The shame of UK’s aerospace champ
THE sheer scale of bribery, corruption and deceit by unidentified senior executives, employees and middlemen at Rolls-Royce, Britain’s emblematic aerospace group, is mind-boggling. The case laid out by the Serious Fraud Office before senior judge Sir Brian Leveson is astonishing. The company made available substantial sums to fund bribery and gained at least £250m of profits in the process.
Documents were falsified and the corruption spread far and wide, to Indonesia, China, India, Brazil and elsewhere.
Even worse, although Rolls-Royce has sought to clean itself up following the production of two reports by the lawyer Lord Gold, it did not think it necessary to share these documents with shareholders. Instead, it chooses to hide behind the claim that the reports were procedural and for the board alone, even though they outlined the governance and accounting shortcomings.
A third and final report by Gold will be released because the Court and the Serious Fraud Office demanded it.
Rolls-Royce’s secrecy is in contrast to that of BAE, which released the findings of its internal investigation into bribery conducted by former chief justice Lord Woolf, or the candid report into ethical lapses at Barclays produced by Sir Anthony Salz.
The engineering champion has been lucky. Because the court hearing took place on the same day as Theresa May’s historic address on Brexit, the media opprobrium was less than might otherwise have been the case.
Was this then a case of ‘Jo Moore’ burying bad news on a busy day? It seems not. Timing of the disclosures was driven by the US Department of Justice seeking to clear the decks before the arrival of Donald Trump’s attorney general, Jeff Sessions.
Rolls-Royce shares may have soared 4.4pc in latest trading, largely on a profits upgrade, but the company’s troubles are not over. Some 38 employees, middlemen and others are identified in the court documents as having been involved in the multiple scams. Six of these were sacked by Rolls and another 11 left at their own volition. None of these officials are protected from criminal prosecution by the deferred prosecution agreement and potentially – we simply don’t know – such cases could go to the top of the company.
The best that can be said is that under War- ren East, the company has cleaned itself up and ended disreputable practices. It didn’t have much choice.
Post-tobacco
SO much time has passed since British American Tobacco revealed its new love of smoking by wanting to take full control of family member, Reynolds American, that one could be forgiven for thinking that the £40bn deal would never be done. Showing the requisite amount of resistance, Reynolds has extracted a little more dosh for investors.
BAT’s return to America, after an absence of 12 years, is a recognition that it is missing out on a lucrative market where no one is in any doubt now that cigarettes are killers. So the legal exposure is no longer the danger it once was. As an international fag powerhouse, it was slightly bonkers for BAT to voluntarily exclude itself from the US.
The deal is much more about revenues than cost savings, which amount to a measly £327m – hardly justifying a premium on the Reynolds share price of £8.2bn or so. It also creates a global market leader in brands, which include Newport, Lucky Strike, and Pall Mall, as well as buying into more R&D and expertise in the vaping, post-tobacco age.
BAT has come full circle when it comes to tobacco. Once, the company saw its future in life insurance and department stores, and sought to cap past legal liabilities. Now, it recognises that whatever the social harm and anti-tobacco groups, increased prosperity in emerging markets and high Latin American immigration into the US means that the lights have not gone out.
The only remaining question is what the US authorities make of all this. BAT could argue that even if the companies were run separately in the past, effective control was in London. The arrival of a new president this week means the US Justice Department has much to think about on anti-trust. This transaction won’t quite be over until the Twitter account sings.
Discerning tooth
HOTEL Chocolat thrived over the holidays with a 14.6pc leap in sales.
Chocolate aficionados prefer to invest in the quality St Lucia-sourced stuff rather than the sugar-laden, cheaper versions found in supermarkets. Enjoy.