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Rolls-Royce calls in the fraud squad

At some point much earlier this year Rolls-Royce, the air engine manufacturer, received a call no company would want.

The Serious Fraud Office approached them after a tip-off that something was amiss in the behaviour of some of their intermediaries operating in the Far East.

There were worries about bribery and corruption.

Rolls-Royce headquarters in Derby Credit: Press Association

Intermediaries are individuals or companies who provide services on behalf of a firm, normally in an area where their own staff might be thin on the ground.

So in Rolls-Royce's case, they might be doing sales, distribution, or even repair and overhaul. It is quite common in this kind of sector that those kind of outside agents would be given contracts to operate on a company like Rolls-Royce's behalf.

But the allegations were so serious that the company called in a firm of outside lawyers to investigate.

That external team did identify concerns in Indonesia, China and other countries too. So the company has now handed that file back to the Serious Fraud Office.

There is precious little detail on what might have gone wrong. But sources at the company itself are making it clear this morning, if proven, the allegations are serious enough to warrant prosecution potentially of the individuals involved, and much more damagingly, the firm itself.

Rolls-Royce worker with the company's MT30 engine Credit: Press Association

Although the intermediaries were not on staff at the company, they were still expected to abide by Rolls-Royce's ethics code and bound by their rules.

In fact the company had recently tightened things up in this area. Perhaps not far enough.

Now the prosecuting authorities, the SFO, will decide what happens next.

And the company will appoint a senior external figure to look at their processes. For the company this kind of attention is the last thing they need.

This morning the company's share price has already taken a hit, down nearly three percent.

Reputations are hard won, and costly and easy to lose.