Rolls’s Potential Corruption Costs Will Depend on Timing

Rolls-Royce Holdings Plc will probably face limited damages from a Serious Fraud Office corruption review if possible wrongdoing took place before the U.K. Bribery Act came into force, anti-corruption experts say.

“Timing of these issues is key,” Jason Mansell, a former regulator for the Financial Services Authority and lawyer for London-based 7 Bedford Row, said in an interview. Criminal prosecution of the company would be more difficult if the action predates July 2011, he said.

Rolls-Royce said yesterday it had “identified matters of concern” relating to actions of intermediaries in China, Indonesia, and other markets during a review prompted by the Serious Fraud Office. The findings have been passed to the regulator.

The SFO is likely to decide in the next two months whether to launch a formal probe of the London-based maker of commercial aircraft and marine engines, Mansell said. Such an investigation would probably last 18 to 24 months, he said.

Activities predating the bribery act and involving foreigners acting overseas would be difficult for the SFO to prosecute, Mansell said.

A U.S. probe could come on top of the one in the U.K.

“Rolls-Royce has to be on the lookout for what the Department of Justice will do,” Richard Levick, a Washington, D.C. based corporate adviser on anti-corruption matters said in a phone interview. Many of the largest corruption case fines have been reserved for foreign companies, he said.

Some of the actions the company has taken to quickly address the SFO concerns could help mitigate any U.S. concerns, he said. The SFO review will be a “speedbump” because the company already had anti-corruption policies in place, Levick said. “I don’t think it is going to have a major impact.”

Outside Review

Rolls said it will appoint an outsider to review anti-corruption procedures. The report will be based to the board of director’s ethics committee.

The aerospace industry has been hit by numerous scandals over alleged corruption in the past decade, with Boeing Co., BAE Systems Plc and Finmeccanica SpA affected. A unit of European Aeronautic, Defence & Space Co. currently is under investigation by the U.K. over dealings in Saudi Arabia.

Rolls shares, which fell more than 5 percent on reports of the SFO probe, rose 1.3 percent today and closed at 896.50 pence in London, valuing the business at 16.8 billion pounds ($27 billion).

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