Rolls-Royce accused of bribing exec

The Guardian, LONDON

Tue, Jan 08, 2013 - Page 15

Rolls-Royce is facing allegations that it paid bribes to an executive involved with two Chinese airlines, in the latest claims attached to a corruption probe at the aircraft engine maker.

The latest allegations are contained in postings by a blogger operating under the pseudonym of “Soaringdragon” and related to deals worth a total of US$2 billion with Air China (中國國際航空) in 2005 and China Eastern Airlines (中國東方航空) in 2010.

They claim an executive who worked at both airlines, Chen Qin (陳琴), accepted payments as an intermediary in the deals.

Rolls-Royce revealed last month that the UK’s Serious Fraud Office (SFO) had approached the company over allegations of malpractice in Indonesia and China, prompting the Derby-based manufacturer to conduct its own investigation through a law firm, Debevoise & Plimpton.

In a statement last month, Rolls-Royce said the probe had found “matters of concern” in Indonesia and China and other unspecified markets, relating to “concerns about bribery and corruption involving intermediaries in overseas markets.”

Rolls-Royce, which is aware of the Soaringdragon postings, declined to comment on whether the blogger’s allegations were included in the dossier passed to the SFO.

However, the Sunday Times published a statement from China Eastern which appeared to confirm the blogger’s claim that Chen had been arrested by the Chinese authorities in 2011.

It said: “Neither China Eastern nor Air China has any right to talk about Chen’s case; only prosecutorial organs know the real background.”

The deals at the center of the allegations boosted Rolls-Royce’s presence in the rapidly growing Asian aviation market. In 2005 Rolls-Royce said it had received an order from Air China for Trent 700 engines, to power the Airbus A330, worth US$800 million.

Then in 2010, Rolls-Royce said it had won an order from China Eastern worth US$1.2 billion for Trent 700 engines to power 16 A330 aircraft. The China Eastern deal was signed in the presence of British Prime Minister David Cameron in the Great Hall of the People in Beijing during an official trade mission to China.

Rolls-Royce faces the threat of a multimillion-pound fine on both sides of the Atlantic if the allegations escalate into official investigations by authorities, although the SFO and the US Department of Justice have yet to announce whether they will proceed with formal probes.

The Soaringdragon postings are the second set of allegations implicating Rolls-Royce in corruption to be posted on the internet.

Dick Taylor, a former Rolls-Royce employee in Indonesia, had alleged via a series of online postings that Tommy Suharto, the son of the former Indonesian president, was paid US$20 million by Rolls-Royce and given a Rolls-Royce car to persuade the Garuda airline to buy Trent 700 engines in 1990.

Taylor has said he felt “cheated” by his experience at Rolls-Royce, the world’s second-largest aircraft engine maker, after he was warned that he risked redundancy when he raised concerns over a colleague’s expenses claims.

Taylor subsequently took early retirement in 2004, but claims that Rolls-Royce was still making payments to intermediaries in Indonesia in 2010.

The Asia-Pacific region is a vital market for Western aerospace companies targeting new customers amid stagnating demand at home.

According to Airbus, the region will account for 35 percent of aircraft deliveries over the next 20 years, with China overtaking the US as the world’s largest domestic airline market from 2031 onward.

As well as bringing opportunities for aircraft makers such as Airbus SAS and Boeing Co, new jet sales also boost orders for engines.

The front-runners for those orders are the likes of Rolls-Royce and its US rivals, General Electric Co and Pratt & Whitney.

Speaking last month, Rolls-Royce’s chief executive, John Rishton, said the company would not tolerate “improper business conduct of any sort.”

“This is a company with exceptional prospects and I will not accept any behavior that undermines its future success, “ he said.

The company also announced that it will appoint an “independent senior figure” to review its compliance process and report to the board’s ethics committee.

Rolls-Royce is one of Britain’s blue-chip exporters and thus a key manufacturer in British Chancellor of the Exchequer George Osborne’s “march of the makers,” posting revenues of £11.3 billion (US$18.36 billion) last year and a pre-tax profit of £1.2 billion, with its strong future prospects underlined by an order book worth £862.2 billion.