Embraer pays $204m to settle bribery case

26 October 2016

Brazilian aircraft manufacturer Embraer has agreed to pay a penalty of more than $107m after admitting it paid bribes to win contracts.

In a deferred prosecution agreement with US authorities, the company admitted bribing government officials in the Dominican Republic, Saudi Arabia and Mozambique and falsely recording payments in India.

In addition to the penalty the firm will also pay $97m in disgorgement and interest.

The investigation involved the US Department of Justice (DoJ), the Securities and Exchange Commission (SEC) and authorities in Brazil and Saudi Arabia.

“Embraer tried to bribe their way into several profitable aircraft contracts around the world,” said assistant special agent in charge William Maddalena, of the FBI’s Miami Field Office.

“Instead of reaping a nice profit, their criminal conduct earned the Brazilian aircraft manufacturer a substantial penalty that more than wiped out their gains from these contracts.”

Embraer admitted its executives and employees paid bribes to government officials and falsified books and records in connection with aircraft sales to several countries.

A government official in the Dominican Republic was paid $3.52m to secure a contract to sell the country’s air force eight military aircraft for around $92m in 2008.

In 2010 the company paid an official in a state-owned Saudi Arabian company $1.65m, to help ease a sale worth $93m.

A high-level official at Mozambique’s state-owned commercial airline, Linhas Aéreas de Moçambique S.A. (LAM) was paid $800,000 in 2008 to secure LAM’s agreement to purchase two aircraft from Embraer for approximately $65m. 

And in India in 2009, Embraer paid an agent $5.76m via a shell company to win a deal with the Indian Air Force for three aircraft worth approximately $208m. 

The DoJ estimated that Embraer earned profits of nearly $84m on all the sales affected by bribery. 

Embraer also agreed to continue to cooperate with the department’s investigation, enhance its compliance programme, implement a more adequate system of internal accounting controls and retain an independent corporate compliance monitor for three years. 

The DoJ said the aviation company cooperated fully with a SEC investigation and disciplined a number of company employees and executives engaged in the misconduct.

However, it failed to discipline a senior executive who was aware of bribery discussions in emails in 2004 and was overseeing employees engaged in those discussions.

In Brazil 11 people have been charged for their alleged involvement with the case while a further two have been charged in Saudi Arabia.

Embraer said: “The company acknowledges responsibility for the conduct of its employees and agents according to the facts ascertained in the investigation. Embraer deeply regrets this conduct.”

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