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Rolls-Royce Unit Mired in German Bribery Probe over Asian Sales

The German probe is a legacy from engine maker Tognum in which Rolls-Royce started to invest only in 2011 -- the year the Korean corruption scandal at the unit broke. Stuttgart investigators are now reviewing Asian sales, which generally took place before 2011.

Rolls-Royce Holdings Plc’s German unit, which paid 12 million euros (US$13.3 million) as part of a settlement of a corruption case over sales in South Korea, is embroiled in an expanding bribery investigation over sales across seven Asian countries.

Stuttgart prosecutors are investigating five people who may have had a role in suspect sales by the unit, Jan Holzner, a spokesman for the German authority, said in an interview. The probe builds on a case started in 2011 that led to April’s settlement. The additional investigation could lead to further profit seizures, Holzner said. He declined to identify the nations concerned.

Rolls-Royce is already facing a UK corruption investigation. In 2012, the London-based company handed over details on what it called “matters of concern” uncovered in China and Indonesia as a reaction to questions by the Serious Fraud Office. The SFO opened a probe in 2013 into whether Rolls-Royce engaged local agents in return for orders and whether that constituted bribery.

‘Zero Tolerance’ for Non Compliance

Stefan Wortmann, Rolls-Royce’s German spokesman, said the company doesn’t comment on ongoing investigations. The unit follows a strict “zero-tolerance” approach towards any form of non-compliant action, he said.

The German probe is a legacy from engine maker Tognum in which Rolls-Royce started to invest only in 2011 -- the year the Korean corruption scandal at the unit broke. Stuttgart investigators are now reviewing Asian sales, which generally took place before 2011, according to Holzner.

In 2011, Tognum found that at least 23 million euros in commissions may have been illicitly paid by its MTU Friedrichshafen unit in connection to sales of defense-related products in South Korea. The revelation prompted a probe against the former chief of MTU’s Asian unit from 2004 to 2010.

In April, the ex-manager accepted a 10-month suspended jail term and paid 30,000 euros to settle the case. As part of the court ruling clearing the deal, authorities seized 12 million euros of profits the company made from South Korean sales obtained through bribery.

While prosecutors already said in April they’re still probing five people, they didn’t disclose details. At some point, the probe also looked at sales in South American countries, but that issue was dropped again, Holzner said.

Rolls-Royce and Daimler AG teamed up to buy Tognum in 2011. Daimler eventually sold its shares to Rolls-Royce in 2014. Rolls-Royce renamed Tognum Rolls-Royce Power Systems AG but kept the MTU brand.

Under its MTU brand, Rolls-Royce sells high-speed engines and propulsion systems for ships and heavy land, rail and defense vehicles, as well as drive systems for use in the oil and gas industry and in power generation.

By Karin Matussek

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