Is it possible for inflight entertainment and connectivity vendors to do business in the Middle East without suspicion of bribery and fraud? A lawsuit recently filed in California suggests the answer is a resounding “no.” Just a couple years after securing multiple major contracts Thales stands accused of failing to pay a partner it used to facilitate those deals. More than a billion dollars in damages are on the line in the case. Perhaps even more important, however, some of the machinations of deal-making in the region are exposed in the filing.
Wamar International, LLC operates a consultancy in the in the fields of Power Generation, Oil and Gas, Aviation, Real Life Support and Defense and Security. The company’s engineering expertise is matched by its access in the Middle East, North Africa and Sub-Saharan Africa. The company highlights its “relationships with many high level decision makers, ideally positioning Wamar to promote and expand the business activities of the client” on its website. Simply put, Wamar makes deals happen. For a fee, of course.
Looking for more details? Check out a deep dive into the deals this case covers and some leadership changes it may have already caused in PaxEx Premium.
As Thales sought to secure an IFE/C win in the Middle East after years of losing to Panasonic Avionics it finally brought in Wamar as outside help. That partnership, launched in 2012, would eventually see Thales Avionics win major deals with Emirates, Etihad, Turkish Airlines, Qatar Airways, Kuwait Airways and others. Wamar claims full credit for securing those contracts and even goes so far as to highlight the projects it was removed from and the contract losses Thales saw as a result. The company claims nearly a quarter billion dollars due in commissions, fees, and expenses of which it has been paid less than $5 million.
Both Thales and Emirates deny the claims.
Read More: Panasonic Avionics admits to bribery, settles with DoJ
Working with a partner is not illegal, of course. Though the circumstances around just how Wamar is able to (legally) secure so many deals so quickly will always remain suspicious. Thales went from zero contracts to a 60% share in the Middle East market seemingly overnight. And then, by allegedly failing to pay commissions and trying to avoid the same FCPA bribery scrutiny that took down Panasonic Avionics’ C-Suite, the company experienced the airing of this dirty laundry on a much larger scale.
Wamar engaged in significant activity at Thales’ insistence and expended substantial resources working with Emirates, U.A.E. governmental agencies, and other third parties for the exclusive benefit of Thales and Thales Avionics. As a direct result of Wamar’s efforts, including Wamar senior management’s personal relationships with executives of Emirates, on September 21, 2016, Thales Avionics was awarded a $975M contract for the installation of IFE systems on (150) 10 B777X aircraft.
One of many claims from Wamar in the lawsuit
Wamar is quick to claim in the filing that all of its actions in securing the deals were legal, “Wamar has worked in good faith, never violated and will never violate US law or any domestic laws of any jurisdiction and/or international law, abides by good business practices and is in conformity with all US and international laws pertaining to anti-corruption acts. In addition, Wamar is TRACE certified, so there is nothing to be concerned with.” But the structure of the deals, and claims of close personal relationships with government agencies, raises plenty of alarms, even before considering how many Thales is accused of failing to pay for.
Rather than pay out consulting fees directly Thales is accused of concocting spare parts supplier schemes where hardware is sold at a significant discount before being resold to the airline customer. Wamar would earn the increased margin on those deals and thereby earn out its commission. In at least one case that spare parts scheme was circumvented, erasing the margins. In another the overall airline order halted halfway through the expected volume, shorting Wamar again, the company claims.
For its part, Thales asserts that the claims “have no legal or factual basis whatsoever.” A spokesman continued:
Indeed, Wamar was given 3 years to comply with a set of agreed-upon contractual obligations to be qualified as a Thales’s key industrial partner.
Wamar entirely failed to fulfill any of these obligations. Their recent claim, which has no legal merit, is an apparent attempt to force Thales to pay certain amounts which are not due.
Thales has therefore no obligations other than those arising from previous contracts, which have been and will be met. Thales reserves the rights to issue any counter suits it might find appropriate, including a claim for defamation.
Thales successfully had the jurisdiction of the case moved from the California state courts to the US court owing to the RICO Act charges included. It also filed to have the case dismissed and to have all claims settled via arbitration. The initial 2012 memorandum with Wamar includes a clause requiring arbitration for any disputes and Thales argues that all the deals made with Wamar follow from that initial arrangement.
Emirates also issued a strong rebuttal of the accusations:
Emirates does not have any business relationship with Wamar, and none of our executives involved in the procurement, or the selection of suppliers for inflight services has had contact with any representative from Wamar. There is absolutely no truth to the claims made by Wamar that it played any role in our contract with Thales.
Their claims implying that our procurement decisions could be influenced or swayed by personal relationships with Emirates executives are defamatory. We take a serious view of allegations that damage to our reputation, and we will be seeking legal advice on this matter.
Wamar seeks $240mm in actual damages plus $720mm in exemplary damages and an additional $720mm in RICO damages.
Looking for more details? Check out a deep dive into the deals this case covers and some leadership changes it may have already caused in PaxEx Premium.
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Bribery seems like it is common in aviation (Airbus, Rolls-Royce, Boeing, Honeywell and many others have paid fines in the past) and not limited to IFEC suppliers. Rockwell (as far as any public information) has averted investigation.
I don’t know that “common” is the right term, but it comes up often enough that you have to wonder why companies and executives believe they’ll get away with it. Or maybe that’s because they usually do and we’re only hearing the exceptions.
It is a push and a pull- i.e. some countries ONLY do business a certain way. But just because other cars are speeding, it doesn’t make it legal for anyone to speed.
Telecom, Aviation, Oil and Gas and many other large/long term/multi-$B deals are done this way it seems like and many companies (not limited to US based) get away
After going through the case filling, it’s obvious that Wamar was qualified as Key Industrial Partner(KIP) for previous years and on renewal of the approval and without advising Wamar of any violations or concerns. Thales found it an opportunity not to approve Wamar as KIP in order to cancel the agreement to avoid paying due amount.
I read the full complaint as well. I disagree that it is obvious any commission payments are due and detail some of the reasons in the linked premium story.
Like most such cases, my guess is the reality lies somewhere in the middle. This is certainly not a type of deal I’d be willing to pursue from the outset.
This is a pro-corporate stand par excellence. Implying bribe on part of Wamar over and over again and suggesting the ‘overnight’ gain while overlooking that they’ve worked for 7 good years, during which their qualification was never questionable- as per the statement of claim, is quite unfair. Of course big companies will deny any allegations made against them and of course mobilize all means possible to serve that end.
Check what they did to Michel Josserand. A small player is easily checkmated, and this kind of press is almost yellow.