Rolls-Royce in the dock
After decades of “egregious criminality”, Rolls-Royce has been fined £671m. Now the focus is on its former top brass, says Ben Judge
If it's not profit warnings with Rolls-Royce, it's bribery and corruption. Last week, the High Court decided the engine-maker was guilty of "devastating, egregious criminality", making "truly vast, corrupt payments" in 11 countries around the world, including Nigeria, Indonesia, Russia, Thailand, India, China and Malaysia. The corruption involved, "on the face of it, very senior" Rolls-Royce employees. The subsequent investigation led to 38 staff being disciplined, with 11 leaving and six being dismissed. Rolls-Royce has apologised unreservedly for its conduct.
The case involved Rolls-Royce's civil and military aerospace businesses and its offshore power business. According to the High Court's judgment, in 2012 "internet postings" alerted the Serious Fraud Office (SFO) to "concerns" about Rolls-Royce's business in China and Indonesia. Rolls-Royce's board immediately launched an investigation, co-operating fully with the SFO a decision that saved it millions in heavier fines. In the event, Rolls-Royce has been required to pay £671m in penalties, including a "disgorgement" of profit of £258m, a financial penalty of £239m and the costs incurred by the SFO of just under £13m. In addition, it was ordered to pay $169.9m to the US Department of Justice, and $25.5m to the Brazilian authorities, who were also involved in the investigation.
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Current Rolls-Royce chief executive Warren East took over 18 months ago, having taken over a "company in confusion", says Lea. Rose's legacy was already a "dysfunctional management class" that was "stultifying the company". The firm has now suffered a grievous blow. Regaining investors' confidence will be an uphill struggle.
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