EMBRAER GUILTY OF BRIBING OFFICIALS

US Assistant Attorney General Leslie R. Caldwell announced on Monday that the Brazilian aircraft manufacturer Embraer has agreed to pay a penalty of more than 107 million US dollars in connection with schemes involving the bribery of government officials in Mozambique, the Dominican Republic, and Saudi Arabia, and to pay millions more in falsely recorded payments in India via a sham agency agreement.

“Embraer paid millions of dollars in bribes to win government aircraft contracts in three different continents,” said Caldwell, in a statement issued by the US Justice Department. “But this prosecution shows that the Criminal Division (of the Justice Department) will hold accountable those who treat corruption as a mere cost of doing business”. The investigation was the joint work of the US, Brazilian and Saudi authorities. “Bribe payers and bribe takers alike have been brought to justice for their wrongdoing,” declared Caldwell.“Embraer tried to bribe their way into several profitable aircraft contracts around the world,” said the Assistant Special Agent in charge of the case, William Maddalena. “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. Crime does not pay!”Under questioning, Embraer admitted that its executives had bribed foreign government officials and had falsified records in connection with aircrafts sales in several countries. The Mozambican connection was a bribe of 800,000 dollars paid via what the Justice Department describes as “a false agency agreement with an intermediary designated by a high-level official” in Mozambique Airlines (LAM). The purpose of the bribe was to secure LAM’s agreement to purchase two aircraft from Embraer for approximately 65 million dollars. So the Mozambican public now knows the real reason why there are Embraer aircraft in LAM’s fleet.Other crimes that Embraer admitted to include a bribe of 3.52 million dollars to a government official in the Dominican Republic to secure a contract to sell the Dominican Air Force eight military aircraft for approximately 92 million dollars, and a bribe of 1.65 million dollars to an official at a Saudi Arabian company to secure the purchase of three Embraer aircraft for about 93 million dollars. Embraer earned profits of nearly 84 million dollars on the aircraft sales secured by bribes. Those profits have been wiped out by the 107 million dollar payment.The Justice Department says that Embraer entered into a three-year deferred prosecution agreement (DPA) to resolve the case. As part of the DPA, Embraer admitted to its involvement in a conspiracy to violate anti-bribery and books and records provisions and to its ”willful failure to implement an adequate system of internal accounting controls”. The full cost to Embraer of these cases is much higher – the company has also reached a settlement with the US Securities and Exchange Commission which will cost it over 98 million dollars, and it will pay the Brazilian authorities 20 million dollars.The Brazilian authorities have charged 11 individuals for their alleged involvement in Embraer’s misconduct in the Dominican Republic, while the Saudi authorities have charged two individuals for their alleged involvement in Embraer’s misconduct in Saudi Arabia.

Nobody has been charged in Mozambique, and the LAM official involved has so far not been named.Court documents cited by the Bloomberg agency say that the initial bribe offered by Embraer to secure the Mozambican purchase was between 100,000 and 160,000 dollars. This was rejected as far too low. “It would have been less insulting to give nothing,” the unnamed Mozambican official told an Embraer executive, according to the court documents. The official suggested a bribe of a million dollar, but apparently settled for 800,000.Embraer has issued an apology. “The company acknowledges responsibility for the conduct of its employees and agents according to the facts ascertained in the investigation,” Embraer said in a statement. “Embraer deeply regrets this conduct. The company has learned from this experience and will be stronger as it moves forward.”