This article first appeared in The Edge Malaysia Weekly on February 10, 2020 - February 16, 2020
THE recent Airbus bribery scandal has once again put the spotlight on the 2017 settlement that London-listed Rolls-Royce plc made with authorities to avoid being prosecuted by anti-corruption investigators in the UK, the US and Brazil.
In the Rolls-Royce case, the aircraft engine maker paid £671 million (US$809 million) in penalties after long-running investigations into claims it paid bribes to win export contracts. In comparison, Airbus will pay €3.6 billion (US$4 billion) in fines to the UK, France and the US to settle its corruption case.
Back then, the statement of facts released by the UK’s Serious Fraud Office (SFO) in relation to the Rolls-Royce court case had also implicated an executive of AirAsia Group Bhd (AAB).
At the time, the British Crown Court found Rolls-Royce to have failed to prevent its employees from providing the AAB executive with credits worth US$3.2 million, to be used to pay for the maintenance of a private jet despite them believing that, in consequence, the AAB executive intended to perform a relevant function improperly. The offence was committed between July 2011 and November 2013.
“This financial advantage was given at the request of the AAB executive, in return for his showing favour towards Rolls-Royce in the purchase of products and services provided by Rolls-Royce and its subsidiaries, including Total Care Agreement (TCA) services to be supplied to AirAsia X Bhd (AAX), a subsidiary of AAB,” says the statement of facts.
In August 2011, according to the statement, a senior employee of AAX had made contact with Rolls-Royce employees seeking information about its engine maintenance programme. The enquiry was in respect of a private jet the AAB executive was planning to purchase.
In November 2011, a Rolls-Royce senior employee met the AAB executive and reported to other employees that “[I] met a very offended [AAB executive] ... because of the CorporateCare rate he had been offered on a new Global he has just bought”.
The CorporateCare programme is a service provided by Rolls-Royce for the maintenance of corporate jets. Due to the condition of the private jet, it would require a US$3 million entry fee and Rolls-Royce could only offer a 15%, or US$450,000, discount.
The jet, it was discovered, was owned by the AAB executive, a second AAB executive and other individuals. While the document did not name who the AAB executives were, it was reported that AirAsia group CEO Tan Sri Tony Fernandes partly owned the jet.
In another exchange on Aug 17, 2012, a Rolls-Royce employee had reported to a senior colleague and others that the AAB executive was seeking to make the corporate jet deal “invisible” with its “value covered within additional A330 TCA charges” for AAX.
According to the statement of facts, in July 2013, three contractual documents were signed by Rolls-Royce and AAX. Among them was the Supplemental Financial Assistance Agreement, which refers to the credits of US$3.2 million. However, none of the documents had made reference to the anticipated use.
It was also revealed that the documents were not clear or transparent to anyone other than the AAX senior employee and the Rolls-Royce employees.
“By the end of November 2013, those credits had been transferred by the AAX senior employee to this company. They were then redeemed with the Rolls-Royce civil business unit, which then transferred the funds to RRD (Royce-Rolls Deutschland, the division managing Royce-Rolls’ CorporateCare service) to cover the cost of the AAB executive’s jet entering the CorporateCare programme,” says the statement of facts. The company refers to the vehicle through which the AAB executive and other individuals owned the jet.
In a filing with Bursa Malaysia in January 2017, AAB has refuted reports linking it to a Rolls-Royce bribery case, noting that it has had no dealings or transactions with the company.
Referring to the Bombardier Global Express corporate jet owned by Caterhamjet Global Ltd that was mentioned in an article in The Financial Times on Jan 22, 2017, AAB said it had already gone through the due process and obtained the necessary approval for the transaction from its audit committee and board of directors, and recommended to its shareholders for approval under recurrent related-party transactions circulars at the general meetings held on June 3, 2015, and May 30, 2016.
“The duly obtained shareholders’ approvals were subsequently announced to Bursa on the same respective dates,” it added.
AAB went on to explain that under the agreement executed for the transaction, it was required to make an annual contribution of US$3 million per year for the use of the corporate jet and, in return, Caterhamjet Global would provide a minimum of 75 flight hours per month to AAB executives.
It added that AAB had also entered into an agreement to acquire that same aircraft from Caterhamjet Global on June 21, 2016. Caterhamjet Global was reported to be a company in which Fernandes and AirAsia chairman Datuk Kamarudin Meranun held an 18.56% indirect stake as at January 2017.
Unlike the bribery allegations pertaining to the purchase of Airbus aircraft, the Rolls-Royce case was never pursued by local authorities such as the Malaysian Anti-Corruption Commission and the Securities Commission Malaysia.
However, more recently, on Dec 30, 2019, Indonesian press reported that Indonesia’s Corruption Eradication Commission (KPK) had charged former Garuda Indonesia president director Emirsyah Satar with receiving IDR46 billion in bribes from former PT Mugi Rekso Abadi president director Soetikno Soedarjo pertaining to the procurement of Rolls-Royce engine parts for Airbus airplanes during Emirsyah’s tenure as president director.
Emirsyah served as the carrier’s CEO from 2005 to 2014.
KPK spokesperson Febri Diansyah was reported to have said that investigators are handing over Emirsyah and Soetikno as well as evidence to prosecutors, adding that the trial will begin soon in the Jakarta Corruption Court.
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