India files criminal complaint against Rolls-Royce and BAE
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 alleged that the companies had between 2003 and 2012 engaged in a “criminal conspiracy” to “cheat the government of India” over deals to manufacture dozens of BAE’s Hawk aircraft, which used Rolls-Royce engines.
The complaint revives historic allegations of wrongdoing against Rolls-Royce, which in 2017 reached a deferred prosecution agreement with the UK’s Serious Fraud Office following a years-long investigation. The SFO accused the company of illegal practices over three decades in what was at the time one of its longest running cases.
Rolls-Royce said it was “continuing to assist the Indian authorities”, noting that the allegations being investigated were disclosed in the DPA. The company added that it was now a “fundamentally different business”.
“We will not tolerate business misconduct of any sort and are committed to maintaining high ethical standards. India remains an important market for Rolls-Royce.”
BAE said it “would be inappropriate to comment on an ongoing investigation”. The company added that it was “committed to maintaining high standards of ethical conduct that our customers, shareholders, partners and colleagues expect”.
The CBI’s complaint is a so-called first information report, which sets out the allegations for further investigation, and is based on a preliminary inquiry launched in 2016.
It draws on the SFO’s investigation, which stems from a 2004 agreement between India’s defence ministry and the companies to supply 24 Hawk aircraft, along with further licence agreements for India’s Hindustan Aeronautics Limited to manufacture dozens more, in deals that totalled more than £1bn.
The CBI alleged that the companies violated agreements made as part of those deals that prohibited them from making payments to intermediaries or “middlemen”.
The case relates to a 2004 agreement between India’s defence ministry and the companies to supply 24 Hawk aircraft © Indranil Mukherjee/AFP/Getty Images
Under the deferred prosecution agreement reached between Rolls-Royce and the SFO in January 2017, Rolls-Royce agreed to pay slightly less than £500mn to settle allegations of bribery and corruption covering seven jurisdictions, including Indonesia, Russia and India.
In India, the SFO alleged that Rolls-Royce “continued to use one of its key intermediaries in relation to relevant defence contracts” despite restrictions on the use of intermediaries by the Indian government.
In its case, the CBI points to allegations that formed part of the SFO case, including that Rolls-Royce paid £1mn to an intermediary to increase its licence fee from £4mn to £7.5mn. It also points to allegations that an additional payment of £1.85mn was made to prevent a list of the intermediaries from falling into the hands of India’s defence ministry.
The CBI complaint said that former Rolls-Royce director Tim Jones, along with British-Indian businessmen Sudhir Choudhrie and his son Bhanu and others were part of a “criminal conspiracy” over the contracts. It said that the Choudhries “are alleged to be unregistered Indian agents/middlemen” who worked for Rolls-Royce and BAE.
Sudhir, a prominent Liberal Democrat donor, and Bhanu were arrested in 2014 as part of the SFO’s investigation into alleged bribery in Indonesia and China but released without charge. They have previously denied wrongdoing.
Jones could not be reached for comment.
Sudhir Choudhrie did not immediately respond to a request for comment made via LinkedIn. His son Bhanu declined to comment through a spokesperson at one of his companies.
The CBI added that the conspiracy also included “unknown” Indian officials.
The allegations come at a sensitive time for Rolls-Royce, which was hit hard by the halt to international air travel during the pandemic. Shares have climbed more than 50 per cent this year, surging in February after the company posted underlying pre-tax profits of £206mn for 2022, compared with £36mn for 2021.
However, shares remain well below pre-pandemic levels. Tufan Erginbilgic, who took over as chief executive in January, has warned the company has historically underperformed, and has put in place a turnround plan.
Source: Financial Times
