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« What's the state of compliance in France? | Main | SEC: BlackRock impeded whistleblower rights »
Tuesday
Jan172017

DOJ charges Rolls-Royce with FCPA conspiracy

Rolls-Royce plc agreed to pay the United States a criminal penalty of $170 million under a deferred prosecution agreement after being charged with a long-running global conspiracy to violate the Foreign Corrupt Practices Act.

The DOJ action was part of an $800 million resolution of investigations into overseas bribery by U.S., UK, and Brazilian authorities.

Rolls-Royce and the DOJ entered into a three-year deferred prosecution agreement (pdf).

The DOJ filed a criminal information (pdf) and the DPA in federal court in Columbus, Ohio on December 20. The documents were under seal until Tuesday.

On Monday, UK-based Rolls-Royce reached agreement for a deferred prosecution agreement with the UK Serious Fraud Office. That DPA (pdf) requires Rolls-Royce to pay £497 million ($599 million) plus interest and the SFO's costs. A London court Tuesday approved the DPA.

SFO chief David Green said: "This is the largest ever single investigation carried out by the SFO, costing £13 million ($16 million) and involving some 70 SFO personnel. It is the third use of a DPA since the power became available to prosecutors in 2014."

In Brazil, Rolls-Royce will pay the Ministério Público Federal a $25.5 million criminal penalty under a leniency agreement.

Rolls-Royce said its total payments under the three agreements will be about £671 million (more than $800 million).

The company makes engines and generators for the aerospace, defense, marine, and energy sectors.

Rolls-Royce admitted in the U.S. enforcement action that between 2000 and 2013 it paid more than $35 million in bribes to foreign officials.

In exchange, the officials gave Rolls-Royce confidential information and awarded it and affiliated companies contracts.

  • In Thailand, Rolls-Royce paid $11 million in bribes to officials at Thai state oil and gas companies in return for seven contracts.
  • In Brazil, Rolls-Royce used intermediaries to pay $9.3 million in bribes to officials at Petrobras or another state-owned affiliate.
  • In Kazakhstan between 2009 and 2012, Rolls-Royce paid commissions of $5.4 million to "multiple advisors." The company knew some of the commissions would be used to bribe foreign officials involved in building a pipeline between Kazakhstan and China. In 2012, Rolls-Royce hired a local distributor, knowing that a high-ranking Kazakh official with influence over Rolls-Royce's business actually owned the business.
  • In Azerbaijan, Rolls-Royce used agents to pay $7.8 million in bribes to foreign officials at the state oil company in return for several contracts. 
  • In Angola, Rolls-Royce paid $2.4 million in bribes through a third party to officials at a state oil company in return for three contracts.
  • And in Iraq, Rolls-Royce bribed officials so it could stay on a list of bidders for the supply of turbines.

Under the U.S. deferred prosecution agreement unsealed Tuesday, Rolls-Royce agreed to pay a criminal penalty of $195.5 million. But the DOJ gave a $25.5 million credit for the Brazil penalty. That reduced the total U.S. fine to $170 million.

As part of its resolution with the SFO, Rolls-Royce admitted (pdf) paying other bribes or failing to prevent bribery in China, India, Indonesia, Malaysia, Nigeria, Russia, and Thailand from 1989 to 2013.

The DOJ said Rolls-Royce didn't self report the bribery until "after the media began reporting allegations of corruption and after the SFO had initiated an inquiry into the allegations and that the conduct was extensive and spanned 12 countries." 

But Rolls-Royce cooperated with the U.S. investigation, the DOJ said.  And the company fired employees and agents "implicated" in the bribery. It also put in place better compliance features and internal controls.

The DOJ said it therefore gave Rolls-Royce a 25 percent reduction in its criminal penalty.

The DOJ's Andrew Weissmann said Tuesday the "global nature" of Rolls-Royce's crimes required a global response and "collective efforts to ensure that ethical companies can compete on an even playing field anywhere in the world.”

____

Richard L. Cassin is the publisher and editor of the FCPA Blog.

Reader Comments (2)

wow!!! SEC & DOJ came out swinging in 2017. I wonder if this has anything to do with wanting to push some enforcement prior to the change of administration.
January 17, 2017 | Unregistered Commenterdurban
This topic has been quiet for a while and will hopefully wake up some organizations of the importance to mitigate this risk. It will not be going away any time soon, and annual "click the box" training is not enough.

Durban, interesting comment...
January 18, 2017 | Unregistered CommenterChristine Watzke-Ulbert
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