Authorities in Brazil filed a criminal action against eight Embraer SA employees for an alleged $3.5 million bribe to an official in the Dominican Republic in return for a $92 million contract for attack planes.
A report Tuesday by Joe Palazzolo and Rogerio Jelmayer of the Wall Street Journal said “the criminal complaint, filed under seal and reviewed by the Wall Street Journal, marks one of the first known efforts by Brazil to prosecute its citizens for allegedly paying bribes abroad, a milestone achieved with help from the U.S. Department of Justice and the U.S. Securities and Exchange Commission.”
The DOJ and SEC have been investigating Embraer’s sales practices in the Dominican Republic and other countries and shared the evidence with law enforcement authorities in Brazil, the report said.
Embraer SA, the world’s third largest commercial aircraft manufacturer, trades on the NYSE under the symbol ERJ.
The company said in an email to the Wall Street Journal that it couldn’t comment.
Embraer disclosed three years ago an investigation for possible violations of the Foreign Corrupt Practices Act. It said in U.S. filings that it received a subpoena from the SEC in September 2010.
The WSJ said “Brazilian prosecutors filed the 31-page complaint in a criminal court in Rio de Janeiro in August, the first step in a criminal prosecution.”
The complaint alleges that Embraer sales executives agreed to pay a $3.5 million bribe to a retired Dominican Air Force colonel, who then leaned on legislators to approve the deal and a financing agreement between the Dominican Republic and the National Economic and Social Development Bank. The sale was completed and the aircraft were delivered.
The story identified the retired colonel as Carlos Piccini Nunez. He was the Dominican Republic’s director of special projects for the armed forces in 2008.
Under the contract, Embraer sold eight Embraer Super Tucanos, a turboprop light attack aircraft.
“The criminal complaint alleges that an Embraer vice president for sales, Eduardo Munhos de Campos, promised to pay the bribe, and that he was assisted in arranging the payments by Orlando Jose Ferreira Neto, another vice president; Embraer regional directors Acir Luiz de Almeida Padilha Jr., Luiz Eduardo Zorzenon Fumagalli and Ricardo Marcelo Bester; and managers Albert Phillip Close, Luiz Alberto Lage da Fonseca and Eduardo Augusto Fernandes Fagundes,” the Wall Street Journal said.
The defendants are charged with corruption in international transactions and money laundering.
The corruption charges carry prison sentences of up to eight years, the WSJ said.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.
Is this the first action taken by Brazilian authorities in line with the Clean Company Act?
This criminal lawsuit does not have a direct relation with the Brazilian Clean Company Act. The individuals involved in the case are facing criminal charges for having alleged committed the crime set forth in article 337-B of the Brazilian Criminal Code. The Brazilian Clean Company Act only provides for the imposition of administrative and civil liability on legal entities for corruptions acts.
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