Proactive Investors - Rolls-Royce Holdings PLC (LON:RR.) is reportedly facing a hefty lawsuit from investors seeking compensation for losses suffered on the back of a corruption scandal in 2017.
According to The Telegraph, a group of investors are seeking around £350 million following the scandal, which saw Rolls-Royce agree to pay £497 million to settle allegations in the UK.
Accusations had been made that the FTSE 100-listed manufacturer bribed officials in the likes of Indonesia to win contracts and forged documents to conceal commissions paid in India.
Investors are poised to argue that Rolls-Royce made misrepresentations to the market about the events, though the firm said it had not yet received a formal indication of the case.
“Rolls-Royce today is a fundamentally different business [it] has zero tolerance for business misconduct,” the company said via a spokesperson.
“We have transformed our internal ethics and compliance procedures, that is why in January last year the Serious Fraud Office filed a notice releasing us from the UK Deferred Prosecution Agreement.”
So what happened?
Rolls-Royce had entered the Deferred Prosecution Agreement in January 2017, which saw it voluntarily admit wrongdoing to the UK’s Serious Fraud Office following a four-year investigation.
This covered allegations that Rolls-Royce paid millions of pounds in bribes, sometimes to middlemen, to secure military and civil contracts overseas.
Such misconduct spread to the likes of Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia, according to the Serious Fraud Office, having taken place over three decades.
One such case saw Rolls-Royce allegedly pay US$20 million to secure a deal with flagship Indonesian airline Garuda for 700 engines.
Another saw documents supposedly falsified to conceal a commission paid to an official from Russian oil firm Gazprom (MCX:GAZP) in India.
In total, the Serious Fraud Office said its agreement with Rolls-Royce - which constituted the largest fine of its kind in the UK - covered 12 cases of “conspiracy to corrupt, false accounting and failure to prevent bribery”.
This had stretched to senior employees, the office added at the time, though no individual convictions were made.
Some £671 extra was paid to settle similar investigations with regulators in the US and Brazil, meanwhile.
Rolls-Royce has since been on a path of reform, with the pandemic having hit the company in the years after the scandal.
This saw the appointment of Tufan Erginbilgic as chief executive early this year, who has since laid out a plan to transform the company back to consistent profitability.
Despite such drastic changes since the scandal, the reported lawsuit from investors comes after the Serious Fraud Office’s own warnings back in 2017 that Rolls-Royce would have to deal with the fallout of the accusations for years to come.