This recent post  went in-depth into the $170 million Foreign Corrupt Practices Act enforcement action against Rolls-Royce. As mentioned in the post, the FCPA enforcement action against Rolls-Royce was part of a broader $800 million global resolution that also included a U.K. Serious Fraud Office component as well as Brazil law enforcement action.
The approximate $625 million U.K. enforcement action comprised the bulk of $800 million global resolution (that would seem to make sense, Rolls-Royce is after all a U.K. company) and is summarized below including the several failure to prevent bribery counts under the Bribery Act.
As noted in this SFO release :
“The SFO has entered into a significant Deferred Prosecution Agreement (DPA) with Rolls-Royce PLC following its approval today by Sir Brian Leveson, President of the Queen’s Bench division. The agreement with the company follows the SFO’s four-year investigation into bribery and corruption, an investigation which continues into the conduct of individuals. The indictment, which has been suspended for the term of the DPA, covers 12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery. The conduct spans three decades and involves Rolls-Royce’s Civil Aerospace and Defence Aerospace businesses and its former Energy business and relates to the sale of aero engines, energy systems and related services. The conduct covered by the UK DPA took place across seven jurisdictions: Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.
Director of the SFO, David Green CB QC, said:
“Bribery harms the reputation of the UK as a safe place to do business. I welcome this DPA, a significant enforcement action by the SFO, using relatively new statutory powers in respect of an important British company. It allows Rolls-Royce to draw a line under conduct spanning seven countries, three decades and three sectors of its business. “I am grateful to the excellent SFO team who led on this case and for the assistance and cooperation of our trusted international partners.”
This is the largest ever single investigation carried out by the SFO, costing £13m and involving some 70 SFO personnel. It is the third use of a DPA since the power became available to prosecutors in 2014.”
In summary fashion, the DPA’s statement of facts  state:
“The draft indictment reflects agreements to make corrupt payments to agents in connection with the sale of Trent aero engines for Civil aircraft in Indonesia and Thailand between 1989 and 2006 (Counts 1-4). The concealment or obfuscation of the use of intermediaries to facilitate its Defence business in India between 2005 and 2009 when the use of intermediaries was restricted (Count 5) and the making of a corrupt payment in 2006/7 to recover a list of intermediaries that had been taken from RR in India (Count 6). An agreement to make corrupt payments to agents in connection with the supply of gas compression equipment in Russia between January 2008 and December 2009 (Count 7). Failing to prevent bribery in conducting its Energy business in Nigeria and Indonesia between the commencement of the Bribery Act 2010 and May 2013 (Count 8) and July 2013 (Count 9) and similar failures in relation to its Civil business in Indonesia, China and Malaysia between the commencement of the Bribery Act 2010 and December 2013 (Counts 10-12).”
Certain of the allegations particularly relating to Indonesia and Thailand concern conduct that allegedly occurred between 1989 and 1998; between 1991 and 1992 and between 1992 and 1997 (in other words 28 years to 19 years prior to the enforcement action). In short, it is difficult to takes these allegations seriously (and for law enforcement to be viewed as fair and credible) if the rule of law and its bedrock principle of statute of limitations are to have any real meaning.
The statement of facts do however contain more (relatively speaking) recent allegations and charge 5 counts for failure to prevent bribery under the Bribery Act which went live on July 1, 2011 and is forward-looking only. However, reflective of the “anything goes” nature of enforcement in this space, many of these allegations concern conduct that allegedly took place prior to July 2011.
For instance, Count 8 concerning Indonesia is termed “failure to prevent bribery between 1 July 2011 and 31 July 2013” and states in summary fashion:
“In 2007 RR employees engaged an intermediary (“Intermediary 7”) to act in relation to an open competitive tender for a long term service agreement (“LTSA”) on Samarinda Island in Indonesia. Certain RR employees, through Intermediary 7, agreed to pay commission to a member of a competitor consortium to ensure that it submitted an uncompetitive bid. In addition, it is inferred that, in agreement with RR employees, Intermediary 7 arranged to pay money directly to individuals working for the state-owned customer, PLN. As a result of this arrangement, RR won the project. Intermediary 7 received regular commission payments for the duration of the LTSA. Count 8 relates to those payments which were made after 1 July 2011.”
The post-July 2011 allegation is the following:
“Certain enquiries regarding payments to Intermediary 7 started to be made internally in January 2012, with the Energy Compliance Officer becoming involved. In March 2013, confirmation was sought that Intermediary 7 was not in breach of any contract or applicable law. Despite such confirmation never being provided and despite the apparent knowledge of some RR employees that the intermediary was acting corruptly on RR’s behalf, RR continued to make ongoing, regular commission payments to Intermediary 7 until July 2013. Intermediary 7 continued to make payments to the President of the Indonesian company and, it is inferred, to PLN. The purpose of those payments was to compensate the President of the Indonesian company for actions that secured and retained an advantage to RR in the pursuit of the LTSA.”
Count 9 concerns Nigeria and is termed “failure to prevent bribery between 1 July 2011 and 31 May 2013 and states in summary fashion:
“Between 2009 and 2013 RR employees engaged a Nigerian company (the “Nigerian Company”) in relation to projects in Nigeria. RR failed in that period to prevent the payment of bribes by the Nigerian Company to Nigerian public officials, which served to obtain commercial advantage for RR on two tenders in Nigeria: the Adanga project and the Egina project. RR eventually withdrew from the Adanga tender due to the product being unsuitable. On the Egina project, RR was on course to win the tender, but withdrew from the project prior to signing a contract, after concerns were raised internally about the receipt of confidential competitor information.”
In pertinent part, the statement of facts notes that “RR did undertake some compliance in relation to the Nigerian Company [but] it was ineffective, and failed to detect the corrupt nature of the relationship between the Nigeria Company and NAPIMS (National Petroleum Investment Management Services – a public entity responsible for supervising the Nigerian government’s investment in the oil and gas sector which also oversaw the bidding process.”
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Count 10 concerns Indonesia and is termed “failure to prevent bribery between 1 July 2011 and 31 March 2012” and states in summary fashion:
“There is an inference that RR failed to prevent its intermediary (“Intermediary 8”) from bribing employees of Garuda [the national airline] in respect of contracts for Total Care, and T700 engines for A330 aircraft to be supplied to Garuda. Despite some RR employees being aware of evidence that Intermediary 8 was acting corruptly on RR’s behalf, RR failed to sever its relationship with Intermediary 8 until March 2012, having already made two commission payments totalling in excess of $1 million in that month.”
Count 11 concerns China and is termed “failure to prevent bribery between 1 July 2011 and 31 August 2013” and states in summary fashion:
“RR failed to prevent its employees from providing a US $5 million cash credit to China Eastern Airlines (“CES”) at the request of a board member, in return for his showing favour to RR in the purchase of T700 engines for A330 aircraft, and an associated TCA. Some or all of the funds were intended to be used by CES to pay for a two-week Master of Business Administration (“MBA”) course at Columbia University in New York to be attended by various CES employees, and including four-star hotel accommodation and lavish extra-curricular leisure activities.”
Count 12 concerns Malaysia and its termed “failure to prevent bribery between 1 July 2011 and 30 November 2013” and states in summary fashion:
“RR failed to prevent its employees from providing an Air Asia Group (“AAG”) executive (“the AAG executive”) with credits worth US $3.2 million to be used to pay for the maintenance of a private jet despite those employees believing that, in consequence, the AAG executive intended to perform a relevant function improperly. This financial advantage was given at the request of the AAG executive, in return for his showing favour towards RR in the purchase of products and services provided by RR and its subsidiaries, including TCA services to be supplied to Air Asia X (“AAX”), a subsidiary of AAG.”
In terms of the origin of the SFO’s investigation, the statement of facts state:
“In early 2012, the SFO sought information from RR in respect of concerns regarding the operation of RR’s Civil business in China and Indonesia raised by certain internet postings. As a result, RR investigated these concerns and reported on the findings into these and other issues in Civil and Defence through late 2012 and early 2013. Further, starting in 2013, RR also voluntarily supplied to the SFO reports in respect of its internal investigations into its Energy, Defence, Civil, and Marine businesses. RR’s internal investigation, from 2012 until the present date, has included the collection of data from relevant employees; the review of email containers of relevant employees; the review of relevant archive material; 229 internal investigation interviews; and regular reports to the SFO and DOJ on findings. RR has reviewed over 250 relationships it had with intermediaries, agents, advisers and consultants (“intermediaries”). RR closely analysed over 120 of those relationships and disclosed its findings to the SFO. As a result the SFO investigated RR’s Defence, Civil, Energy and Marine businesses.”
The statement of facts further states:
“The investigation is the largest conducted by the SFO to date. In addition to examining the internal investigations (including the interviews, RR having waived any claim for LPP on a limited basis) the SFO, with the extraordinary cooperation of RR, has conducted its own extensive investigation which included:
- Obtaining from RR the key documents identified by the internal investigations including memoranda of interviews,
- Obtaining from RR complete digital repositories or email containers where available of in excess of 100 key employees or former employees, without filtering the material for potential privilege but instead permitting issues of privilege to be resolved by independent counsel,
- The arrests of domestic and overseas intermediaries including searches of their premises,
- Obtaining documentary evidence through requests for mutual legal assistance,
- The arrests of former RR employees and searches of their addresses both domestically and overseas,
- Conducting numerous interviews voluntarily, under compulsion and of suspects,
- Access generally to RR hard copy documents, and
- Other targeted requests and review of material such as: Compliance material including historic internal reviews, Personnel files, Employee notebooks, Telephones, Marketing services agent files, and Accountancy records.
RR has cooperated fully and extensively with the SFO’s investigation, in particular in voluntarily providing the documents and materials described in paragraphs 10.1, 10.2, 10.7 and 10.8, as well as assisting in arranging interviews with employees. These steps have led to the acquisition of and application of digital review methods to over 30 million documents.”
As noted in the DPA , the SFO and Rolls-Royce agreed that approximately $324 million was “the amount of profit gained as a result of the alleged offenses” and the SFO and Rolls-Royce further agreed “that Rolls-Royce will pay a financial penalty to the SFO” in the approximate amount of $300 million.
Pursuant to the DPA, the settlement amount will be paid in installments through 2021. In addition, the SFO and Rolls-Royce agreed that “Rolls-Royce will pay the reasonable costs of the SFO’s investigation and of entering into this agreement” in the approximate amount of $15 million.
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