RollsRoyce Hit by Corruption Probe into Asian Dealings

Rolls-Royce Hit by Corruption Probe into Asian Dealings

Dec. 6, 2012
At issue are concerns about bribery and corruption involving intermediaries in overseas markets.

LONDON -- Aircraft engine maker Rolls-Royce (IW 1000/256) on Thursday warned it may be prosecuted over alleged "malpractice" in Indonesia and China after passing on information related to bribery concerns to Britain's fraud office.

"It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company," Rolls-Royce said.

In reaction, Rolls-Royce shares shed as much as 3% in value.

The British group said it had "passed information to the Serious Fraud Office (SFO) relating to concerns about bribery and corruption involving intermediaries in overseas markets."

It added: "This follows a request for information from the SFO about allegations of malpractice in Indonesia and China. Investigations by Rolls-Royce have identified matters of concern in these, and in other overseas markets."

Rolls-Royce said it would co-operate fully with the SFO.

"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 necessary action to ensure compliance," said Rolls-Royce chief executive John Rishton.

"This is a company with exceptional prospects and I will not accept any behavior that undermines its future success," he said.

Rolls-Royce added that it had significantly strengthened its compliance procedures in recent years, including the introduction of a new ethics code.

"As a further measure, Rolls-Royce will appoint an independent senior figure who will lead a review of current procedures," it announced on Thursday.

"This is negative, all the more for Rolls-Royce, which market leadership in some areas is widely acclaimed," said Christophe Menard, analyst at financial group Kepler Capital Markets.

"Bribery and corruption have always been considered therefore distant threats, in that Rolls products are considered real industry standards. If proven true, these allegations would shake the company corporate image of integrity and industry leadership."

He added: "In any case, more details will be needed to determine the financial impact on the company."

Rolls-Royce, which also makes power systems for use on land and at sea, reported soaring first-half net profits in July on rising revenues, a bumper order book and the sale of its stake in US-based International Aero Engines.

Profit after tax jumped 24% to £1.19 billion (US$1.84 billion) in the six months to the end of June, compared with £842 million in the same part of last year.

 Copyright Agence France-Presse, 2012

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