Rolls-Royce accused of bribing a Chinese airline executive

Blogger alleges that airline executive accepted payments as intermediary in deal to supply aircraft engines valued at £1.25bn 

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 $2bn (£1.25bn) with Air China in 2005 and China Eastern in 2010. They claim an executive who worked at both airlines, Chen Qin, accepted payments as an intermediary in those deals.

Rolls-Royce revealed last month that the Serious Fraud Office 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 Qin 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 centre 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 $800m. Then in 2010 Rolls-Royce said it had won an order from China Eastern worth $1.2bn for Trent 700 engines to power 16 A330 aircraft. The China Eastern deal was signed in the presence of 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 $20m (£12m) 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% of aircraft deliveries over the next 20 years, with China overtaking the US as the world's largest domestic airline market from 2031 onwards. As well as bringing opportunities for aircraft makers such as Airbus and Boeing, 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 and Pratt & Whitney.

Speaking in December, 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 behaviour that undermines its future success". 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 George Osborne's "march of the makers", posting revenues of £11.3bn last year and a pre-tax profit of £1.2bn, with its strong future prospects underlined by an order book worth £62.2bn.

Rolls-Royce has admitted that the disclosures could result in the "prosecution of individuals and the company." Legal experts have warned that Rolls-Royce's co-operation so far will not spare the business from a prosecution by the SFO. The organisation's new boss, David Green, has signalled that the SFO will eschew settlements in favour of prosecutions, tackling a perception that it had been keener in recent years to deal with cases outside the courtroom.

Story:   http://www.guardian.co.uk