RR. Rolls-royce Holdings Plc

By Robert Wall 

Rolls-Royce Holdings PLC said Monday that it had settled a longstanding corruption probe with U.S., British and other authorities at a cost of more than $800 million.

Under the agreement, the U.K.-based maker of jet and marine engines admits to guilt in some of its business dealings overseas. The U.K.'s Serious Fraud Office, the country's corruption investigator, began examining the alleged wrongdoing in 2012 and opened a formal probe the following year. U.S. and other regulators joined the investigation.

The initial probe focused on Rolls-Royce's business dealings in China and Indonesia. The company said Monday that the case involved "intermediaries in a number of overseas markets." Allegations of business wrongdoing spread to Brazil as part of a wider corruption probe in that country.

The investigation spurred the company, which is no longer affiliated with the maker of luxury cars, to order an outside review of business practices. As a result it cut back on the use of middlemen in trying to secure contracts overseas.

Rolls-Royce Chief Executive Warren East, who took over the company in mid-2015, has been eager to resolve the legal uncertainty from the investigation. The U.K. probe kicked off a period of turmoil for Rolls-Royce that has seen extensive management changes and profit warnings. Last year the company cut its dividend for the first time in years.

Rolls-Royce, a major supplier of aircraft engines to Boeing Co. and Airbus SE, said it would pay about GBP671 million ($809 million) to the U.S., U.K. and Brazilian governments.

The biggest payment will be to the U.K. government, totaling GBP497 million, plus interest, in addition to a payment to cover costs. The fine will be paid over five years. Payments in the first three years of the agreement should total GBP293 million.

Rolls-Royce said it had "cooperated fully" with authorities and would continue to do so.

The U.S. Justice Department will be paid $170 million, Rolls-Royce said, with Brazil's Ministério Público Federal set to receive $25.6 million under the agreement.

The Serious Fraud Office also is examining alleged wrongdoing by Airbus in separate satellite and aircraft deals overseas. The European plane maker has said it is cooperating with authorities.

The Rolls-Royce agreement is one of the highest profile corporate admissions of guilt the U.K. anticorruption authority has been able to secure.

The authority in 2015 struck its first deferred prosecution agreement when ICBC Standard Bank PLC agreed to pay it about $25.5 million and $7 million to the government of Tanzania over illegal payments the bank had made. At the time, Standard Bank Group said it had separately agreed to pay $4.2 million to the U.S. Securities and Exchange Commission in connection with how the Tanzania bond transaction was presented to U.S. investors, and that the U.S. Department of Justice has closed a related investigation.

A U.K. court still needs to sign off on the Serious Fraud Office settlement in a hearing planned for Tuesday. A preliminary hearing was held Monday. Rolls-Royce and the authority wouldn't provide details of the settlement ahead of the court hearing.

Under the agreement, Rolls-Royce avoids prosecution if the company adheres to the terms of the settlement, which typically includes no future missteps.

The London-based company said it would provide a further update on implications of the settlement agreements when it reports its full-year 2016 results on Feb. 14. It added that it had a good finish to the year with both profit and cash ahead of expectations.

Tapan Panchal contributed to this article

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

January 16, 2017 14:56 ET (19:56 GMT)

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