AirAsia, the Malaysian budget carrier, has denied wrongdoing after an inquiry into corruption at Rolls-Royce found that the UK engine maker failed to prevent its employees from bribing an AirAsia executive with a $3.2m discount for the maintenance of a private jet part-owned by Tony Fernandes, the airline’s co-founder.
The UK’s Serious Fraud Office charged that Rolls-Royce failed to prevent staff from paying a credit “despite those employees believing that, in consequence, the AAG executive intended to perform a relevant function improperly.” This discount was given at the request of an AirAsia executive in return for his “showing favour” towards Rolls-Royce in the purchase of products and services, said the SFO.
The $3.2m credits were provided for a Bombardier Global Xpress business jet owned by Tune Group, the investment holding company set up by Mr Fernandes, the AirAsia chief executive, and his business partner Kamarudin Meranun, AirAsia’s executive chairman, the Financial Times has established.
AirAsia’s denial comes after Rolls-Royce last week admitted a string of bribery and corruption offenses stretching over 23 years and a dozen countries as part of a £671m settlement with authorities in the UK, US and Brazil.
The company will not be prosecuted as long as it abides by the terms of the settlement, but UK and US investigators are expected to launch criminal charges against individuals in the coming months.
Sir John Rose, chief executive between 1996 and 2011, has hired the lawyer who defended Barings rogue trader Nick Leeson to represent him in relation to the probe. The lawyer, Stephen Pollard, partner at WilmerHale, declined to comment.
A former music executive, Mr. Fernandes bought AirAsia, then a tiny, lossmaking airline, in 2001 and built it into the region’s biggest low-cost carrier. An outspoken businessman with a passion for sports, he owns Queens Park Rangers, the London football club, alongside Mr Meranun and other investors.
After rapid expansion left AirAsia saddled with debt and prompted questions about its accounting practices, Mr Fernandes has moved to reorganise the group, implementing a debt-for-equity conversion at its struggling Indonesian subsidiary, raising cash through the sale and leaseback of aircraft and planning to spin off its leasing division.
AirAsia said it had “followed all procedures” in obtaining credits from Rolls-Royce and that the private jet was used by the AirAsia’s executives for business travel, with the airline paying for the operational and maintenance costs.
At the time when the private jet credits were provided, AirAsia and Rolls-Royce were negotiating on the lease of aircraft with Rolls-Royce engines, for which the British company would provide servicing.
The purpose of the credits was not “clear or transparent” to anyone at AirAsia apart from a single senior employee, the SFO said.
In a message disclosed by the SFO, Rolls-Royce’s compliance department warned against providing the credits, saying the UK company could not grant the AirAsia executive preferential rates on a personal aircraft just because of the business the two companies were transacting.
“The two should not be linked as there are both legal and ethical implications to doing so,” the Rolls-Royce compliance department said.
AirAsia said that the credits were used to offset the operational costs of the corporate jet used by senior executives of AirAsia X — the carrier’s long-haul arm — for business travel.
The airline added: “AirAsia and AirAsia X board of directors and management were kept informed at all times of transactions relating to the jet, the upkeep for which was also clearly spelt out in the annual reports for both companies and AirAsia X initial public offering prospectus.”
AirAsia bought the Bombardier private jet from CaterhamJet Global, a company in which Tune Group is the sole shareholder, for $10m in June last year.
Indonesia’s anti-corruption agency announced last week that it had placed two people under investigation for suspected corruption in the purchase of aircraft and engines from Rolls-Royce and Airbus.
Singapore’s Corrupt Practices Investigations Bureau said that it was “working closely with the relevant authorities” in connection with the investigation into Rolls-Royce.
Original article can be found here: https://www.ft.com
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