Legal Magazine

Embraer Probe Leads to $205M Settlement of Corruption Charges

Posted on the 08 November 2016 by Angelicolaw @AngelicoLaw

In 2009, Brazilian plane maker Embraer sold eight of its Super Tucano turboprop planes to the Dominican Republic for $94 million. The Dominican government said the planes were used to fight the drug trade in South America, but an international investigation shows otherwise. It turned up bribes linked to that deal and others. Now Embraer has agreed to pay $205 million to authorities in Brazil and the United States to settle the charges. According to Reuters, the settlement resolves a six-year corruption investigation and prevents the company from being prosecuted by U.S. authorities under the Foreign Corrupt Practices Act.

Brazilians have become familiar with corruption investigations probing deals that Brazilian businesses and government officials broker to skirt the law. The Embraer inquiry, however, is different. It shows how corruption schemes involving Brazilian companies can also cross international borders, leading Brazilian authorities to work with agencies in other countries.

According to the U.S. Securities and Exchange Commission (SEC), Embraer boosted its revenue by using third parties to cover up bribes paid to government officials who had influence over contracts that it sought to win. The questionable contracts involved deals for aircraft sold to entities in the Dominican Republic, Saudi Arabia, India, and Mozambique.

Embraer reportedly took extreme precautions to keep its activities secret. Court documents showed that Embraer used a United Kingdom-based shell company to hire a person who would ensure that Embraer would be awarded Indian defense contracts without competitive bidding, Bloomberg reported. Later, the company secured a $208 million contract to provide aircraft for the Indian Air Force, for which the hired agent was paid a $5.7 million commission.

Brazilian authorities charged eleven people and Saudi Arabia charged two. The arrest of four in the Dominican Republic included a former defense minister accused of accepting a $3.5 million bribe in exchange for ordering military aircraft. In total, Embraer reaped $83 million in profit by paying $11.7 million in bribes.

Embraer issued a statement acknowledging the findings of the inquiry and the company’s role in the conspiracy. Embraer also took responsibility for the conduct of its employees and agents. Under the settlement, the company will pay $107 million to the U.S. Justice Department and $98 million to the SEC; the $20 million owed to Brazilian authorities will be deducted from what it pays to the SEC.

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