Rolls Faces Corruption Probe After Uncovering Malpractice
Rolls-Royce Holdings Plc (RR/), Europe’s largest maker of commercial aircraft and ship engines, said it unearthed possible wrongdoing in overseas business dealings and is under scrutiny by the U.K. Serious Fraud Office.
A company review, spurred by an SFO inquiry, began early this year and “identified matters of concern” in China and Indonesia, as well as other markets, the London-based company said in a statement today. Shares of Rolls fell the most in 10 months.
Rolls said it will appoint an outsider to review anti- corruption procedures and has submitted information to the SFO. The aerospace industry has been hit by numerous scandals over alleged corruption in the past decade, with Boeing Co. (BA), BAE Systems Plc (BA/) and Finmeccanica SpA (FNC) affected. A unit of European Aeronautic, Defence & Space Co. (EAD) currently is under investigation by the U.K. over dealings in Saudi Arabia.
“The consequence of these disclosures will be decided by the regulatory authorities,” Rolls-Royce said. “It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company. We will cooperate fully.”
Rolls achieved a “B” grading in Transparency International U.K.’s recent ranking of anti-corruption standards.
“Neither I nor the board will tolerate improper business conduct of any sort and will take all necessary action to ensure compliance,” Rolls Chief Executive Officer John Rishton said. The outside review will report to the board of directors’s ethics committee.
Shares of the British manufacturer dropped as much as 3.5 percent to 881.5 pence, the most since Feb. 9. They traded at 884.5 pence at the open of trading in London.
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