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Rolls Royce bribery allegations settled by Deferred Prosecution Agreement

02.02.2017 Anti-bribery, Compliance

After a five year investigation by the UK’s Serious Fraud Office (SFO) and other foreign authorities into allegations of significant bribery and corruption against Rolls Royce, a settlement has been reached that involves Rolls Royce paying £497 million in penalties to the UK authorities, with separate and substantial payments being made to the US and Brazilian authorities.

It is reported that Rolls Royce must pay a total of £671 million in penalties. The claims related to bribes that Rolls Royce was alleged to have paid via local agents to secure contracts around the world. The allegations covered an extended period in time spanning 1989 to 2013 and involved primarily conspiracy to corrupt, false accounting and failure to prevent bribery.

The settlement was concluded in January 2017 and took the form of a Deferred Prosecution Agreement (DPA) that was approved by the English Court. DPAs came into force in the UK in February 2014 and this was only the third DPA to be agreed with the SFO and approved by the Court since their inception. DPAs allow an organisation to avoid prosecution for bribery, fraud and other economic crimes by entering into a settlement with the SFO that must then be approved by the Court. The Court will only sign off on a DPA if it considers it to be in the interests of justice and also fair, reasonable and proportionate in its terms. The DPA will usually allow any prosecution of the organisation to be suspended for a fixed period to allow the organisation to meet specified conditions set out by the SFO and the Court. The aim of DPAs is to allow a corporate to make full reparation for any economic crime without the stigma of a criminal conviction. However, DPAs are a matter of public record and are, therefore, public knowledge.

One of the two previous DPAs that have been approved by the English Court related to instances of bribery discovered by Standard Bank Plc in connection with certain of its transactions in Tanzania. The other was with a UK-based company, unnamed, which did most of its business with Asia. However, the Rolls Royce settlement is by far the largest in financial terms. Under the terms of the DPA, Rolls Royce must pay the penalties over five years. It has also agreed to pay the SFO’s costs of the investigation, which are reported to be about £12 million. Rolls Royce’s own costs are reported to be around £123 million.

The allegations of wrongdoing centred on the company’s supply of aviation jet engines to China and Indonesia. Rolls Royce did not self-report, which would have worked in its favour. Nonetheless, in 2012, after the SFO was alerted to certain concerns surrounding the business operations complained of, Rolls Royce undertook its own internal investigation and also commissioned an external review of its anti-corruption and compliance procedures. Among other considerations for the Court in approving the DPA was that Rolls Royce had implemented significant changes within the organisation to prevent future instances of wrongdoing and had co-operated fully with the investigation.

The Rolls Royce settlement has had mixed reactions. There are those who see it as a sign that the UK Government and the SFO are serious about tackling bribery and corruption both in the UK and abroad. Others have argued that Rolls Royce got off lightly and should have been prosecuted. Either way, Rolls Royce’s problems highlight the potential risks of dealing with local agents or contacts to help secure contracts abroad. More DPAs are likely to follow.