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Rolls-Royce faces second investigation in

Brazil corruption scandal
High-level congressional commission to investigate British engineering group over ties with state
oil company Petrobas

Harry Davies
Sunday 27 September 2015 17.02 BST

Rolls-Royce is facing further scrutiny over bribery allegations in Brazil after a high-level
congressional commission told the Guardian it will investigate the company in
connection with a sprawling corruption scandal.

The beleaguered British engineering group now faces two investigations in Brazil after it
admitted last month it is cooperating with investigating bodies, believed to include
Brazil’s federal anti-corruption authority.

The commission confirmed the inquiry intends to examine Rolls-Royce’s relationship

with Brazil’s state-owned oil company, Petrobras, currently ensnared in a multibillion-
dollar bribery scandal which has prompted political turmoil in the country.

Manoel Alvim, the commission’s secretary, said it has requested documents from the
UK’s Serious Fraud Office (SFO), which is conducting its own separate investigation into
alleged corruption at Rolls-Royce. The SFO has not answered the request.

The inquiry, formed earlier this year and made up of members from Brazil’s lower
chamber, could summon Rolls-Royce executives to testify in public hearings.

In Brazil, an inquiry of this kind has broad investigative powers – including the authority
to compel witnesses to testify under oath and require financial institutions to provide
private banking details. So far, the inquiry has summoned senior politicians and
executives from Petrobras and its contractors.

Rolls-Royce was first dragged into the scandal in February after a former Petrobras
executive alleged the group paid him and others bribes in exchange for contracts with
the oil company.

Rolls-Royce said the company has repeatedly made clear it will not tolerate business
misconduct of any kind, but was unable to comment on its cooperation with
investigating authorities.

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Over the past decade, the Derby-based company has won hundreds of millions of
pounds worth of contracts with Petrobras to supply power turbines for offshore oil
platforms.

The congressional commission’s inquiry opens up a new front in the corruption inquiries
that Rolls-Royce is facing. The company is currently cooperating with Brazilian
authorities believed to include the country’s anti-corruption authority, the Office of the
Comptroller General (CGU).

CGU officials are currently investigating scores of Petrobras contractors over alleged
bribery as part of the sweeping scandal that has hit Brazil’s faltering economy and
triggered a domestic political crisis.

A CGU investigation could have serious consequences for Rolls-Royce. If the authority
brings proceedings, it could face fines of up to 20% of revenues. The GCU can also strike
leniency deals with companies if they pay damages and admit wrongdoing.

The CGU was unable to comment on questions regarding Rolls-Royce. The

spokeswoman said: “The CGU is silent on the research work in progress until they are
finalised.”

Last month, the Guardian reported that investigations into an influential Brazilian
businessman who claimed his consultancy represented Rolls-Royce in Brazil have
intensified.

The businessman, Julio Faerman, has struck a plea bargain with prosecutors in Rio de
Janeiro. In June he appeared before the congressional inquiry to answer questions about
bribery allegations. Faerman has denied any wrongdoing.

Rolls-Royce has been under pressure over corruption allegations since late 2013 after
the SFO launched a criminal investigation into alleged bribery in Indonesia and China.
The SFO’s director said last year that the investigation concerned several divisions of the
company.

The SFO was unable to comment on whether the investigation is now looking at the
company’s activity in Brazil.

In March 2014, Rolls-Royce disclosed it is also cooperating with investigators at the US

Department of Justice in connection with the SFO’s investigation. The involvement of
federal authorities in multiple jurisdictions could increase the range of any fines the
company may be ordered to pay.

In response to cross-border investigations, Rolls-Royce has hired New York law firm
Debevoise & Plimpton. Meanwhile, the company continues to suffer financially with
some investors calling for the group to be broken up.

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In July, Rolls-Royce’s new chief executive Warren East was forced to issue a profit
warning on his second day in the job - the company’s fourth profit warning in 18
months.

More news

Topics
Rolls-Royce Serious Fraud Office Brazil Americas

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