Rolls-Royce faces new questions in Brazil corruption investigation

http://www.theguardian.com/business/2016/jan/01/rolls-royce-brazil-corruption-probe-deepens

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Rolls-Royce is facing fresh questions over its ties to an influential Brazilian businessman after he was charged in connection with a high-profile corruption investigation known as Operation Black Blood.

The businessman, who worked as a representative for Rolls-Royce in Brazil, was charged before Christmas with alleged bribery, money-laundering and tax evasion as part of a scheme involving a Dutch company and Brazil’s state-owned oil giant Petrobras.

Rolls-Royce has repeatedly declined to comment on its relationship with the businessman, Julio Faerman, who told the Guardian his company acted as an agent when Rolls-Royce sold power turbines to Petrobras for offshore oil platforms. Faerman denies any wrongdoing.

The British engineering group is currently cooperating with Brazilian authorities investigating alleged corruption at Petrobras and its contractors. Earlier this year, allegations emerged that Rolls-Royce had paid bribes to Petrobras executives and politicians via its agent in exchange for a $100m (£67.7m) contract with the oil company.

The allegations against Rolls-Royce form part of a widespread, multibillion-dollar scandal that has engulfed Petrobras and other major Brazilian and foreign companies. The scandal, which continues to unfold, has had a profound impact on Brazil’s economy and political landscape.

The prosecutors behind Operation Black Blood have charged 12 individuals, including Faerman and his business partner, for their alleged participation in a long-running bribery scheme between Petrobras and one of its major contractors, SBM Offshore, which builds specialist ships for the oil and gas industry.

Faerman, a former sales agent for SBM in Brazil, was allegedly involved in arranging multimillion-dollar bribes for the Dutch company. Payments of at least $46m were made via Swiss bank accounts, acccording to a statement from federal prosecutors in Rio de Janeiro.

Senior SBM executives, including its current chief executive, are among those charged, as well as former Petrobras executives such as Pedro Barusco, who has alleged in testimony that he received bribes from Rolls-Royce.

Rolls-Royce declined to answer the Guardian’s questions about its relationship with Faerman. Echoing previous statements about allegations in Brazil, a spokesman said the company has “repeatedly made clear it will not tolerate business misconduct of any kind”.

He said: “We have confirmed that we are cooperating with investigating authorities in Brazil, but are unable to comment further on the nature of that co-operation.”

In an email, Faerman told the Guardian he has “not committed any irregularity related to Rolls-Royce’s activities in Brazil”.

He said he was unable to comment on the SBM case because of a plea bargain he had signed with the Brazilian authorities. He declined to comment on a report in the Folha de São Paulo newspaper before Christmas that said he had admitted to paying bribes in the SBM case and been ordered to pay back $54m.

The latest development comes as Rolls-Royce is also still under criminal investigation in the UK over bribery allegations in Asia. The Serious Fraud Office (SFO) launched its investigation in December 2013. Three months later, Rolls-Royce said it was also cooperating with investigators at the US Department of Justice.

The Guardian understands that the SFO met Brazilian prosecutors earlier this year in connection with the Petrobras affair. The SFO has previously indicated the investigation concerns a number of Rolls-Royce devisions, but declined to comment on whether it is now considering the group’s activities in Brazil.

Rolls-Royce is currently undergoing company-wide upheaval after a series of profit warnings over the past two years. Earlier this month, Warren East, who became chief executive in July, ordered a drastic restructuring of the group in an effort to cut costs.

In Brazil, the sprawling investigation into the Petrobras affair, known as Operation Car Wash, intensified in December when federal police conducted 53 raids across seven states, including senior politicians’ residences. About 30 foreign companies are believed to be under investigation.

Responding to the charges against its senior executives, SBM said in a statement there were “no impediments” to either continuing in their roles. “We have no doubts regarding the integrity of both,” the company said.

In July, the Guardian reported that SBM would receive £34m worth of financial support from the UK’s export finance agency despite its involvement in the scandal. The significant financial support will go towards one of SBM’s flagship oil projects in Brazil.