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Embraer pays $205.5 million to US and Brazil, settles six-year corruption probe

The new EMBRAER multi-functional aircraft KC-390 is displayed at Brasilia's Air Base on April 5, 2016. Photograph: (AFP)

Reuters S?o Paulo - State of S?o Paulo, Brazil Oct 24, 2016, 05.10 PM (IST)


Brazilian aerospace company Embraer SA today reached a USD 205.5 million agreement with US and Brazilian authorities to settle a six-year corruption investigation, international news agency Reuters reported. 

 

The aerospace company and the US investigators were quoted as saying by Reuters that a probe had found evidence of wrongdoing in deals with Saudi Arabia, India, Mozambique and the Dominican Republic between 2007 and 2011.

 

The US Justice Department and Securities and Exchange Commission (SEC) announced jointly that the company took in nearly $84 million in profits on aircraft sales after paying bribes, AFP reported. 

 

"Embraer paid millions of dollars in bribes to win government aircraft contracts in three different continents,” assistant attorney general Leslie Caldwell, head of the justice department`s criminal division, said in a statement, according to AFP. 

 

The company will pay a USD 107 million fine to the Justice Department as well as give up USD 98 million in ill-gotten gains, or disgorgement, to the SEC. Embraer also agreed to retain an independent consultant for a period of three years  to monitor its legal compliance. 

 

The aerospace company admitted to a conspiracy to violate the FCPA and had wilfully failed to create internal accounting controls which could have prevented the corruption, the justice department  was quoted as saying by AFP. 

 

The alleged bribery included payments of USD 3.5 million to "an influential government official" in the Dominican Republic for a contract on the USD 92 million sale of eight aircraft to the local air force; $1.7 million to an official at a Saudi state enterprise for a USD 93 million sale of three aircraft; and USD 800,000 to a senior representative of a Mozambican state airline to win a USD 65 million sale, the news agency said. 

 

The company also allegedly made USD 5.8 million in payments via a shell company in connection with a contract to sell three aircraft on to the Indian air force.

 

According to Reuters, the fine due to US and Brazilian authorities is in line with a USD 200 million provision Embraer made in July.

 

"The settlement is no question a positive, although the reaction may be more muted as management has done a good job communicating the potential implication of the investigation in recent months," RBC Capital Markets analyst Derek Spronck was quoted saying by Reuters. 

 

In the recent years, Embraer, the world's third-largest maker of commercial jets, has replaced much of its senior management, reinforced compliance efforts and curtailed use of third-party sales representatives, who drew suspicion in the deals under review.

 

The internal investigation was led by Baker & McKenzie  and it expanded beyond the scope of US authorities' initial inquiry, reviewing hundreds of thousands of documents and conducting more than 100 interviews, the company said in a public statement, according to Reuters. 

 

(WION with inputs from AFP, Reuters) 
 

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