The Wall Street Journal
By Joe Palazzolo and Paulo Winterstein
Nov. 1, 2013 7:01 p.m. ET
U.S.
and Brazilian authorities are investigating whether aircraft maker
Embraer SA bribed officials in the Dominican Republic in return for a
$90 million contract to furnish the country's armed forces with attack
planes, according to law enforcement documents and people familiar with
the case.
The probe takes aim at one of Brazil's highest-profile
companies—the world's third-largest commercial aircraft manufacturer—and
appears to be among the country's first forays into investigating a
domestic company for alleged bribery overseas.
U.S. authorities
were investigating Embraer in 2010 for possible violations of the
Foreign Corrupt Practices Act, an antibribery statute, according to
regulatory filings. A request for evidence sent early this year by
Brazil to the U.S., and reviewed by The Wall Street Journal, sheds new
light on the probe.
According to the February request, reviewed
by the Journal, officials at the U.S. Department of Justice and the SEC
first approached Brazilian authorities about an investigation of Embraer
at an international anticorruption conference in Paris in March 2012.
In
the following months, the Americans said they had evidence—including
bank records and emails—that they believed to show that Embraer
executives had approved a $3.4 million bribe to a Dominican official
with influence over military procurement, according to the request,
which was made under a legal-assistance treaty between the two
countries.
The alleged payment led to the Dominican government in
2010 purchasing eight Embraer Super Tucanos, turboprop attack support
aircraft that have been a darling of air forces in developing countries,
the request said.
Embraer, which first disclosed the FCPA probe
in 2011, said it has been cooperating with authorities. It hired law
firm Baker & McKenzie LLP to conduct an internal investigation after
receiving a subpoena from the SEC in September 2010, according to a
regulatory filing.
"Integrity, transparency in its business
transactions and ethics in its relationships are the principles that
always guided Embraer. The Company requires that all its employees have a
conduct of strict compliance with laws and regulations, as established
in its corporate policies and in its Code of Ethics and Conduct," the
company said in an emailed statement Friday. "Due to the mandatory
confidentiality of the investigation, the company is unable to comment
on it."
Spokesmen for the SEC and the Justice Department declined
to comment. Fernando Lacerda Dias and Marcello Paranhos de Oliveira
Miller, prosecutors in Brazil's Federal Public Ministry, which is
handling the investigation, declined to comment.
Brazil has never
prosecuted an individual for paying bribes overseas, according to the
anticorruption group Transparency International. The country has picked a
high-profile target.
Embraer employs more than 18,000 people at
its plants in Brazil, China, Portugal, France and the U.S., and its
shares trade on the New York Stock Exchange. In recent years, the
company has made an effort to expand revenue from military and executive
airplanes. Its third-quarter profit fell 8%, but the company reported a
$17.8 billion backlog of orders at the end of September, the highest
level since 2009.
Brazil's government has a golden share in Embraer, allowing it to veto some executive decisions.
The
investigation of the Dominican sale centers on a retired colonel,
Carlos Piccini, who in 2009 was serving as the Dominican Republic's
director of special projects for the armed forces, according to the
request from the Brazilians. Mr. Piccini is said to have directed
Embraer executives to split the $3.4 million money among bank accounts
maintained by three shell companies.
The Dominican Republic Air
Force said Mr. Piccini is retired and can't be reached. Phone and email
requests to reach Mr. Piccini through the office of the president of the
Dominican Republic weren't answered. The president's press office also
didn't reply to phone and email requests for comment on the Armed
Forces' role in the purchase of Embraer airplanes.
Embraer
allegedly routed the payments to Mr. Piccini through a middleman,
according to the legal-assistance request. Company officials attempted
to conceal the payments by booking them as fees in a deal to sell
aircraft to the Kingdom of Jordan that never happened, according to the
legal-assistance request.
The U.S. has jurisdiction to
investigate Embraer, because its shares trade in New York and because
some of the alleged payments passed through the U.S. financial system,
according to the legal-assistance request, which the U.S. has honored,
according to a person familiar with the matter.
The U.S. was the
first country to ban bribery of foreign officials in the 1970s and has
brought dozens of cases in the past decade; U.S. officials have long
lobbied the international community to join them on the beat.
The
Brazilians have opened an investigation of Embraer under a law that
bars individuals from making payments to foreign officials to gain a
business advantage, according to the request. The country passed a law
in August making it a crime for corporations to pay bribes, modeled
after the U.S. Foreign Corrupt Practices Act, but it isn't retroactive.
Four foreign bribery investigations were under way in Brazil as of this
year, Transparency International said in an Oct. 7 report.
Several
current and former Embraer executives have retained U.S. lawyers from
Schertler & Onorato LLP, Shearman & Sterling LLP, Williams &
Connolly LLP and Zuckerman Spaeder LLP.
Source: http://online.wsj.com
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