EMBRAER BRIBE SCANDAL

A document from the Federal Public Prosecutor’s Office in Brazil has named the former chairperson of the board of Mozambican Airlines (LAM), Jose Viegas, as involved in taking an 800,000 US dollar bribe from the Brazilian aircraft manufacturer, Embraer.The scandal came to light in October, when US Assistant Attorney General Leslie R. Caldwell announced that Embraer had agreed to pay a fine of more than 107 million US dollars in connection with schemes involving the bribery of senior officials in Mozambique, the Dominican Republic, India and Saudi Arabia. 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. 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 (SEC) which will cost it over 98 million dollars, and it will pay the Brazilian authorities 20 million dollars.The documentation on the case from the US Justice Department and the SEC gives details of how the bribe was paid, but gives no names. The Brazilian prosecutors are less reticient. Their document, dated 6 October this year, and signed by both prosecutors and senior Embraer officials names Viegas as the LAM official involved and the intermediary (or “Agent C” as he is referred to in one of the US documents) as Mateus Zimba. 

Zimba was not an employee of LAM. For many years he was the Mozambican manager of the South African petrochemical giant, SASOL, and is currently the regional director of the US company General Electric.According to the Brazilian document, Embraer sales director Patrice Candaten had been trying for three years to sell aircraft to LAM and on 22 May 2008 formalised a proposal for the sale of two aircraft for 32 million dollars each, with an option to purchase a further two at the same price.But on 11 August 2008, Candaten sent an e-mail to Luis Fuchs, Vice-President of Embraer-Europe, saying that he had been approached by Mateus Zimba, who had played no part in the sales negotiations.

Zimba wanted to work as “a consultant” in the deal, and Candaten proposed that Embraer “create some margin for commissions” for Zimba.Fuchs sent a message to Candaten two days later saying he had spoken to Zimba who told him that, although Embraer had not expected to deal with any consultant, “we would like to have ‘a gesture’ on delivery of the first plane”. Fuchs suggested that this “gesture” could be between 50,000 and 80,000 dollars.He added that he had told Zimba how to set up a company to which Embraer could send payments for the supposed “consultancy services”. This company “should not be based in a tax haven”, Fuchs warned.Another senior Embraer official, Jose Molina, approved the offer of 50,000 dollars to Zimba for each of the first two planes with “a margin of negotiation” that could reach 80,000 dollars.But when Zimba received this “offer”, Fuchs soon understood that he was expecting much more, and hinted that unless the “offer” was increased, LAM might buy its planes from some other manufacturer.Viegas then phoned Fuchs, who briefed Candaten on the conversation in an e-mail of 25 August. He said that Viegas had received reactions from unnamed other people who regarded the Embraer offer “as an insult, and to some extent it would have been less offensive to offer nothing at all”.
When Fuchs asked what he would find acceptable, Viegas suggested a million dollars, but eventually settled on 800,000. Funchs told him that Embraer did not have that sort of money for “consultancy servces”, and so Viegas suggested increasing the price of the aircraft. So on 15 September 2008, LAM and Embraer signed an agreement whereby LAM would buy two Embraer E-190 aircraft for 32.69 million dollars each. Viegas was one of the LAM executives who signed the agreement.On 22 April 2009, Embraer signed a commercial representation agreement with the company Xihevele, set up by Zimba, and registered in Sao Tome and Principe. This company was to promote the sale of E-190 aircraft to LAM, even though LAM had already signed the purchase agreement.Xihevele had not existed during the negotiations between LAM and Embraer. The Brazilian document noted that the contract with Zimba’s company falsely stated that its sales promotion work began in March 2008.Although Zimba had provided no services at all to Embraer, the Brazilian company accepted two invoices from him each for 400,000 dollars, and dated 15 August 2009 and 24 September 2009. The money was paid into a Xihevele account in Portugal, and Embraer explained the payments in its own accounts as “sales commissions”.The independent television station STV asked Viegas about the Brazilian account. He replied that he had nothing to say, because a long time had passed, and there are things he no longer remembers. STV attempted to contact Zimba, but he did not answer the phone. According to the Zitamar News Service, Zimba has refused to comment on the matter. Senior Mozambican lawyers believe that the Public Prosecutor’s Office should act. The former chairperson of the Bar Association (OAM), Gilberto Correia, cited in the daily paper “O Pais”, said Mozambican prosecutors should have begun an investigation when the US Justice Department issued its statement.He noted that LAM had been prejudiced because it paid more than it should have for the planes. Correia called for criminal and civil suits against those involved, to oblige them to compensate LAM. 

Teodoro Waty, a former chairperson of Mozambique Airlines (LAM), has said that he did not notice any irregularities in the management of the company when he took over from Jose Viegas in 2011. Viegas has been implicated in the scandal of an 800,000 US dollar bribe paid to LAM by the Brazilian aircraft manufacturer Embraer in 2009.Asked by the independent television station STV for his reaction to the scandal, Waty said “Newspapers are not courts, I have no proof that what is said is true. I trust my predecessor. When I was there, I saw no signs of what has been reported”.Waty seems unaware that the source of the accusation against Viegas is not any media report, but a document signed by Brazilian federal prosecutors and by officials from Embraer itself. Embraer was accused of bribing officials, not only in Mozambique, but also in India, Saudi Arabia and the Dominican Republic. It reached a settlement both in Brazil and in the United States, which involved paying total fines of around 225 million US dollars, and giving full details of the bribes.Despite his apparent trust in Viegas, Waty also hoped that prosecutors in Mozambique will investigate the case. “We hope that Mozambican justice plays its role”, he said. “I believe that it will intervene and that it will be impartial, equidistant, just and speedy to clear up what happened”.A representative of the Mozambican Bar Association (OAM), Filipe Sitoe, told STV “the judicial bodies should do their work, and with full respect for the rights of the suspect”.A second person named in the Brazilian document is Mateus Zimba, who at the time was the manager in Mozambique for the South African petrochemical giant, Sasol, and is now regional director of the US company, General Electric.Zimba was allegedly a middleman in the bribe, setting up a fake company, named Xihevele, and registered in Sao Tome and Principe, which received the money from Embraer in an account in Portugal.The independent newssheet “Mediafax” caught up with Zimba on Thursday at a conference on natural gas held in Maputo’s Joaquim Chissano Conference Centre and tried to ask him about the scandal.According to Friday’s issue of the paper, Zimba replied “There’s nothing I can say. I have a great deal of respect for your work”.When the reporter tried to insist, Zimba simply said “Thank you very much”.