India files criminal complaint against Rolls-Royce, BAE

Groups accused of historic deals for supply of fighter jets to country India’s top investigative agency has filed a criminal complaint accusing Rolls-Royce and BAE Systems of engaging in corruption over historic deals to supply fighter jets to the country.

The Central Bureau of Investigation (CBI) alleged that between 2003 and 2012, the companies engaged in a criminal conspiracy to “cheat” the Indian government over deals for the manufacture of dozens of BAE Hawk aircraft which used Rolls-Royce engine.

The complaint brings back historic allegations against Rolls-Royce. In 2017, the UK Serious Fraud Office reached a deferred prosecutor agreement following an investigation that lasted for years. In what was then one of the SFO’s most long-running cases, the SFO accused Rolls-Royce of illegal practices for over 30 years.

Rolls-Royce stated that it “continues to assist the Indian Authorities”, noting the allegations under investigation were disclosed in DPA. The company said that its business was “fundamentally” different.

We will not tolerate any business misconduct and we are committed to upholding high ethical standards. India is an important market for Rolls-Royce.”

BAE stated that it “would not be appropriate to comment on a current investigation”. The company said that it is “committed” to maintaining the high standards of ethics that its customers, shareholders and partners expect.

The CBI complaint is what is known as a first information report. It outlines the allegations that will be investigated further and is based upon a preliminary investigation launched in 2016.

The SFO investigation is based on a 2004 agreement that was made between the Indian defence ministry and companies for the supply of 24 Hawk aircraft. Further licence agreements were also signed by Hindustan Aeronautics Limited in India to manufacture several dozen more Hawks, with a total value of more than £1bn.

The CBI claimed that these companies had violated agreements that were part of the deals, which prohibited them from paying intermediaries. In January 2017, Rolls-Royce reached a deferred prosecution deal with the SFO. Under this agreement, Rolls-Royce agreed that it would pay a little less than £500mn in order to settle allegations of corruption and bribery in seven countries, including Indonesia and Russia.

The SFO claimed that Rolls-Royce in India “continued using one of its main intermediaries with respect to relevant defense contracts” despite Indian government restrictions on the use intermediaries.

The CBI cites allegations in its case that were part of the SFO investigation, such as that Rolls-Royce had paid £1mn (£1mn) to an intermediary for the purpose of increasing its licence fee, which was originally £4mn, to £7.5mn. The CBI also refers to allegations that a payment of £1.85mn extra was made in order to prevent the Indian defence ministry from obtaining a list of intermediaries.

According to the CBI complaint, former Rolls-Royce Director Tim Jones along with British-Indian Sudhir Choudhrie, his son Bhanu, and other businessmen were involved in a “criminal conspiracies” regarding contracts. The CBI complaint said that the Choudhries were “alleged to be unregistered Indian middlemen/agents” who worked at Rolls-Royce or BAE.

Sudhir, a Liberal Democrat donor and Bhanu, a prominent Liberal Democrat, were detained in 2014 in the SFO investigation into alleged bribery allegations in Indonesia and China, but released. The two men have denied any wrongdoing.

Jones was not available for comment.

Sudhir Choudhrie didn’t immediately respond to an inquiry made on LinkedIn. Bhanu Choudhrie declined to make a comment via a spokesperson from one of his businesses.

The CBI also added that “unknown” Indian officials were included in the conspiracy.

Rolls-Royce is facing a difficult time, as the company was severely affected by the suspension of international travel due to the pandemic. The company’s shares have increased by more than 50% this year. They surged in February, after it announced a underlying profit of £206mn (compared to £36mn) for 2022.

The shares are still well below their pre-pandemic level. Tufan Erginbilgic who became chief executive of the company in January has warned that it has historically underperformed and put in place a turnaround plan.

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