Embraer, amid soaring profit, embroiled in bribery probe

Nov. 5, 2013 at 8:53 AM
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RIO DE JANEIRO, Nov. 5 (UPI) -- Brazilian aircraft maker Embraer S.A. reported soaring profits amid reports it faces tough questions over reports it bribed some of its foreign buyers.

The allegations center on charges the world's third largest aircraft manufacturer made improper payments to procurement and other authorities in Argentina and the Dominican Republic.

U.S. investigations of the charges stem from jurisdiction extended to the United States due to the company being listed on the New York Stock Exchange.

The investigations in the United States and Brazil so far have centered on the sale of commercial jets to Argentina and light attack aircraft to the Dominican Republic. Embraer's website offered no update on the investigations although the company in the past admitted it was subjected to U.S. probes.

Embraer is under investigation in the United States for allegedly paying $3.4 million in bribes to a retired Dominican colonel, Carlos Piccini, Defense Industry Daily reported. Piccini, armed forces' director of special projects in the Dominican Republic when the government agreed to buy 22 of Embraer's Super Tucano light attack aircraft, could not be reached for comment.

Embraer is also under investigation over a deal, said to be worth more than $900 million, for the purchase of 22 of its E-190 passenger jets to Argentina's state-owned Aerolineas Argentinas, Defense Industry Daily said.

New investigations into alleged improper payments by Embraer executives were also reported in The Wall Street Journal and Brazilian news media.

The payments allegedly were routed through bank accounts maintained by three shell companies, Compliance Week reported. Embraer executives allegedly attempted to conceal the payments by booking them as fees in a bogus deal to sell aircraft to Jordan, the website said, citing documents obtained before the latest media reports.

The news of the probe comes three years after the U.S. Securities and Exchange Commission issued a subpoena to Embraer over possible violations of the Foreign Corrupt Practices Act, a Nov. 3, 2011 regulatory filing showed.

In response, the company said it retained law firm Baker & McKenzie "to conduct an internal investigation into transactions in three specific countries" but did not identify the names of those specific countries, Compliance Week said.

Brazilian President Dilma Rousseff, facing popular protests over endemic corruption, is under pressure to do more to combat graft in bureaucracy and the public and private sectors. A new Brazilian law in August extended culpability from individuals to corporate entities.

Foreign companies operating in Brazil, including subsidiaries, and Brazilian companies controlled by foreign corporations after merger or acquisition, can now be prosecuted if found bribing officials. Transparency International welcomed the new legislation.

Embraer's third-quarter results reported a firm order backlog of $17.8 billion, the highest level since the third quarter of 2009, mainly as a result of significant orders in its commercial aviation segment, the company reported on its website.

 Embraer said it was listed for the fourth consecutive year on the Dow Jones Sustainability Index, which combines indices evaluating the sustainability performance of the largest 2,500 companies listed on the Dow Jones Global Total Stock Market Index.

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