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Aerospace / Defense / Security
São José dos Campos, São Paulo, Brazil
Nationality of Foreign Officials: Dominican Republic
Summary of Allegations:
Embraer executives allegedly made bribe payments to officials in the Dominican Republic in exchange for a USD 96.4 million contract to furnish the country's armed forces with military planes. The scheme allegedly took place between 2008 and 2010.
Embraer allegedly had negotiated directly with the Fuerza Aérea de República Dominicana (the Dominican Republic's air force) for the sale of military planes to be used to combat drug trafficking and run border patrol and counter-insurgency missions in the Dominican Republic. The contract terms were negotiated directly with Dominican military officials, and the Dominican government's primary point of contact for the negotiations with Embraer was a retired air force colonel who was a close associate to the Secretary of the Armed Forces for the Dominican Republic (and was later named the General Manager/Managing Director of Projects and Programs to the Secretary of the Armed Forces of the Dominican Republic). According to some sources, the official was Carlos Piccini, the former director of special projects for the country's armed forces.
After the contract terms were finalized but before the contract was approved by the Dominican legislature, the primary point of contact allegedly requested a commission from Embraer. Embraer executives allegedly agreed to pay 3.7% of the contract value to the official through three different companies that had not provided any services to Embraer.
Financing for the deal was approved in September 2008 and the sale was approved in December 2008. Afterwards, Embraer allegedly entered into a consulting agreement with an agent to promote the sale of Embraer airplanes in Jordan, with an advance payment to the agent for the amount promised to the Dominican official. This agent allegedly had been suggested by an Embraer executive to make payments to the Dominican official.
Approximate Alleged Payments to Foreign Officials: USD 3.52 million
Business Advantage Allegedly Obtained: USD 96.4 million contract
Nationality of Foreign Officials: India
Summary of Allegations:
Embraer allegedly paid a middleman USD 5.5 million as commission in connection with a Rs 1,350 crore (USD 208 million) deal with India's Defence Research and Development Organisation ("DRDO") for three aircraft equipped with indigenous radars for AEW&C (airborne early warning and control systems) in 2008.
Approximate Alleged Payments to Foreign Officials: USD 5.5 million in commission to middleman
Business Advantage Allegedly Obtained: Rs 1,350 crore (USD 208 million) deal
Nationality of Foreign Officials: Mozambique
Summary of Allegations:
In 2008, Embraer allegedly paid a high-level Mozambican government official USD 800,000 in connection with the sale of two commercial airplanes to Linhas Aéras de Moçambique (LAM), a state-owned airline, for USD 32 million each.
While negotiating the sale of two commercial airplanes to LAM, an agent allegedly contacted Embraer and informed the company that he would be acting as a consultant on the deal. Embraer employees allegedly believed that the agent was connected with Mozambique government officials. Embraer executives allegedly offered to pay the agent USD 50,000-80,000 for each airplane sold to LAM, despite the agent not providing any services to Embraer. LAM's chief executive officer allegedly called an Embraer employee and suggested that Embraer pay USD 1 million, but that USD 800,000 would be acceptable. The chief executive officer threatened to go with a different company if the payment was not made.
In September 2008, Embraer and LAM entered into a purchase agreement for the sale of two airplanes for USD 65 million. In April 2009, Embraer allegedly entered into a consulting agreement with the Mozambican agent's company to promote the sale of airplanes to LAM, and paid the agent USD 800,000 after the airplanes were delivered to LAM.
The bribe allegedly was demanded by Jose Viegas, the then-chairperson of the LAM board, through a company created by Mateus Zimba, them the Mozambique representative of South African oil company Sasol. The shell company, Xihevele, sent two invoices to Embraer for USD 400,000 each, which Embraer allegedly paid.
Approximate Alleged Payments to Foreign Officials: USD 800,000
Business Advantage Allegedly Obtained: USD 32 million contract
Nationality of Foreign Officials: Saudi Arabia
Summary of Allegations:
Between 2009 and 2011, Embraer allegedly paid a high-level official at Saudi Aramco, a state-owned entity, more than USD 1.65 million in connection with the USD 93 million sale of three Embraer 170 regional jets.
Embraer allegedly worked directly with Saudi Aramco on a contract for the purchase of three executive airplanes. An executive at Saudi Aramco allegedly told an Embraer executive that he could convince Saudi Aramco to purchase the aircraft from Embraer in exchange for a commission. The Embraer executive allegedly agreed to pay the Saudi Aramco official USD 550,000 per airplane sold to the Saudi Aramco.
In 2010, Saudi Aramco agreed to purchase three new executive airplanes for USD 93 million. After the airplanes were delivered, Embraer allegedly paid USD 1.65 million to a South African company that was an agent for the sale to Saudi Aramco, despite its lack of qualifications and not providing any services to Embraer on the transaction. The South African company then allegedly wired the funds to bank accounts in Saudi Arabia and Switzerland held in the name of the father of an employee of Saudi Aramco.
In 2012, an internal audit by Saudi Aramco led to the identification of violations which prompted Saudi Aramco to initiate the internal investigation and alerting the authorities, including the US and Saudi Arabian authorities.
Saudi Aramco disclosed that it has ceased all future dealings with Embraer and will take legal actions against Embraer following cease of all ongoing investigations.
Approximate Alleged Payments to Foreign Officials: USD 1.65 million
Business Advantage Allegedly Obtained: USD 93 million contract
Agencies: Brazil: Securities and Exchange Commission (CVM)
Results: Disgorgement
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
On 23 September 2014, the Securities and Exchange Commission of Brazil ("CVM") filed a criminal action against eight former Embraer vice presidents, directors and managers and consultant, Elio Moti Sonnenfeld, charing them with corruption and money laundering in connection with an alleged USD 3.5 million bribe to an official in the Dominican Republic in return for a USD 92 million contract for attack planes. The Wall Street Journal said that the criminal complaint, "marks one of the first known efforts by Brazil to prosecute its citizens for allegedly paying bribes abroad [. . .]."
Consultant Sonnenfeld is cooperating with the Brazilian authorities. In the official summaries of Sonnenfeld's statements, Sonnenfeld alleged that Embraer's top managers, including Chief Executive Frederico Curado, knew of the bribes.
On 26 April 2016, CVM announced that it has rejected a settlement with Orlando José Ferreira Neto, former head of defense for Embraer. According to the CVM's press release, Ferreira proposed a settlement of 300,000 reais (USD 85,000) after CVM's investigation revealed that he was likely responsible for the allegations of USD 3.52 million bribes.
On 24 October 2016, Embraer released a statement that the company has reached a settlement with the Brazilian Federal Public Prosecutor's Office (Ministerio Publico Federal ("MPF")) and the Brazilian Securities and Exchange Commission ("CVM") for the resolution of allegations of violations of certain Brazilian laws. Under the settlement, Embraer acknowledge violations of certain Brazilian laws between 2007 and 2011 and agreed to pay a total of R$ 64 million, out of which R$58 million will be paid to a Brazilian federal fund as disgorgement and R$6 million to the CVM as damages and penalty.
As a part of the settlement, the MPF and the CVM acknowledged that Embraer voluntarily conducted a broad internal investigation and approached the Brazilian authorities proactively and in good faith. In addition, both agencies will agreed to either not file a suit against the company or end an ongoing administrative proceedings arising out of the acts acknowledged by Embraer.
Agencies: Dominican Republic: Special Prosecutor for the Prosecution of Administrative Corruption
Results: Prosecution of Public Officials
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 10 August 2016, Dominican Special Prosecutor for the Prosecution of Administrative Corruption arrested Pedro Rafael Pena Antonio, defense minister from 2008 to 2010, Air Force Colonel Carlos Piccini, businessman Daniel Aquino Mendez and his son Daniel Aquino Hernandez, for allegedly accepting a USD 3.5 million bribe from Embraer in exchange for the aircraft contract.
On 14 May 2018, Pedro Rafael Peña, Carlos Piccini, Daniel Aquino Hernández, Daniel Aquino Méndez, Ysrael Abreu Rosario and Félix del Orbe Berroa were indicted and expected to testify.
On 14 August, 2018, Dominican prosecutors announced that Embraer had agreed to a 7 million USD settlement and to provide authorities with detailed information on the bribes paid out.
Agencies: India: Central Bureau of Investigation
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
The DRDO reportedly has asked India's Central Bureau of Investigation ("CBI") to probe the 2008 deal between DRDO and Embraer in 2008.
On 28 September 2016, CBI announced that it has tracked down the middleman Embraer allegedly paid in connection to the 2008 deal in India and will interview the individual. CBI reportedly will approach law agencies of other countries, including Brazil and United Kingdom, to obtain details on the middleman and other aspects of the payment.
On September 2, 2022, it was reported that the CBI had arrested Delhi-based lawyer Gautam Khaitan in the case of alleged kickbacks. After an interrogation, Mr. Khaitan was placed in judicial custody.
On 5 September 2022, the CBI reported that Singapore-based business man, Dev Inder Bhalla, admitted that his firm "Interdev Aviation Services Pte." received $5.76 million in kickbacks from Embraer. The kickbacks were used to influence officials in the Ministry of Defense of India, to secure a contract for supplying three EMB-145.
Agencies: Internal Investigation
Results:
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In its Form 6-K filed with the SEC on 3 November 2011, Embraer disclosed that the company retained an outside counsel to conduct an internal investigation into transactions in three specific countries.
In its Form 6-K filed with the SEC on 26 July 2013, Embraer disclosed that the internal investigation had been expanded to include additional countries and that the investigation remained ongoing.
In its Form 6-K filed with the SEC on 10 June 2016, Embraer announced that the company Frederico Fleury Curado will step down from his CEO position. Curado will be replaced by Paulo César de Souza e Silva, current President and CEO Commercial Aviation, as of July 2016.
On 24 October 2016, in a press release, Embraer indicated that its settlements with the US and Brazilian authorities represent the conclusion of the internal investigation of noncompliance with the FCPA and certain Brazilian laws in some aircraft sales outside Brazil.
Agencies: Mozambique: Attorney General's Office
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 28 October 2016, the Mozambican Attorney-General’s Office ("PGR") announced that they will investigate into the official of Mozambique Airlines (LAM) who took an 800,000 US dollar bribe from Embraer. The prosecutors will open a preliminary investigation to ascertain the veracity of the facts in the US investigation into Embraer in their own independent investigation in Mozambique.
In September of 2021, the Maputo City Court acquitted Jose Viegas, the former LAM chairman.
On 15 September 2021 the PGR was set to appeal the acquittal of Mr. Viegas. The acquittal came as a result of insufficient evidence and the expiration of the statute of limitations. Mr. Viegas was charged with illicit business participation when he negotiated the amount of the bribe, although there was no evidence he had taken any money himself.
Agencies: Mozambique: Central Office for the Fight Against Corruption (GCCC)
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
The GCCC is investigating the staff employed by LAM in 2008-2009, as well as third parties involved in LAM's purchase of Embraer airplanes. A request was made in January 2017 for documents from the Brazilian Federal Prosecutor's office. On 9 January 2018, the GCCC sent the case to the Maputo City Court, also charging three individuals with money laundering and illicit participation.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Compliance Monitor, Criminal Fine, Deferred Prosecution Agreement, Disgorgement
Year Resolved: 2016
Compliance Monitor: three years
Ongoing: No
Details:
In September 2010, Embraer received a subpoena from the U.S. Securities and Exchange Commission ("SEC") and associated inquiries from the U.S. Department of Justice ("DOJ") relating to possible violations of the U.S. Foreign Corrupt Practices Act ("FCPA"). Embraer is fully cooperating with the SEC and the DOJ. Embraer's outside counsel has been in regular contact with the authorities, providing them with documents and other information, and has briefed them on the status of its internal investigation.
In May 2015, Embraer announced that the company has entered into talks with the US authorities to reach a resolution.
In its Q2 2016 earning release, Embraer disclosed that the negotiations have significantly progressed and the company recognized a USD 200 million loss contingency in relation to the allegations, reflecting the likely outcome of the matter. In addition, Embrarer announced that a final settlement with the US authorities is likely to include a deferred prosecution agreement, ad imposition of an independent monitor.
On 24 October 2016, Embraer S.A. agreed to pay a criminal penalty of USD 107,285,090 to the DOJ and USD 98,200,000 in disgorgement and prejudgment interest to the SEC to resolve allegations that the company made improper payments to government officials in the Dominican Republic, India, Saudi Arabia and Mozambique related to the purchase of Embraer aircraft. The DOJ filed a criminal information and the SEC filed a civil complaint against Embraer with the U.S. District Court for the Southern District of Florida on 24 October 2016. Both the SEC and the DOJ alleged that Embraer had violated the bribery provision as well as the books and records and internal control provisions of the FCPA. The SEC agreed to credit against its disgorgement USD 20 million that Embraer agreed to disgorge to Brazilian authorities.
The settlement with the SEC and DOJ included allegations that Embraer had violated the books and records provision of the FCPA with a payment to an Indian agent. The company allegedly believed such a payment to be illegal under Indian law, and used an agreement related a separate transaction in a different country in order to pay the Indian agent.
On 21 December 2017, Colin Steven, a former sales executive of Embraer, pleaded guilty to engaging in a scheme to pay bribes to a high-level foreign government official in exchange for obtaining an aircraft sales contract with favorable terms and receiving a kickback as part of the scheme. Steven pleaded guilty to all charges: one count of conspiracy to violate the FCPA, one count of wire fraud, one count of conspiracy to commit wire fraud, one count of money laundering, one count of conspiracy to launder money and one count of making a false statement.
On 14 December 2018, Colin Steven agreed to disgorge USD 74,000 and received a penalty of USD 25,000.