Exclusive - Austria investigates Airbus CEO over suspected fraud

By Kirsti Knolle
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FILE PHOTO: Thomas Enders, Chief Executive Officer of EADS (now Airbus Group) speaks at a ground breaking ceremony for Airbus for its first U.S. assembly plant in Mobile

FILE PHOTO: Thomas Enders, Chief Executive Officer of EADS (now Airbus Group) speaks at a ground breaking ceremony for Airbus for its first U.S. assembly plant in Mobile, Alabama April 8, 2013. REUTERS/Lyle Ratliff /File Photo

By Kirsti Knolle

VIENNA (Reuters) - Airbus was plunged deeper into legal wrangling over past business dealings on Wednesday when Vienna prosecutors announced a fraud investigation into its chief executive in connection with a $2 billion (1.56 billion pounds) fighter order over a decade ago.

Airbus called the accusations against CEO Tom Enders "completely unsubstantiated" after Reuters exclusively revealed the investigation, which came to light in correspondence seen by the news agency and confirmed by Vienna prosecutors.

For the second time in two months, Airbus seemed taken aback by the latest developments in a longstanding row over the Eurofighter deal, which has spawned numerous investigations that now coincide with separate probes in other countries of its passenger jet sales.

In February, Vienna prosecutors opened a criminal investigation into Airbus and the Eurofighter consortium after the defence ministry said it believed they had misled Austria about the price, deliverability and equipment of the 2003 deal.

That investigation now involves 16 individuals including Enders, according to a list seen by Reuters.

"Upon our inquiry after initial media reports, the Vienna prosecutor this afternoon informed us for the first time that all individuals, who have been mentioned by the Republic of Austria in its statement of alleged facts, ... are under investigation," an Airbus spokesman said by email.

"This list of individuals includes, among others, Tom Enders. As we have repeatedly stated, we consider the accusations as completely unsubstantiated."

Enders and Airbus, which was called European Aeronautic, Defence and Space Company (EADS) at the time the fighter jet order was agreed, have repeatedly denied any wrongdoing.

Enders, a 58-year-old German, was head of EADS's defence division when the contract was signed. He took responsibility for combat aircraft a few months later.

The Eurofighter consortium, which comprises BAE Systems , Italy's Leonardo and Airbus, has also denied any wrongdoing.

Airbus shares fell as much as 1.1 percent after Reuters reported the probe into Enders, before closing unchanged.

COMPLIANCE DRIVE

Airbus has warned of financial implications as it carries out a clean-up of its files under a compliance drive ordered by Enders, which last year exposed discrepancies over jetliner sales that Airbus reported to UK and French authorities.

Prosecutors in both countries are carrying out investigations into suspected fraud, bribery and corruption.

Enders has pledged to push ahead with the compliance effort.

While it recognises problems with past applications for export aid in its passenger jet business, Airbus has pushed back strongly against allegations of wrongdoing in Austria, which it believes are wrapped up in domestic political manoeuvres.

Austrian and German prosecutors have separately been investigating for years whether officials received bribes aimed at ensuring they chose Eurofighter jets over rival offers from Saab and Lockheed Martin .

Allegations surfaced almost immediately after the purchase was agreed that money was pocketed by politicians, civil servants and others via brokers for so-called offset deals accompanying the transaction.

These deals, common in large arms purchases, are designed to provide work for local businesses in countries placing orders.

Austria's defence ministry has alleged Airbus and the Eurofighter consortium illegally charged nearly 10 percent of the purchase price of 1.96 billion euros for these side deals.

(Additional reporting by Victoria Bryan and Tim Hepher; Editing by Francois Murphy, Keith Weir and Mark Potter)

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