or embargoes. The lists include a globally array of such lists including the U.S. Office of Foreign Assets Control Specially Designated Nationals List (OFAC SDN), the European Union Consolidated List, the World Bank Listing of Ineligible Firms and Interpol’s Most Wanted List. With the exception of the findings reported above, no additional information was noted.
F. Corruption Enforcement Actions
Research was performed in an effort to determine whether the subject company and/or associated persons were in any way identifiable with a prosecution, matter, pending investigation or a voluntary disclosure of the FCPA, UKBA or similar international anti-corruption statues. With the exception of the findings reported above, no additional information was noted.
IV. Potential Action Items
Set forth below are potential action items for additional due diligence steps, requests for additional clarifying information or supporting documentation. These potential items are presented to assist the Client in weighing any potential course of action and are not intended to supplant the Client’s managerial authority. They are provided in support of client compliance or legal personnel should they deem it necessary to take further steps prior to determining the appropriate disposition for a given third party.
Potential Action Item / Assigned to / CommentsRequest status update on pending bribery investigation in Germany. / Client Chief Compliance Officer or designee
Consider escalating to enhanced due diligence field investigation in Germany and/or Paraguay about bribery investigation / general reputation and business practices. / Protiviti
Determine if any improvements made to anti-corruption program subsequent to discovery of bribery investigation in Paraguay. / Client Chief Compliance Officer or designee
Gain an understanding as to the controls in place to ensure General Kruger’s interaction with the Ministry of Defence are undertaken at arm’s length. / Client Chief Compliance Officer or designee
Request information about the company’s controls regarding interaction with employees of government agencies and state-owned companies. / Client Chief Compliance Officer or designee
[1] This report was performed at an intermediate level of depth deemed risk appropriate in situations in which a client has significant volumes of entities that need to be held to a higher standard of care. The research performed is based entirely on an examination of English and, where possible local language, adverse media and Internet research, corporate registrations (where available) and a wide array of global watchlists, lists of politically exposed persons and state-owned companies. At this stage, no criminal records, consumer and business credit reporting agency, site visits or human intelligence research were performed. Such more intensive investigation may be performed at the sole discretion of the Client. This report is governed by the Master Services Agreement dated March 16, 2013 between Protiviti and Client.
[2] Alert levels follow the colors of a traffic signal (Red, Yellow and Green). They are assigned for the limited purpose of assisting Clients who may be dealing with large volumes of investigative research to apply a risk-based approach to their review of reports as they receive them. Red reports contain potentially significant findings which may impact on the Client’s decision as to suitability. Yellow reports contain some information that may require clarification or additional research. Green reports contain no potential significant findings. Color coding is solely to assist Clients to establish an appropriate review priority and is not intended to influence the Client’s decision making process. Those decisions may be based in part on report findings as well as other tools and information sources that are available to the Client.
[3] Protiviti utilizes media resources that include newswire services and other authoritative media resources that are published in 28 languages comprised most of the major spoken languages. In addition, many of the research analysts are themselves, multi-lingual and are in some instances performing research that goes beyond the 28 languages available.