Multi-Jurisdictional Prosecutions and the SFO Show Teeth in Rolls Royce Settlement
Lauren Connell, Managing Associate at the Volkov Law Group, joins us again for a posting on the Rolls Royce Anti-Corruption Settlement. Lauren can be reached at [email protected]
Rolls Royce’s $800 million global settlement further solidifies what the future of anti-bribery and corruption enforcement looks like: multi-jurisdictional prosecutions based on egregious conduct supported by strong evidence. The similarities to the recent Odebrecht – Braskem $3.5 billion global settlement are striking. Both enforcement actions were multi-jurisdictional, Odebrecht settled with authorities in the US, Brazil, and Switzerland while Rolls Royce settled with authorities in the US, the UK, and Brazil. The DOJ also cited assistance from Austria, Germany, the Netherlands, Singapore, and Turkey in its press release on the Rolls Royce settlement.
Both enforcement actions alleged widespread corruption that occurred at the highest levels of the company across the globe. Odebrecht had its own “Bribery Department” (the “Division of Structured Operations,” very clever name) while Rolls Royce paid over $35 million in bribes through third parties in countries around the world.
Like the Odebrecht settlement, described here, Rolls Royce’s settlement gives us a detailed description of a complex and multi-level bribery scheme in which a “high-level executive with substantial decision-making authority” was involved. The DOJ lists five different third parties who allegedly funneled money for Rolls Royce to bribe government officials in over seven countries, including executives of Petrobras.
Rolls Royce depended primarily upon inflated commission payments to third parties to fund its bribery payments. Government officials were bribed in Thailand, Brazil, Kazakhstan, Azerbaijan, Angola, and Iraq. Rolls Royce’s settlement with UK authorities cited bribery in a wider list of countries, including China, India, Indonesia, Malaysia, Nigeria, Russia, and Thailand. According to the SFO, it is its largest investigation conducted to date and further defines how the SFO will exercise its enforcement authority.
The enforcement actions were aided by email evidence showing that Rolls Royce was aware of the intended use of inflated commission payments. When Rolls Royce attempted to crack down on inflated commission payments, by limiting sales commissions to 5%, Rolls Royce managers and executives disguised commission payments to third parties by booking them separately for other fees or expenses, such as a no-services consulting contract, again documented via email, such as in this email regarding commission payments in Thailand:
I know we have reached agreement with you that [Intermediary 4]’s commission on this project will be 6.5% but this cannot be paid under a single agreement with [Intermediary 4] as it will not be allowed by RR Corporate. So -what we need to do is to split it into two parts – one normal commission, for say 4.5%, and the other 2% must be covered under a separate contract for “local Engineering Assistance.” … [I]t would need to be a separate company, and for a defined scope of work, for which you would invoice RR according to an agreed progress payment schedule.
As companies around the world increase their global footprint, multi-jurisdictional enforcement actions like this will increasingly become the norm. Companies operating globally, particularly those with operations in high-risk countries, need to be proactive in implementing effective compliance programs, conducting internal investigations, and addressing enforcement authorities. In explaining the settlement amount, the DOJ cited that Rolls Royce did not disclose the conduct until after the media was already reporting on it. Considering the scope of the multi-jurisdictional prosecutions we have seen lately, the risks of failing to act will continue to grow.