Last updated: December 6, 2012 7:29 pm

Rolls-Royce reveals SFO corruption probe

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The Rolls-Royce Trent 1000 is the lead engine for the Boeing 787 Dreamliner©Newscast

Rolls-Royce, the aircraft engine maker, warned on Thursday that it faced the possibility of prosecution after the Serious Fraud Office and an internal investigation raised concerns about corruption and bribery in Indonesia, China and other overseas markets.

The US Department of Justice has also been informed of the concerns, two people close to the matter said. The SFO, which investigates white-collar crime, must now decide whether to launch an official investigation that could result in prosecution of the company, individuals and potentially large fines.

The SFO has been looking into Rolls-Royce for more than a year and earlier this year asked the company for information regarding its concerns about bribery and corruption in Indonesia and China.

This prompted Rolls-Royce to retain a law firm to launch a probe of its own.

Rolls-Royce said in a statement that it had handed the results to the SFO, noting: “Investigations by Rolls-Royce have identified matters of concern in these [Indonesia and China], and in other overseas markets.”

But the US authorities could ultimately become Rolls-Royce’s biggest concern because the DoJ has a history of levying large fines on companies that break US bribery laws. However, a mitigating factor is the likelihood that any transgressions by Rolls-Royce are more likely to have come from its civilian business rather than defence sales, according to analysts. This would likely reduce the size of any kickbacks paid and the political sensitivity of the issue.

The alleged corruption is said to have occurred both before and after the UK’s more stringent Bribery Act came into force in July 2011.

Rolls-Royce shares fell 3.1 per cent to 885p on the news but are up more than 25 per cent over the past year.

John Rishton, Rolls-Royce chief executive, said: “I want to make it crystal clear that neither I nor the Board will tolerate improper business conduct of any sort and will take all necessary action to ensure compliance. This is a company with exceptional prospects and I will not accept any behaviour that undermines its future success.”

Rolls-Royce ranked relatively poorly compared with its peers in a recent report on corruption by Transparency International, the campaign group.

The study, which looked at the information available – mainly from public sources – on how diligently 129 defence companies worked to minimise corruption showed Rolls-Royce presented only moderate evidence of tackling the issue. The survey was split into several categories and found the company’s leadership did well in voicing the importance of the issue, but that it presented only limited evidence of training its staff to avoid corruption.

Rolls-Royce said it had significantly strengthened its compliance procedures in recent years. “As a further measure, Rolls-Royce will appoint an independent senior figure who will lead a review of current procedures and report to the ethics committee of the board,” the company said in a statement.

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