U.S probes Rolls-Royce over Bribery Claims
Rolls-Royce investigated in US over bribery claims
DoJ could to order a wide-ranging investigation of Roll-Royce’s business units worldwide
By Katherine Rushton8:36PM GMT 05 Mar 2014CommentsComments
Rolls-Royce is being investigated by the US Department of Justice (DoJ), following allegations that its executives bribed officials in Indonesia, China and India in order to win lucrative contracts.
The British engineering giant has been under scrutiny by the Serious Fraud Office for some time, but on Wednesday admitted that the DoJ was also probing the company.
“The group is currently under investigation by law enforcement agencies, primarily the Serious Fraud Office in the UK and the US Department of Justice,” it said in its annual report. “Breaches of laws and regulations in this area can lead to fines, penalties, criminal prosecution, commercial litigation and restrictions on future business.”
The engineering business added in a subsequent statement that the DoJ has yet to move its enquiry into a full-blown formal investigation, as the SFO did two months ago, but the news was enough to rattle investors. Shares in the company closed down 13p, or 1.25pc, at £10.25 on Wednesday, as the news broke shortly before markets closed.
There is little doubt that the inquiry marks a serious blow to the business, which has already shocked shareholders this year with its first profit warning in a decade.
The DoJ takes a firm stance on violations of America’s Foreign and Corrupt Practices Act, which outlaws companies from taking bribes from foreign officials. If it judges that Rolls has breached the Act, it will have the power to order a wide-ranging investigation of every one of the company’s business units worldwide.
Rolls will have to bear the cost of the investigation, and could be fined hundreds of millions of dollars if further breaches were found. Senior executives would also be vulnerable if they authorised bribes or knew about the practice and failed to take action.
Most of the bribery allegations centre on contracts won before its current chief executive, John Rishton, took charge in March 2011. Former employee Dick Taylor has claimed that executives paid the son of a former Indonesian dictator to persuade the national airline to buy Rolls’ engines during the 1990s. Meanwhile, a blogger known as Soaring Dragon alleges that Rolls paid bribes to an official working for two Chinese airlines to help win engine orders worth $2bn in 2005 and 2010.
However, The Telegraph disclosed last month that the SFO’s investigation also extends to contracts signed less than three years ago, during Mr Rishton’s tenure. The chief executive has stressed repeatedly that he would not “tolerate improper business conduct of any sort and will take all necessary action to ensure compliance”.
The company is facing a new corruption inquiry into bribes that were allegedly paid to staff at Hindustan Aeronautics Limited (HAL), a state-owned aircraft manufacturer, to help Rolls win deals to supply Hawk advanced jet trainers between 2007 and 2011.
According to Indian officials, the country’s defence minister, AK Antony, called in detectives from the Central Bureau of Investigation after receiving an anonymous letter about the alleged payments. “At this stage they’re just allegations. Maybe there’s truth, maybe not – we’ll know in the course of time,” a HAL official told The Telegraph at the time.
News of the Indian investigation came two weeks after the SFO arrested Sudhit Choudhri, a leading Indian businessman and major donor to the Liberal Democrats, and his son Banu in connection with its investigations. The pair “strongly denied” any allegations of wrongdoing.