BUSINESS

Embraer Will Have To Pay $205 Million To Settle Corruption Charges In India And 3 Other Countries

About USD 5.76 million was allegedly paid to an agent in India in connection with the sale of three highly specialised military aircraft to the Indian Air Force

25/10/2016 1:01 AM IST | Updated 25/10/2016 1:08 AM IST
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Hamad I Mohammed / Reuters

Aircraft manufacturer Embraer has agreed to pay over USD 205 million 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 USD 5.76 million 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 (AWACS).

The CBI has already registered an FIR in the case.

"The Securities and Exchange Commission (SEC) today 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 USD 83 million 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, USD 3.52 million were paid in bribes to an official in the Dominican Republic's air force to secure a military aircraft contract in that country, and USD 1.65 million in bribes were routed to an official in Saudi Arabia to win business there.

An alleged payment of USD 800,000 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 USD 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 USD 107 million penalty to the Justice Department as part of a deferred prosecution agreement, and more than USD 98 million in disgorgement and interest to the SEC.

Embraer may receive up to a USD 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.

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