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SFO launches formal bribery investigation of Rolls-Royce

The UK’s Serious Fraud Office (SFO) has launched a formal investigation into Rolls-Royce Holdings Plc, Europe’s largest manufacturer of aircraft engines. The investigation is centered around the company’s business dealings in China and Indonesia and follows up on concerns the SFO raised a year ago about possible bribery and corruption involving intermediaries in Asia.

In December 2012, in response to the SFO’s inquiry, Rolls-Royce supplied information about the third-party vendors that handled the sales, distribution, repair and maintenance work that the British firm could not handle on its own, due to a lack of employees in those regions.

At that time, Rolls-Royce said that it had strengthened its internal compliance program, established a new code of conduct and hired David Gold, a member of the House of Lords and a former partner of the law firm Herbert Smith LLP, to lead a review of its compliance procedures.

In its 2012 annual report, the company noted that it had enhanced its anti-bribery and corruption training program on a global level and tightened its policies on how it works with advisers and consultants.

Some of the allegations date back more than 10 years, suggesting that the offenses might not fall under the UK’s Bribery Act, which came into effect in 2010. The law includes as an offense the failure to prevent bribery and prohibits ‘facilitation payments,’ (goods or services given to a public official to perform or speed up the performance of an existing duty) regardless of their size or frequency.

After today’s SFO announcement, shares in the company were down 0.1 percent at 5:41 a.m. EST, falling as much as 1.2 percent.

The defense and aerospace industry are comprised of companies that rely greatly on intermediaries in countries where they lack a significant presence. BAE Systems Plc was fined $450 million by the United States and Britian in 2010 after a lengthy corruption investigation at home and abroad into its dealings in Saudi Arabia, Tanzania, Sweden, the Czech Republic and Hungary.

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Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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