Saturday, November 5, 2011

Embraer Faces Allegations of Violating US Foreign Corrupt Practices Act

Brazilian aircraft maker Embraer SA, the fourth largest manufacturer of commercial aircraft in the world, has reportedly retained outside counsel to investigate allegations that the firm may have violated U.S. Foreign Corrupt Practices Act (FCPA). The U.S. Justice Department and Securities and Exchange Commission have initiated joint investigations.

COMMENT: The FCPA bars companies from paying money to government officials in hopes of obtaining or retaining business. From all indications, Embraer is cooperating in the probe, which is focusing on allegations in three countries.

For the benefit of our readers, the US government has legal standing to initiate the investigations because of the extensive sales of Embraer aircraft to US airlines and because the manufacturer is currently attempting to sell Super Tucano aircraft to the US armed forces.

News of the investigation and the company’s poor third-quarter results caused Embraer’s share price to plunge nearly 5% on Thursday (November 3) on the Sao Paulo stock exchange.

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