March 6 (Bloomberg) -- Rolls-Royce Holdings Plc, Europe’s largest maker of commercial jet engines, said the U.S. Department of Justice has joined U.K. fraud prosecutors in an investigation into bribery and corruption at the company.
“The group is currently under investigation by law enforcement agencies, primarily the Serious Fraud Office in the U.K. and the U.S. Department of Justice,” the company said in its annual report. “Breaches of laws and regulations in this area can lead to fines, penalties, criminal prosecution, commercial litigation and restrictions on future business.”
The SFO started a formal investigation in December and in January asked the government for an extra 19 million pounds ($26 million) to pay for “blockbuster” probes, including Rolls-Royce. The involvement of U.S. prosecutors potentially increases the range of fines Rolls-Royce faces. In a parallel case against weapons maker BAE Systems Plc, the U.S. levied penalties of $400 million, compared with $50 million from the SFO.
Rolls-Royce retreated as much as 25 pence, or 2.4 percent, to 1,000 pence at 11:15 a.m. in London. The stock has fallen about 3 percent over the past 12 months, valuing the company at 19 billion pounds.
Rolls-Royce said in the report yesterday that it’s too early to assess how much the company will have to pay in fines.
“Rolls-Royce has been cooperating with regulatory authorities on both sides of the Atlantic in regard to allegations of bribery and corruption,” Rolls-Royce said in a separate statement today, adding that it has not received notification of a formal inquiry in the U.S.
The enginemaker identified “matters of concern” in 2012 in China and Indonesia in a review spurred by an inquiry from the SFO. The London-based company named David Gold, previously a partner at the law firm Herbert Smith LLP, to review anti-corruption procedures.
Rolls-Royce said in yesterday’s report that it has updated its global code of conduct and employees are now required to certify that they have received a copy. A confidential “ethics line” for staff was also updated and re-launched last year.
Last month, the company said revenue will not grow in 2014 as lower demand for defense equipment cuts into civil-aviation sales. The muted outlook was a rare miss for Rolls-Royce, which has rewarded investors with a near uninterrupted stock-price growth for a decade, coupled with steady earnings and dividends.
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