Rolls-Royce Holding PLC (PINK:RYCEY) (LON:RR) has announced that it is being investigated by the Serious Fraud Office in the UK. The investigation is in connection with possible bribery involving overseas intermediaries, and it could result in prosecution of both the company and individuals who are suspected of being involved.
Rolls-Royce Holding PLC (PINK:RYCEY) (LON:RR) is the second largest aircraft engine maker in the world behind General Electric Company (NYSE:GE). The company said it is cooperating with the investigation and has given the SFO information about some concerns the agency has about corruption in intermediaries in Indonesia, China, and other international markets.
An anonymous source told Fox Business that the SFO had already spoken with Rolls-Royce earlier this year and asked the company to investigate possible corruption in Indonesia and China. Rolls-Royce paid a third party to handle the investigation and gave the results of it to the SFO.
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It’s not uncommon for defense and aerospace companies to use intermediaries in places where they don’t have the infrastructure that is needed to handle their operations. Intermediaries can handle a variety of jobs, including everything from sales to handling contracts.
Shares of Rolls-Royce Holding PLC (PINK:RYCEY) (LON:RR) plummeted this morning in London trading after the announcement. Shares opened in London trades at 885 pounds per share, and then dropped as low as 866 pounds per share. Since that initial drop, shares of Rolls-Royce Holding PLC (PINK:RYCEY) (LON:RR) have recovered and settled back around 888 pounds per share. The stock has risen about 25 percent this year, so today’s drop takes it lower than it has been in a year.