Rolls-Royce the aircraft engine maker might face prosecution due to allegations of corruption in Indonesia, China and other international locations. The company first started as a luxury carmaker. However, it also provides power systems plus services to the marine, energy and defense industries.
The company announced it was fully cooperating with the Serious Fraud Office in the UK in a probe involving intermediaries. Rolls-Royce announced through a statement that the consequences of the disclosures would be decided by regulatory authorities and it is very early to predict any outcome, but there could be prosecution of specific individuals within the company.
After the announcement by the company, shares of Rolls-Royce fell nearly 2% in London trading. BAE Systems, another defense contractor in Britain paid fines of more than $400 million in 2010 also related to an investigation over corruption in Africa, the Middle East and Europe.
Indonesia and China are both losing ground in the battle against corruption said a new survey released by Transparency International this week. The anti-corruption group’s index for 2012 ranked China in 80th place amongst 176 countries, down five places from 2011. Indonesia was even worse as it was ranked at 118 down 18 places from 2011. The index ranks countries on how corrupt the public sector is perceived to be.
Hu Jintao, the outgoing president of China, warned that not tackling corruption could prove to be fatal in the country as well as the Communist Party.
Rolls-Royce announced it was appointing an independent figure to oversee the review of the current procedures at the company.
Get Analysts' Upgrades and Downgrades Daily - Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.