UK fraud office starts probe at Rolls-Royce over China-related bribery allegations

PUBLISHED : Tuesday, 24 December, 2013, 1:55am
UPDATED : Tuesday, 24 December, 2013, 10:54pm

Rolls-Royce Holdings, Europe's largest maker of commercial aircraft engines, said Britain's Serious Fraud Office has begun a formal investigation related to potential wrongdoing in business dealings in Asia.

"Further to our announcement of December 6 2012, relating to concerns about bribery and corruption in overseas markets, we have been informed by the Serious Fraud Office that it has now commenced a formal investigation into these matters," the London-based company said in a statement yesterday.

Nilima Fox, an SFO spokeswoman, did not immediately comment on the probe.

Rolls-Royce last year identified "matters of concern" in China and Indonesia in a review spurred by an inquiry from the SFO.

Chief executive John Rishton told investors at this year's annual general meeting in May that neither he nor the company board would tolerate "improper business conduct of any sort". In addition to tightening how it works with advisers and consultants, the engine maker introduced additional training on anti-bribery and corruption policies worldwide this year, according to its annual report.

The company's stock reversed its gain after the announcement, falling as much as 15 pence, or 1.2 per cent, to 1,228 pence in London. The shares have gained 42 per cent this year.

"These things can be very serious for individuals involved and they tend to result in cultural change in companies. If you look at the financial cost of the fines, they are rarely very large," Nick Cunningham, a London-based analyst at Agency Partners said. Even if Rolls-Royce were to be found guilty, this would "have very little impact" on the firm's financial performance, he said.