Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
A class action against Embraer, the Brazilian aerospace firm, was recently dismissed by U.S. District Judge Richard Berman. The class action, which was brought in federal district court in New York, alleged that Embraer had failed to adequately disclose the scope and possible financial impact of ongoing corruption investigations by the DOJ and SEC, harming the company’s investors.
In granting Embraer’s motion to dismiss, Judge Berman held that the company’s disclosures were sufficient as a matter of law, and that requiring disclosures advocated by the putative class plaintiffs would effectively require reporting companies to acknowledge guilt for conduct that was still being investigated and had not yet been charged.
The underlying bribery alleged in the complaint (and being investigated by regulators) involves Embraer’s October 2016 admissions that from 2007 to 2011, company executives made payments to government officials in several countries, including the Dominican Republic, Saudi Arabia, Mozambique, and India, totaling $11.5 million. Embraer received government contracts resulting in profits over $83 million in exchange.
This decision is a clear win for publicly traded companies currently under investigation for corruption-related conduct. Had the case proceeded, companies may have faced difficult choices between making more detailed disclosures to investors regarding the potential merits of ongoing investigations and protecting themselves against incriminatory public statements about these same matters.
According to media reports, the Brazilian government has filed a criminal complaint against eight Embraer SA executives, alleging bribery of foreign officials. This is one of the first criminal prosecutions that Brazil has undertaken against its citizens for foreign bribery. The complaint alleged that Embraer sales executives agreed to pay a $3.5 million bribe to a retired Dominican Air Force colonel and then-director of special projects for the Dominican Republics armed forces, who in exchange influenced legislators to approve a $92 million contract and financing agreement for aircraft. The deal provided the Dominican Republic with eight Embraer Super Tucanos, which is an attack support aircraft. The complaint indicated that part of the bribe was to be paid to a Dominican senator, but the senator was not named in the complaint. The executives attempted to make the payments through three shell companies, but Embraers compliance department blocked the full transfer in 2009. The rest of the bribe payments were concealed by booking them as consulting fees to a middleman in a separate deal with Jordan that never happened. The complaint charges the Embraer executives with corruption in international transactions, which carries a maximum sentence of eight years in prison, and money laundering. According to The Wall Street Journal, who reviewed the complaint that was filed under seal, the U.S. DOJ and the U.S. SEC assisted the Brazilian prosecutors by providing evidence from the U.S. agencies investigations. In 2011, Embraer disclosed that it was under investigation in the United States for potential violations of the FCPA, and those investigations are ongoing.
- Kathryn L. Ryan to discuss "Industry open forum session on NMLS usage" at the NMLS Annual Conference & Training
- Tim Lange to discuss "State legislative update - MSBs and consumer finance" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to discuss "Regulating innovative consumer lending products" at the NMLS Annual Conference & Training
- Daniel P. Stipano to moderate "Washington update" at the Puerto Rican Symposium of Anti Money Laundering
- Melissa Klimkiewicz to discuss "Private flood insurance updates" at the Mortgage Bankers Association Servicing Solutions Conference & Expo
- Jonice Gray Tucker and H Joshua Kotin to discuss regulatory compliance issues in the fintech industry at Protiviti's Risk & Compliance Innovation Roundtable
- APPROVED Checkpoint Webcast: CFL overview
- Amanda R. Lawrence and Sherry-Maria Safchuk to discuss "California privacy rule" on an NAFCU webinar
- Sasha Leonhardt to discuss "MLA & SCRA" on a NAFCU webinar
- Daniel P. Stipano to discuss "Pathway of the SARs: Tracking trajectories of suspicious activity reports from alerts to prosecution" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Which bud’s for you? A deep-dive into evolving marijuana laws" at the ACAMS International AML & Financial Crime Conference
- John P. Kromer to discuss "Navigating the multi-state fintech regulatory regime" at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems