Rolls-Royce could faces prosecution over allegations of bribery and corruption in China and Indonesia

Renowned aeroplane engine maker hands over ‘matters of concern’ to Serious Fraud Office

Rolls-Royce’s squeaky clean image has been tarnished after the world’s pre-eminent aeroplane engine maker warned that the company and some of its staff could face prosecution over allegations of bribery and corruption in China and Indonesia.

For the first time in its 106-year history, Rolls-Royce’s corporate reputation has come under threat as it revealed that an investigation by an external law firm had “identified matters of concern” over the methods used by intermediaries in China, Indonesia and other overseas markets in the pursuit of lucrative contracts.

Rolls-Royce, whose jet engines are propelling 400,000 people through the sky at any one time, said it had passed the results of the investigation to the Serious Fraud Office (SFO). “It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company. We will co-operate fully,” said a spokesman for Rolls-Royce, which, its website says, is “renowned for its integrity, reliability and innovation”.

Rolls-Royce and the SFO were tight-lipped about the details of the allegations, which continue a long line of bribery and corruption scandals in the defence and aerospace industries.

In the most high-profile case involving a British company, BAE Systems agreed a $450m (£279.2m) joint settlement with the SFO and the US Department of Justice in 2010 after it pleaded guilty to false statements and accounting practices, notably over deals with Saudi Arabia and Tanzania.

In 2008, US authorities fined the German engineering group Siemens a record $800m to settle a long-running bribery and corruption scandal. EADS, the European aerospace giant which recently tried and failed to merge with BAE, is currently under investigation by the SFO over dealings in Saudi Arabia. EADS has said it is fully co-operating with the SFO and that internal audits and a review by PricewaterhouseCoopers had found no evidence of improper payments.

“This is a bit of a surprise because Rolls-Royce has a squeaky clean image and has so far not been caught up in these kind of issues,” said Sandy Morris, an analyst at Jefferies, the investment bank.

Rolls-Royce commissioned the investigation following a request for information from the SFO about allegations of malpractice in Indonesia and China. John Rishton, its chief executive, was keen to demonstrate a no-nonsense attitude to corporate wrongdoing. “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 the necessary action to ensure compliance,” he said. “This is a company with exceptional prospects and I will not accept any behaviour that undermines its future success.”

The cases the SFO is investigating concern intermediaries who represent Rolls-Royce in dealings with customers. Typically, they are involved in areas such as sales, distribution and coordinating maintenance and support contracts.

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