Monday, 23 January 2017 11:37
Rolls-Royce: Finally some bragging rights for the SFO?
The £671m deferred prosecution agreement with the aero engine maker marks a successful end to the Serious Fraud Office’s biggest ever investigation, argue Kelly Hagedorn and Jessica Veitch of legal firm Jenner & Block.
Rolls-Royce plc, the British engineering giant, announced on 16 January 2017 that it had agreed to pay a total of approximately £671m by way of settlement with the UK Serious Fraud Office (SFO), US Department of Justice (DoJ) and the Brazilian Ministério Público Federal (MPF), after years of investigations into allegations of bribery and corruption committed by several of the company’s subsidiaries in seven jurisdictions, spanning a period of over 20 years.
It is interesting that a Deferred Prosecution Agreement (DPA) was available to Rolls-Royce at all, given (1) that the conduct was not self-reported to the SFO and (2) the extremely serious nature of the allegations. It is testament to the breadth and depth of the cooperation maintained by the company throughout the SFO’s four-year investigation that this outcome was secured.
Concerns about Rolls-Royce’s conduct first surfaced via internet articles published in 2012. The SFO contacted Rolls-Royce in response to those articles, which then started a long and thoroughly cooperative process between the two organisations.
The DPA was approved by Lord Justice Leveson who concluded (as he is required to do under Schedule 17 of the Crime and Courts Act 2013 if the DPA is to take effect) that approval of the DPA was in the interests of justice and that, taking everything into account, its terms were fair, reasonable and proportionate.
In his judgment, Leveson LJ noted that the investigation was, “in a very large part conducted and voluntarily revealed to the SFO by Rolls-Royce itself”. He frequently emphasised the very high level of cooperation demonstrated by the company, even described by Sir Edward Garnier QC (acting for the SFO) as “extraordinary”. For example, the company conducted 229 internal interviews and reviewed over 250 of its relationships during the course of the investigation. Leveson LJ went as far as to say, “that I entirely accept that Rolls-Royce could not have done more to address the issues that have now been exposed.” Clearly, this level of cooperation, maintained over a number of years and at a high price to the company (estimated to be around £123,115,643 in costs associated with the investigations) was crucial in persuading the Judge that this DPA should be approved.
Securing a DPA of this size marks a successful end to the SFO’s largest investigation to date. The judgment provides further guidance to others who may in future seek a DPA, in particular as regards self-reporting of criminal conduct. Although self-reporting is a necessary prescribed first step in securing a DPA, in exceptional circumstances, committed, long-term cooperation with the SFO may persuade the SFO to initiate DPA discussions and allow companies to avoid the potentially disastrous consequences resulting from a criminal conviction – even if the conduct is very serious and long-running.
Kelly Hagedorn is a Partner, and Jessica Veitch is an Associate at Jenner & Block.