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From Securities Regulation Daily, October 24, 2016

Embraer settles FCPA charges for $205M

By Anne Sherry, J.D.

Embraer agreed to pay more than $205 million to resolve allegations that it bribed officials to secure aircraft contracts. The company will disgorge its $83 million in profits, plus interest, back to the SEC and pay a $107 million penalty to the Justice Department. The DOJ credited Embraer for cooperating in the investigation once it got started, including by providing information about complicit individuals (U.S. v. Embraer S.A., October 24, 2016; SEC v. Embraer S.A., October 24, 2016).

According to the SEC’s complaint, Embraer routed bribes through a U.S. subsidiary to officials in the Dominican Republic, Saudi Arabia, and Mozambique between 2008 and 2011. Embraer also allegedly created false books and records and engaged in an accounting scheme in India, in violation of the Foreign Corrupt Practices Act.

As part of the deferred prosecution agreement, Embraer admitted to its involvement in a conspiracy to violate the FCPA’s anti-bribery and books-and-records provisions and to its willful failure to implement an adequate system of internal accounting controls. In addition to the $107 million criminal penalty, the company must continue to cooperate in the investigation, enhance its compliance program, implement stronger internal controls, and retain a corporate compliance monitor. The $98 million disgorgement agreed to between Embraer and the SEC will be reduced by the $20 million the company has agreed to disgorge to Brazilian authorities.

Justice Department officials have recently spoken about the importance of full cooperation in an investigation, and the Department’s press release explains the cooperation credit granted to Embraer. Embraer cooperated fully in the DOJ’s investigation once the SEC subpoenaed it, disclosing all relevant, non-privileged facts, including about individuals involved in the misconduct. But Embraer did not engage in full remediation: although the company disciplined a number of employees and executives, it did not discipline a senior executive who was aware of bribery discussions and supervised the employees engaged in those discussions. The criminal penalty is 20 percent below the bottom of the applicable range under the sentencing guidelines, "a discount that reflects Embraer’s full cooperation but incomplete remediation."

The case is Nos. 16-cr-60294 and 16-cv-62501.

Attorneys: Ernesto Palacios for SEC. Jason Linder, U.S. Department of Justice, for the United States.

Companies: Embraer SA

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