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The FCPA Looks South

Many foreign companies (most with shares traded on a U.S. exchange) have previously resolved FCPA enforcement actions.  A few companies (JGC Corp. and Bridgestone) have been from Japan, but the vast majority of foreign companies resolving FCPA enforcement actions have been from Europe (Diageo, Tenaris, Royal Dutch Shell, Panalpina, Daimler, ABB, Siemens, Technip … to name a few). 

I do not believe that a company based in the Southern Hemisphere has ever resolved an FCPA enforcement action.  That could change.

Brazil based Embraer (here), one of  the world’s largest manufacturer of commercial jets with shares traded on the New York Stock Exchange, last week disclosed (here) as follows.

“In response to a subpoena issued in an investigation by the U.S. Securities and Exchange Commission (“SEC”) relating to possible violations of the U.S. Foreign Corrupt Practices Act, the Company retained outside counsel to conduct an internal investigation into transactions in three specific countries.  That internal investigation is ongoing, and the Company is fully cooperating with the SEC and the U.S. Department of Justice (“DOJ”).  The Company’s outside counsel has been in regular contact with the SEC and the DOJ and has provided both agencies with documents and other information.  The Company’s outside counsel recently met with both agencies to brief them on the status of its investigation.  The Company and its outside counsel expect to continue to have discussions with the SEC and the DOJ.  The Company is unable to predict duration, scope or results of the investigation.”

Words matter in an SEC filing, and based on the above language, it is reasonable to conclude that the SEC’s investigation is not the result of a voluntary disclosure.  For instance, it is unusual for a company that voluntarily discloses to receive a subpoena.  Whether the SEC’s investigation was prompted by a whistleblower, a competitor’s complaint, or as Joe Palazzolo at the Wall Street Journal (here) asks another industry sweep, remains to be seen.  As Palazzolo noted, over the summer Reuters reported (here) that the “FBI briefed other government agencies … about a project focused on possible corruption associated with sales and maintenance contracts between aerospace companies and state-owned airlines.”  According to the report, the new project focuses on “sales and maintenance contracts on the commercial side, not in defense.”

According to media reports, Embraer is currently trying to sell Super Tucano aircraft to the U.S. Military.  During an investor conference call last week Embraer CEO Frederico Curado was “confident” that the current FCPA scrutiny of the company would not prevent it from participating in any bidding process.

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