Rolls-Royce completes agreements with investigating authorities

Eleanor Steed
By Eleanor Steed January 20, 2017 17:55

Rolls-Royce completes agreements with investigating authorities

On January 17, Rolls-Royce announced that it has entered into a Deferred Prosecution Agreement (DPA) with the UK’s Serious Fraud Office (SFO) with the approval of the President of the Queen’s Bench Division (The Right Honourable Sir Brian Leveson) and published by the SFO.

Rolls-Royce has also reached a DPA with the US Department of Justice (DoJ) and a Leniency Agreement with Brazil’s Ministério Público Federal (MPF).

These agreements relate to bribery and corruption involving intermediaries in a number of overseas markets, concerns about which the company passed to the SFO from 2012 onwards following a request from the SFO. These are voluntary agreements, which result in the suspension of prosecution provided that the company fulfils certain requirements, including the payment of a financial penalty. The agreements will result in the total payment of £671m.

Warren East, Chief Executive, Rolls-Royce, said: “The behaviour uncovered in the course of the investigations by the Serious Fraud Office and other authorities is completely unacceptable and we apologise unreservedly for it. This was unworthy of everything which Rolls-Royce stands for, and that our people, customers, investors and partners rightly expect from us.”

“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.”

Ian Davis, Chairman, Rolls-Royce added: “We have co-operated fully with the authorities and will continue to do so. The Board has taken extensive action to strengthen ethics and compliance procedures across the company so that high standards of business conduct are embedded as an essential part of the way we do business.”

“We share a determination to see that Rolls-Royce comes out of this episode as a more trusted, resilient and better managed business that ‘wins right’ every time. Our underlying technologies and skills are as strong as ever and we are well positioned in long-term growth markets.”

Under the terms of the DPA with the SFO, Rolls-Royce will pay £497,252,645 plus interest under a schedule lasting up to five years, plus a payment in respect of the SFO’s costs.

Rolls-Royce has also agreed to make payments to the DoJ totalling $169,917,710 and to the MPF totalling $25,579,179. As a result, total payment by Rolls-Royce in the first year of all three agreements is expected to be £293m.

Rolls-Royce reports its full year 2016 results on 14 February 2017 and an appropriate update on the implications of these settlements will be provided at that time. Early indications are that the Group has had a good finish to the year with both profit and, in particular, cash expected to be ahead of expectations.

Rolls-Royce has co-operated fully and extensively with the authorities and all three agreements record Rolls-Royce’s co-operation, with the UK agreement specifically noting its “full and extraordinary co-operation” with the SFO’s investigation.

In a statement, Rolls-Royce said that it has taken “decisive disciplinary action where the rules have been broken”, which resulted in a number of people leaving the business and the termination of relationships with all of the intermediaries who have been implicated.

Rolls-Royce highlighted the implementation of an “extensive action programme to embed ethics and compliance at our heart and transform our business culture”.

Eleanor Steed
By Eleanor Steed January 20, 2017 17:55