Is Private Sector Corruption Less Serious? Lessons from Airbus, Rolls-Royce and the Rosmah Solar Case
Is Private Sector Corruption Less Serious? Lessons from Airbus, Rolls-Royce and the Rosmah Solar Case
Why “it was only a business deal” is no defence, why compliance manuals alone fail, and what courts in Malaysia, Singapore and the UK have said about punishing corruption between companies
A Problem Bigger Than Many Think
When people think of corruption, they often picture a civil servant taking cash under the table. But much corruption happens entirely between businesses: a purchasing manager accepting kickbacks from a supplier, a sales team paying a client’s staff to win orders, or an agent leaking a rival’s bid in exchange for a secret fee.
The numbers suggest the problem is serious in Malaysia. According to the World Bank’s Enterprise Survey cited in the book, 28.2 per cent of Malaysian firms reported receiving at least one bribe request a year in 2015. By comparison, the figure for Sweden, Ireland and the Netherlands was between 0 and 0.4 per cent in 2020.
MACC’s own figures for 2022 tell a similar story:
Category | Number of arrests (2022) |
|---|---|
Private sector | 386 |
Public officials | 323 |
General public | 181 |
Others | 19 |
The book notes that this is not surprising. Since Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) came into force in June 2020, the MACC’s reach has extended beyond individuals to companies and partnerships, whether incorporated in Malaysia or abroad.
Where Corporate Corruption Happens
No industry is free from corruption risk. It can arise both inside and outside an organisation:
- Externally, companies may bribe public officials to avoid enforcement action or influence decisions, bribe business partners to win contracts, or collude with competitors to form cartels that ultimately hurt consumers.
- Internally, corruption can involve manipulating the company’s own procedures in areas such as recruitment, procurement, administration and finance, affecting everyone from owners and directors to junior staff.
Small businesses face special pressures
Studies cited in the book suggest that small and medium enterprises (SMEs) are more exposed to corruption than large multinationals. SMEs often have less bargaining power to resist demands for bribes, and fewer resources to build compliance systems or run regular audits. They may also feel a stronger temptation to pay bribes to win contracts they cannot win on track record. One report cited in the book suggested that 80 per cent of Malaysian SMEs suffer from corruption, which creates obstacles to obtaining licences, finance and access to supply chains.
This matters because SMEs are the backbone of Malaysia’s economy, and the adequate procedures defence under Section 17A applies to every commercial organisation, regardless of size. A small company cannot argue that it was too small to have anti-corruption procedures.
When Big Companies’ Policies Fail
Multinationals usually have more resources for compliance, yet the UK cases show that written policies alone do not stop corruption. The lesson is that policies only work if they are actually followed and enforced.
Case Spotlight: Director of the Serious Fraud Office v Amec Foster Wheeler Energy Ltd [2021] Lexis Citation 110 (Southwark Crown Court) The facts: Between 1996 and 2014, when the company was known as Foster Wheeler Energy Ltd, it used agents to channel money to public officials in Nigeria, Saudi Arabia, Malaysia, India and Brazil. The Malaysian offending, covered by four of the ten counts, ran from 1997 to 2010. The company had anti-corruption policies throughout, but documents were created to hide the payments, and the SFO found a culture of disregard for compliance procedures. The board’s failure: Between 2007 and 2010, lawyers investigated suspected corruption in several countries and reported evidence that senior employees and directors may have broken bribery laws. The board of the group’s parent company discussed the Saudi report in 2007 but decided not to report anything to the authorities, having been advised there was no legal obligation to do so. Within a short time, very similar corruption began in Brazil. The judge’s view: Although there was no legal duty to report suspected crime, the judge said there is a moral duty on all citizens, which extends at least equally to companies. He described the board’s failure as deplorable, and observed that the company’s policies never worked because it did not want them to. The outcome: Under a deferred prosecution agreement approved in July 2021, the company had to pay about £99.9 million plus £3.4 million in costs in the UK, including about £21.7 million as the fine for the Malaysian offending, as part of a global settlement with the UK, US and Brazilian authorities. The judge only approved the agreement because the company had since changed hands twice and was now owned by John Wood Group, an innocent buyer that had co-operated fully. The lessons: When corruption is discovered, hiding it only makes things worse. For buyers, the case also shows why anti-corruption due diligence matters before acquiring a company, since the new owner may end up paying for the old management’s wrongdoing. |
Other examples from the book show the same pattern:
Company | What was in place | What went wrong | Outcome |
|---|---|---|---|
Airbus | An anti-corruption compliance certificate awarded in 2012, written due diligence policies for business partners | Policies were easily bypassed. Among other things, US$50 million was paid as “sponsorship” of a sports team owned by two AirAsia executives | Close to €1 billion in the UK and over €3.5 billion globally (2020) |
Petrofac | A large international oil and gas group | Senior executives used agents to bribe officials to win oil contracts in Iraq, Saudi Arabia and the UAE, paying about £32 million in bribes for contracts worth about £2.6 billion | Convicted in October 2021 on seven counts. Ordered to pay about £22.8 million in confiscation, fines of over £47 million and £7 million in costs |
Rolls-Royce | Compliance team, contract review committee, ethics committee | Among other things, credits worth US$3.2 million for an AirAsia Group executive’s private jet, and a US$5 million credit for China Eastern Airlines (see below) | Over £510 million in the UK (2017) |
Airline Services Ltd | Legal advice, a draft anti-corruption policy and checklists provided by external advisers in 2010 | After one training session, the company told its advisers it would take “a different approach” and did not implement the recommendations | About £3 million in disgorgement, penalty and costs |
Rolls-Royce and China Eastern: ignoring the warnings
One of the most striking episodes involves China Eastern Airlines, a majority state-owned airline. In 2010, a board member of the airline asked Rolls-Royce to fund a management training programme and to contribute to a pilots’ healthcare centre, which was understood to be his pet project and would “close the deal” on engines for 16 aircraft. Rolls-Royce agreed to contribute US$3 million and US$2 million respectively.
What followed shows how warnings can be overridden from inside a company:
- Rolls-Royce’s compliance and legal staff raised concerns, and an outside law firm advised that the arrangement risked breaching US anti-bribery law.
- Staff suggested converting the credit into cash for the airline to spend as it wished. A compliance employee warned that this would only increase the risk.
- The planned programme turned out to be a two-week trip to a New York business school with four-star hotels and lavish social activities, but only seven days of actual training. Compliance urged the team to stop and take stock immediately.
- Faced with the airline’s displeasure, Rolls-Royce eventually replaced the funds with a US$5 million “spare parts” credit, which the airline took in cash.
According to the court, the gross profit from the related engine and maintenance contract was about £31.1 million. The lesson is that compliance staff must have the authority to stop a deal, not merely to comment on it.
Airline Services: corruption between two private companies
The Airline Services case, as described in the book, shows that corruption does not need a government official. An agent who was supposedly acting for Lufthansa secretly worked for Airline Services at the same time, and was described internally as “our man”. Across three tenders, he passed on confidential information, a list of rival bidders and a competitor’s pricing, and even advised Airline Services to raise its price, to Lufthansa’s detriment. Airline Services won contracts worth over £6.7 million. It admitted that it had no adequate procedures in place from July 2011 to early 2015.
Is Private Sector Corruption Less Serious? The Courts Say No
People charged with corruption have often argued that, because no public official was involved, their offence was a purely commercial matter that should be punished with a fine rather than prison. The courts, particularly in Singapore, have firmly rejected this argument.
Case Spotlight: Lim Teck Chye v Public Prosecutor [2004] 2 SLR(R) 525 (Singapore High Court) The facts: Lim was a director of a bunkering company that supplied fuel to ships. He conspired with his staff to pay marine surveyors to falsely certify that customers’ vessels had received the full amount of fuel, when in fact the company was short-supplying them and buying back fuel from ships’ engineers at below-market prices. He set targets for his staff to secure illicit “gains” and taught them how to avoid undercover anti-corruption officers. The bribes on the six charges totalled only S$6,300. His argument: He said corruption in a commercial context normally attracts only a fine, and that the surveyors who took the bribes had not been jailed. The decision: The court upheld his sentence of six months’ imprisonment and S$240,000 in fines. It held that:
|
Case Spotlight: Public Prosecutor v Ang Seng Thor [2011] 4 SLR 217 (Singapore High Court) The facts: Ang was the chief executive of a listed company supplying equipment to semiconductor makers. He paid S$97,158 to an employee of Seagate in return for purchase orders, and joined his co-managing director in handing S$50,000 to a director of Infineon’s Malaysian plant at a hotel in Malacca, to secure an order for four machines worth about S$1 million. The lower court: The district judge imposed the maximum fine of S$100,000 on each charge, reasoning that private sector corruption normally deserves a fine and that a giver of bribes is less culpable than a receiver. The decision: On appeal, the High Court imposed six weeks’ imprisonment on each charge, to run consecutively, plus a fine of S$25,000 per charge. It held that there is no presumption in favour of a fine for private sector corruption, and that givers are not less culpable than receivers simply because they give. It stressed that courts must set the correct moral tone for business, and that corruption involving senior managers or important business deals adds greatly to the seriousness of the offence. |
Case Spotlight: Public Prosecutor v Syed Mostofa Romel [2015] 3 SLR 1166 (Singapore High Court) The facts: Romel was a trainee surveyor who inspected ships seeking to enter an oil terminal. He told a ship’s captain that his vessel had high-risk defects that would keep it out, then asked for money to leave them out of his report. The captain reported him, and he was caught in a sting operation. The bribes over three occasions totalled US$7,200. The decision: The district judge imposed two months’ jail. The Chief Justice increased it to six months’ imprisonment, holding that the perception that public sector corruption attracts jail while private sector corruption attracts a fine is wrong. Where private sector corruption involves a significant amount, continues over a long period, or involves a serious betrayal of trust, the starting point is likely to be prison. Safety risks to the terminal and its workers were a further aggravating factor. Three types of private sector corruption: The court described three broad categories, which remain a useful guide: | ||
Type | What happens | Likely sentence |
1. Buying a benefit | The person paid confers a benefit within his power, such as placing orders with the payer, whether or not the payer deserves it | Depends on the facts, and may include prison |
2. Paying someone to neglect a duty | The person paid turns a blind eye, for example an inspector ignoring defects | Frequently prison |
3. Paying to avoid unjustified harm | The person paid demands money and threatens harm he has no right to inflict, such as blocking a licence or contract | Generally prison, as the most serious type |
In a related appeal mentioned in Romel, a building manager who made a cleaning subcontractor pay him S$600 a month, under the threat of a bad report that could cost the subcontractor its contract, also had his fine replaced with a prison term. And in Takaaki Masui v Public Prosecutor [2021] 4 SLR 160, two Japanese managers seconded to Singapore who extracted about S$2 million from a flour distributor over several years, by threatening his long-standing distributorship, were each sentenced to 43 months and three weeks’ imprisonment, a fine of about S$200,000 and a penalty of about S$1 million.
Malaysia takes the same approach
Case Spotlight: Public Prosecutor v Subahir bin Salmin [2009] MLJU 670 (High Court, Shah Alam) The facts: Subahir was a project coordinator at a private construction company. After a worker broke his leg in a workplace accident, Subahir had the worker’s time card filled in to show he had worked 30 days in October 2001, when he had actually worked only four. The card was used to pay salary and overtime of about RM1,455, and Subahir cashed the company’s salary cheque. The worker himself received pay only for the days he actually worked, and he reported the matter. The decision: The Sessions Court acquitted him, accepting his story that management had agreed to help the injured worker. On appeal, the High Court found that story to be an afterthought, since it was never put to the company’s owner during cross-examination. It convicted him of using a false document to mislead his principal under the Anti-Corruption Act 1997 and sentenced him to eight months’ imprisonment and a fine of RM10,000. The court’s message: The judge noted that offences in the corporate sector are usually not brought to court, unlike those involving government servants, but that what happened in a private company was still corruption, an evil that must be wiped out. Employers must be able to trust their employees to deal honestly on their behalf. |
The Rosmah Solar Case
Case Spotlight: Public Prosecutor v Rosmah binti Mansor [2022] 9 CLJ 83 (High Court) The background: A private company, Jepak Holdings Sdn Bhd, proposed a project to supply solar hybrid power and maintenance to 369 rural schools in Sarawak, to replace diesel generators. The then Education Minister had doubts about the company’s ability to carry out a project of that size and had recommended an open tender. The High Court’s findings, as described in the book: The company’s representatives were introduced, through her special officer, to Datin Seri Rosmah Mansor, the wife of the then Prime Minister. She held no government office. The court found that she solicited RM187.5 million, 15 per cent of the RM1.25 billion project, after the company had offered 10 per cent, as an inducement to help the company obtain the project by direct negotiation. The payment was disguised as a consultancy agreement with a foreign company for services that were never provided. The company was appointed directly, obtained an advance payment of RM63 million before meeting the usual conditions, and then paid RM1.5 million in cash at her home. The court also found that other officers had not been inclined to approve the company’s requests but did so on the direction of the then Prime Minister. The sentence: She was convicted under section 16(a)(A) of the MACC Act and sentenced to ten years’ imprisonment and a fine of RM970 million, described in the book as the highest fine ever imposed for a corruption offence in Malaysia. The court rejected her plea for one day’s imprisonment, which was based on her being a housewife without income, a first offender and a former “First Lady”. It said corruption had reached almost every level of society and must be curbed before it becomes a pandemic. Status: At the time the book was written, the case was pending appeal in the Court of Appeal. |
The book draws several lessons from the case. Although a government project was involved, the accused was not charged as a public officer. Her influence came from her position as the Prime Minister’s wife, and she used it to extract money from a private company. Procurement procedures were flagrantly ignored, and the biggest loser was the country itself. The book suggests this may explain the record fine, and that the case reinforces the judiciary’s hard-line approach to corruption regardless of whether the accused is a public officer. The judge also warned that if corruption is left unchecked, society will come to accept it as a normal way of life and business.
What This Means for Malaysian Businesses
Common belief | What the cases show |
|---|---|
“It is only a commercial deal, so it will just be a fine.” | Courts in Singapore and Malaysia regularly jail private sector offenders, even for small sums such as S$6,300 or RM1,455 |
“We paid the bribe, we did not receive it, so we are less to blame.” | Givers and receivers start from equal culpability, and masterminds can be treated more harshly |
“We have an anti-corruption policy, so we are protected.” | Airbus, Amec Foster Wheeler and Rolls-Royce all had policies. What matters is whether they are followed and enforced |
“If we find a problem, we can deal with it quietly.” | In Amec Foster Wheeler, the board’s decision not to report was condemned, and the corruption continued |
“We are too small to need compliance.” | The adequate procedures defence under Section 17A applies to every commercial organisation, regardless of size |
“No official was involved, so it is not corruption.” | Bribing a private company’s employee or agent, as in the Airline Services and Seagate cases, is corruption too |
Practical Checklist
- Treat private sector bribery as seriously as bribing officials. Your policies should cover dealings with customers, suppliers, agents and competitors, not just government.
- Give compliance real authority. Compliance staff must be able to stop a transaction, not merely raise concerns that are overridden.
- Scrutinise “creative” payments. Sponsorships, training funds, credits, discounts and consultancy agreements were all used to disguise bribes in these cases.
- Check your agents. Make sure agents are not secretly acting for the other side, and pay only for genuine, documented services.
- Act on red flags and report. If an internal investigation uncovers corruption, deal with it openly rather than trying to contain it quietly.
- Protect time cards, claims and invoices. Even small falsifications to mislead your company can lead to prosecution and jail.
- Do anti-corruption due diligence before buying a company. You may inherit its past wrongdoing.
- Scale procedures to your size, but have them. SMEs can start with a clear policy, a gifts register, basic due diligence and a reporting channel.
Conclusion
Is private sector corruption less serious? The courts’ answer is clear: no. Whether it is a director bribing surveyors, a chief executive paying a customer’s staff, a surveyor extorting ship captains, a coordinator falsifying a time card, or a well-connected individual extracting a share of a school project, the harm to fair competition, to public confidence and to the economy is real.
As the book concludes, corruption in the private sector is no less culpable than corruption in the public sector. With Section 17A now holding companies directly liable, Malaysian businesses of every size can expect the same hard-line approach.
Cases Referred To
- Public Prosecutor v Rosmah binti Mansor [2022] 9 CLJ 83 (High Court), as described in the book
- Public Prosecutor v Subahir bin Salmin [2009] MLJU 670 (High Court, Shah Alam)
- Lim Teck Chye v Public Prosecutor [2004] 2 SLR(R) 525 (Singapore High Court)
- Public Prosecutor v Ang Seng Thor [2011] 4 SLR 217 (Singapore High Court)
- Public Prosecutor v Syed Mostofa Romel [2015] 3 SLR 1166 (Singapore High Court)
- Takaaki Masui v Public Prosecutor [2021] 4 SLR 160 (Singapore High Court)
- Director of the Serious Fraud Office v Amec Foster Wheeler Energy Ltd [2021] Lexis Citation 110
- Director of the Serious Fraud Office v Airbus SE [2020] Lexis Citation 56
- Serious Fraud Office v Rolls-Royce plc and another [2017] Lexis Citation 3
- Director of the Serious Fraud Office v Airline Services Ltd [2020] Lexis Citation 335, as described in the book
- Petrofac Ltd (UK, October 2021), as described in the book from the company’s statement and news reports
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