High-profile Asia-Pacific airlines feature prominently in the UK Serious Fraud Office's list of allegations against engine maker Rolls-Royce.
Rolls-Royce will not be prosecuted for the allegations, but will pay a financial penalty under a deferred prosecution agreement. Chief executive Warren East said Rolls-Royce's behaviour had been "completely unacceptable", and that the company was "unreservedly" apologetic.
In its Statement of Facts document, the SFO lists 12 counts against Rolls-Royce. Of these, seven mention Asia-Pacific carriers. One pertains to the AirAsia Group, one to China Eastern Airlines, three to Thai Airways, and two to Garuda Indonesia. The allegations cover a period from 1989 to 2013.
AIRASIA PRIVATE JET
Count 12 relates to AirAsia Group and covers the most recent allegations. The SFO document names no individuals, but accuses Rolls-Royce of having "failed to prevent bribery" by allowing employees to provide an "AirAsia Group executive" with credits to help pay for the maintenance of a privately owned "Global" business aircraft.
In the chronology set out in the document, a senior employee of AirAsia X in August 2011 sought information about Rolls-Royce's engine maintenance programme for private-jet engines that the AirAsia Group executive – the "AAG executive" – was planning to buy. The enquiry was responded to by Rolls-Royce Deutschland.
Months later, in November 2011, a Rolls-Royce employee met with the AAG executive. "I met a very offended [AAG executive] because of the CorporateCare rate he had been offered on a new Global he has just bought," reported the Rolls-Royce employee to colleagues.
Over the next two years, Rolls-Royce executives and the company's compliance department struggled with how to deal with the issue. One challenge was that the business jet was privately owned. The AirAsia X senior executive allegedly pushing Rolls-Royce for the credit avoided discussing the matter in the presence of other AirAsia X personnel, or with Rolls-Royce staff beyond the individual representative.
Ultimately, Rolls-Royce applied to an AirAsia X engine deal a $3.2 million credit that was subsequently applied to the AAG executive's business jet entering the manufacturer's CorporateCare programme.
The document summarises Count 12 thus: "RR [Rolls-Royce] failed to prevent its employees from providing an AirAsia Group executive with credits worth $3.2 million to be used to pay for the maintenance of a private jet despite those employees believing that, in consequence, the AAG executive intended to perform a relevant function improperly."
AirAsia did not respond to FlightGlobal's request for comment.
CHINA EASTERN MBA
In the summary of the China Eastern count, Rolls-Royce is accused of having "failed to prevent its employees from providing a $5 million cash credit to China Eastern Airlines at the request of a board member, in return for his showing favour to RR... in the purchase of Trent 700 engines for A330 aircraft, and associated TCA [TotalCare agreement]. Some or all of the funds were intended to be used by [China Eastern] to pay for a two-week Master of Business Administration course at Columbia University in New York to be attended by various [China Eastern] employees, and including four-star hotel accommodation and lavish extracurricular activities."
An accompanying list of facts offered in the document indicates that the China Eastern board member first broached the idea in August 2010, and after some discussions Rolls-Royce acceded to the request. The $5 million included $2 million for a "pilots' healthcare centre" fund. A "pet project" of the board member, this would help "close the deal". The other $3 million was for "high-level business school training" for China Eastern's "future business leaders".
This business-school investment, the allegations suggest, involved a month of coursework at New York City's Columbia University in 2012, but also a considerable amount of leisure activities, including expensive restaurants, sightseeing, and hotels.
Rolls-Royce compliance and legal professionals expressed concerns about the programme, but it appears executives felt pressure to meet the expectations of a powerful customer.
THAI AIRWAYS TRENT BUYS
The three counts relating to Thai Airways are tied to the periods June 1991-June 1992, March 1992-March 1997 and April 2004-2005, and all involve Trent engine acquisitions by the carrier.
It is alleged in the three counts that Rolls-Royce agreed to pay intermediaries approximately $36.3 million intended for people who would act in Rolls-Royce's favour.
"In the case of Rolls-Royce having admitted to the Serious Fraud Office (SFO) of the United Kingdom on allegations of bribery in a number of countries including Thailand from 1991-2005, Thai confirms the company conducts all its businesses in a transparent manner and without exception to corruption," says Thai in an email to FlightGlobal.
"Thai assures that the company will promptly request and gather information from all the sources in order to investigate the matter thoroughly. When all facts have been compiled and reviewed in detail, Thai shall expedite in determining the appropriate actions to take on any corruption found."
The Garuda Indonesia counts cover two periods, January 1989-December 1998 and July 2011-March 2012. In the first count, it is alleged that senior Rolls-Royce employees agreed to pay $2.25 million and a Rolls-Royce Silver Spirit car to an "Intermediary 1", with an inference that the intermediary "acted as an agent of the office of the President of Indonesia and that this money was a reward for Intermediary 1 showing favour to Rolls-Royce in respect of a contract for Trent 700 engines".
The second Garuda count alleges an "inference that RR failed to prevent its intermediary (Intermediary 8) from bribing employees of Garuda in respect of contracts for TotalCare, and T700 engines for A330 aircraft to be supplied to Garuda. Despite some RR employees being aware of evidence that Intermediary 8 was acting corruptly on RR's behalf. RR failed to sever its relationship with Intermediary 8 until March 2012, having already made two commission payments totalling in excess of $1 million in that month."
In an emailed response to FlightGlobal, Garuda says it is "still working internally upon the case".
The other five of the 12 counts relate to Indian defence acquisitions, and deals in the Nigerian, Indonesian, and Russian energy sectors.
Source: Cirium Dashboard