Published: Wed, October 26, 2016
Economy | By Melissa Porter

Embraer to pay $205M to resolve FCPA charges

Embraer to pay $205M to resolve FCPA charges

According to the company's admissions, Embraer executives and employees paid bribes to government officials and falsified books and records in connection with aircraft sales to foreign governments and state-owned entities in multiple countries. An additional $1.65 million bribe was paid to an official in Saudi Arabia.

To hide the payment Embraer created a false agency agreement.

Embraer said it is not party to those parallel criminal investigations in Brazil.

A day after Brazilian aerospace conglomerate Embraer announced settlement with U.S. and Brazilian authorities in the ongoing corruption investigation against it, Defence Minister Manohar Parrikar said decision here will be taken based on CBI investigation.

Defence Minister Manohar Parrikar on Tuesday said that the Central Bureau of Investigation's (CBI) probe into the Embraer deal will continue and the Brazilian aircraft manufacturer can not escape Indian laws just because it has struck a settlement with American authorities.

Additionally, Embraer also entered into a three-year deferred prosecution agreement with the Justice Department, in which Embraer agreed to continue to cooperate with the Department's investigation; enhance its compliance program; implement a more adequate system of internal accounting controls; and retain an independent corporate compliance monitor for a term of three years.

"As alleged in our complaint, Embraer realized significant revenues by surreptitiously using third parties to mask bribes paid to government officials with influence over contracts it was competing to win", said the director of the SEC's enforcement division, Andrew J. Ceresney.

According to Brazil's Monetary Values Commission - the SEC's counterpart in Brazil - Embraer has admitted to paying roughly $6 million in bribes to government officials in Dominican Republic, Saudi Arabia, and Mozambique to sell military aircraft between 2007 and 2010.

The Justice Department announced penalties of $107 million, and the SEC announced it will claw back profits and interest payments from Embraer worth a combined $98 million. The company set aside $200 million in second-quarter provisions for the anticipated settlement, leading to a net loss of $99.4 million. According to the complaint, the company paid $3.52 million in bribes to an official in the Dominican Republic to secure a military contract there. On November 21, 2009, more than a year after it was awarded the India contract, Embraer through its wholly-owned subsidiary - ECC Investment Switzerland AG - executed an agency agreement with a shell company domiciled in Singapore and affiliated with Agent D for its purported services as an agent in a sale Embraer had made to an unrelated customer in another country that had purchased an Embraer aircraft more than a year earlier in July, 2008. The Dominican Republic government said they used the planes, which have bubble glass cockpits and noses painted with growling teeth, to combat aerial drops of drugs from South America. Embraer agreed to pay $5.76 after a meeting with lawyers representing Agent D.

Three years later, Embraer executed a contract valued at $208 million to provide three highly specialized aircraft for the Indian Air Force, authorities said.

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