Rolls-Royce paying 671 million to settle bribery and corruption probesSettlement reveals details of corrupt payments spanning decades, continents, and different parts of the businessRolls-Royce made estimated 250 million profit from the bribes and senior employees knewJudge calls case "truly vast" and says it contains "the most serious breaches of the criminal law in the areas of bribery and corruption."LONDONThe details of one of the biggest corporate scandals in recent British history were made public on Tuesday after Rolls-Royce agreed to pay 671 million to settle bribery and corruption probes in the UK, US, and Brazil.The investigation into the FTSE 100 engineering giant, known for its airline engines, first began in 2012 but details have been kept hidden until now. The settlement agreement reveals corrupt payments spanning decades, continents, and departments.The UK's Serious Fraud Office (SFO) estimates the bribes helped Rolls-Royce win contracts that delivered over 250 million in profitwhich the company has been ordered to give upand says the corruption involved "careful planning" with evidence that some senior employees knew what was going on, according to the settlement.Bribes included $36 million for middlemen in Thailand across three deals and $2.25 million and a Rolls-Royce car in Indonesia to "show favour" to another fixer, according to Sky News. (Rolls-Royce cars are made by a separate company.)In theapproval of the settlement released late on Tuesday,"Judge Sir Brian Leveson writes (emphasis ours):My reaction when first considering these papers was that if Rolls-Royce were not to be prosecuted in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequentially, even greater profits, then it was difficult to see when any company would be prosecuted."The judge's approval details:bribes made in connection with the sale of engines in Indonesia and Thailand between 1989 and 2006, and in connection with the supply of gas compression equipment in Russia between January 2008 and December 2009the concealment of the use of intermediaries in Rolls Royce's defence business in India between 2005 and 2009 when the use of intermediaries was restrictedan agreement to make a corrupt payment in 2006/7 to recover a list of intermediaries that had been taken by a tax inspector in India to try and block an investigationa failure to prevent bribery by employees or intermediaries at its energy business in Nigeria and Indonesia, with similar failures in relation to its civil business in Indonesiaa failure to stop Rolls-Royce employees in China and Malaysia effectively making bribes in its civil businessa failure to actprevious senior leadership knew about the allegations in 2010 but did nothingRolls-Royce CEO Warren East, who joined as a non-executive director in 2014, apologised "unreservedly" in a statement on Tuesday.'The most serious breaches of the criminal law'Faced with such a long charge sheet, the 671 million fine Rolls-Royce has agreed to with UK, US, and Brazilian investigators may look like a bargain.Alan Tovey, the Telegraph's Industry Editor, asks on Wednesday: "Did Rolls-Royce get off lightly over 'truly vast' bribery'" The Daily Mail's City editor calls the scale of the scandal "mind boggling."Sir Leveson describes the case as "devastating" and "of the very greatest gravity," highlighting "the most serious breaches of the criminal law in the areas of bribery and corruption." He said the evidence "implicated senior management and, on the face of it, controlling minds of the company."Despite Sir Leveson's initial reaction, the company has not faced criminal prosecution, instead paying fines to settle the case under what's called a "Deferred Prosecution Agreement." The judge sided with the SFO in deciding not to prosecute for several reasons.Firstly, Rolls-Royce reported the wrongdoing to the SFO in the first place and has spent over 120 million on internal investigations and "genuine cooperation." Sir Leveson writes: "I entirely accept that Rolls-Royce could not have done more to address the issues that have now been exposed."The company has also undertaken wholesale management change and put in place new systems. CEO East says in Tuesday's statement: "The past practices that have been uncovered do not reflect the manner in which Rolls-Roycedoes business today. We now conduct ourselves in a fundamentally different way. We have zero tolerance of business misconduct of any sort." Sir Leveson agrees that: "Rolls-Royce is no longer the company that once it was."The judge also argued that criminal prosecution of Rolls-Royce would be too disruptive. The company employs 50,000 people and prosecution could lead to it becoming a pariah in the City, losing business and having to lay people off.He adds: "In any event, it will have to suffer the undeniably adverse publicity that will flow from the facts of its business practices which will be exposed."Finally, prosecution would entail more work and more cost to the taxpayer-funded SFO. The watchdog has already spent 13 million on the Rolls-Royce case, its largest-ever investigation that entailed reviewing 30 million documents. Put simply, it is just too expensive to try and push for criminal charges against the company when it's willing to settle.The settlement does not prevent the criminal prosecution of individuals involved in the case and Sir Leveson says "the investigation into the conduct of individuals continues." Thirty-eight Rolls-Royce employees were identified in the probe, with six dismissed and eleven leaving during disciplinary proceedings.Join the conversation about this storyNOW WATCH: A Harvard business professor explains a legal form of 'insider trading' in America
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