A deferred prosecution agreement (DPA), between Rolls-Royce Holdings Plc and the Serious Fraud Office (SFO) has been approved by Sir Brian Leveson QC at a public hearing in the High Court in London. It is the largest penalty levied to date by the SFO for bribery and corruption following the SFO’s biggest individual investigation to date.
Shares in Rolls-Royce, Europe’s largest maker of commercial jet engines, rose almost 7 per cent the day after Rolls-Royce announced that it had agreed with regulators in the UK, US and Brazil to pay £671m (US$809m) in total penalties for bribery and corruption. The UK component of the settlement is a £497.2m penalty plus interest and a payment for the SFO’s costs was approved today by Justice Leveson QC. It is the largest penalty levied by the SFO for a bribery matter to date and is scheduled to be paid over a five-year period. The company has also agreed certain other measures which will see its conduct monitored. In a statement read out in court on behalf of Rolls-Royce, the company apologised for the conduct which had been uncovered.
Under the DPA agreed with the US Department of Justice, Rolls-Royce will pay a US$170m penalty. It will also pay a $25.6m penalty under the Leniency Agreement made with Brazil’s Ministério Público Federal. Under all three agreements, the total payments which will be made by Rolls-Royce in the first year would amount to £293m (US$359m).
Rolls-Royce first announced that it was under investigation by the SFO in December 2013 for its use of intermediaries in a number of foreign markets. The DPA, which was read out in court, describes how Rolls-Royce failed to prevent bribery in Nigeria and Indonesia and hid its use of intermediaries in India. The company also admitted to paying bribes in Russia and to conspiracy to corrupt in India.
In the UK, this is the third DPA the SFO has agreed since 24 February 2014, when provisions in the Crimes and Courts Act 2013 came into effect enabling the SFO and Crown Prosecution Service to agree DPAs with organisations for fraud, bribery and other economic crimes.
DPAs are voluntary agreements which result in the suspension of a prosecution in return for the offending company meeting certain obligations, including the payment of a financial penalty. A DPA is different to a plea deal because the company must account for its offending before a criminal court and the agreement to defer prosecution is not effective until a judge confirms that the DPA is in the interests of justice and its terms are fair, reasonable and proportionate. DPAs are not available to individuals.
Since coming into effect in July 2011, the UK Bribery Act created some of the strictest anti-bribery and corruption laws in the world. Yet, compared to its US-counterpart, the SFO has been criticized for a slow and gradual approach to bringing enforcement action. In this context, the Rolls-Royce DPA marks a significant shift for the SFO in terms of the size of the penalty, the depth and length of its investigation and the multi-jurisdictional cooperation with US and Brazilian authorities. Rolls-Royce will avoid prosecution in the UK so long as it complies with the terms of the DPA.