UK reprieve for Rolls-Royce in India bribery cases
Rolls-Royce got a reprieve when a British court approved an agreement between the company and authorities to defer prosecution in connection with corrupt practices in India and six countries.world Updated: Jan 20, 2017 20:20 IST
Aerospace defence major Rolls-Royce got a reprieve this week when a British court approved a Deferred Prosecution Agreement (DPA) between the company and the Serious Fraud Office (SFO), which was investigating its corrupt practices in India and six countries.
Valid for five years, the DPA enables Rolls-Royce to avoid potential criminal conviction in court, which would have barred it from bidding for contracts in several countries. The SFO investigation, aided by full cooperation from the company, spanned more than three decades and covered 12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery.
Rolls-Royce, which has bagged large defence and other contracts in India over the years, has also been under investigation by the Central Bureau of Investigation and other Indian authorities. Of the 12 counts, two relate to its activities in India, and highlight the nature of its past unethical activities.
The DPA, approved in the interest of justice by Judge Leveson, president of the Queen’s Bench Division, involves a settlement of £497.25 million plus interest and the SFO’s legal costs of £13 million. Rolls-Royce has entered into similar agreements with authorities in the US and Brazil.
Rolls-Royce apologised for its behaviour and said it had overhauled its culture and practice since 2013. It described the activities uncovered during the investigations as “completely unacceptable”.
The first India-related count of conspiracy related to “false accounting” in the company’s activities between March 24, 2005 and September 30, 2009.
Leveson said in his ruling: “At the heart of the count is the fact that, during this period, the use of intermediaries in connection with Indian government defence contracts was increasingly restricted by the Indian authorities and the terms of a number of Rolls-Royce defence contracts contained undertakings that intermediaries had not been used.
“Breach of the undertaking entitled the Indian authorities to cancel agreements, and prevent bidding for future contracts. Notwithstanding these undertakings and the developing procurement rules, Rolls-Royce continued to use one of its key intermediaries in relation to relevant defence contracts.
“The criminality disclosed by this count relates to the way in which failure to comply with the requirements of the Indian procurement processes was hidden in relation to a number of contracts and the steps taken to do so, rather than to bribery or corruption. The relevant proportion of the revenue arising from these affected contracts amounted to £7,890,000.”
The second India-related count related to conspiracy to corrupt. Between January 2006 and August 2007, the ruling said, there was an agreement to make corrupt payments to a tax inspector as an inducement to recover a May 2002 list of Rolls-Royce’s advisers which had been removed by an inspector from the company’s offices in New Delhi during a tax survey in January 2006.
On both counts, the ruling added, “Turning to factors which increase seriousness, there is the fact of substantial harm to the integrity of national or local Indian government.”
The SFO’s investigations are suspended for five years but under the terms of the DPA, they can be resumed if Rolls-Royce fails to honour its commitments. Individuals facing prosecution are not covered by the DPA.
SFO’s investigation related to Rolls-royce’s activities in India, China, Thailand, Russia, Malaysia, Nigeria and Indonesia.
Rolls-Royce chief executive Warren East said: “The behaviour uncovered in the course of the investigations by the SFO and other authorities is completely unacceptable and we apologise unreservedly for it.
“The past practices that have been uncovered do not reflect the manner in which Rolls-Royce does business today. We now conduct ourselves in a fundamentally different way. We have zero tolerance of business misconduct of any sort.”