Embraer to pay $205 mn to settle graft charges in India, 3 other countries

Aircraft manufacturer Embraer has agreed to pay over $205 million (over Rs 1,371 crore) as settlement with American and Brazalian authorities for resolving corruption charges in India and three other countries.

The corruption charges in India relate to alleged payment of $5.76 million (over Rs 38 crore) to an agent in India in kickbacks for clinching a deal for the sale of three aircraft for the IAF’s Airborne Early Warning and Control System.

The CBI has already registered an FIR in the case.

“The Securities and Exchange Commission announced a global settlement along with the US Department of Justice and Brazilian authorities that requires aircraft manufacturer Embraer SA to pay more than USD $205 million to resolve alleged violations of the Foreign Corrupt Practices Act (FCPA),” an official statement said.

The SEC’s complaint alleges that Embraer made more than $83 million (over Rs 555 crore) in profits as a result of bribe payments from its US-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique. Embraer allegedly created false books and records to conceal the illicit payments, and also engaged in an alleged accounting scheme in India, the statement said.

According to the SEC’s complaint, $3.52 million (over Rs 23 crore) were paid in bribes to an official in the Dominican Republic’s air force to secure a military aircraft contract in that country, and $1.65 million (over Rs 11 crore) in bribes were routed to an official in Saudi Arabia to win business there.

An alleged payment of $800,000 (Rs 5.3 crore) was made at the behest of a Mozambican government official as a condition of obtaining a contract with a state-owned airline in that country.

Approximately $5.76 million was allegedly paid to an agent in India in connection with the sale of three highly specialised military aircraft to Indian Air Force, and the payments were falsely recorded in Embraer’s books and records as part of a consulting agreement that was not legitimate.

“As alleged in our complaint, Embraer realised significant revenues by surreptitiously using third parties to mask bribes paid to government officials with influence over contracts it was competing to win,” said Andrew J Ceresney, Director of the SEC Enforcement Division.

Kara N Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Embraer’s alleged misconduct spanned multiple continents, and it has taken significant ongoing coordination among international regulators and law enforcement agencies to uncover the company’s complex bribery schemes.”

Under the settlement, Embraer must pay a $107 million penalty to the Justice Department as part of a deferred prosecution agreement, and more than $98 million in disgorgement and interest to the SEC. Embraer may receive up to a $20 million credit depending on the amount of disgorgement it will pay to Brazilian authorities in a parallel civil proceeding in Brazil.

Embraer must retain an independent corporate monitor for at least three years, the statement said.