Rolls-Royce Settles Corruption Probe -- WSJ
January 17 2017 - 3:03AM
Dow Jones News
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 17, 2017 02:48 ET (07:48 GMT)
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