* U.S. and Brazilian investigators collaborate on probe
* Embraer cooperating with authorities, flagged to investors
By Brad Haynes and Aruna Viswanatha
SAO PAULO/WASHINGTON, Nov 2 (Reuters) - U.S. and Brazilian
authorities are investigating whether Embraer SA
bribed officials in Argentina and the Dominican Republic to
secure deals for commercial and defense aircraft, according to
legal documents reviewed by Reuters.
The investigations involve the sale of 20 passenger jets to
an Argentine state airline, worth about $900 million at Embraer
list prices, and a $92 million deal with the Dominican armed
forces for eight Super Tucano light attack planes, according to
documents prepared by prosecutors.
The world's third-largest commercial plane maker disclosed
two years ago that it had been under investigation by the U.S.
Department of Justice and the Securities and Exchange Commission
since 2010 regarding sales of aircraft abroad.
The allegations cast a harsh light on one of Brazil's
biggest exporters and a cornerstone of its growing defense
industry, which is looking to build credibility with major
powers after years of dealing arms in emerging markets.
Embraer's defense division has partnered with Boeing Co
to sell an upcoming military cargo jet, its biggest plane
ever, against Lockheed Martin Corp's Hercules airlifter
in the United States and Britain.
In documents reviewed by Reuters, prosecutors cited evidence
that Embraer executives approved a $3.4 million bribe to a
Dominican official with influence in military procurement.
Details of the Dominican Republic case were first reported by
the Wall Street Journal on Saturday.
Embraer is cooperating fully with authorities, the company
said in a statement, but it declined to comment on details of
allegations because of the confidentiality of the investigation.
"The company requires that all its employees have a conduct
of strict compliance with laws and regulations," said a
spokesman in an emailed statement on Saturday.
Officials at the U.S. Department of Justice and the
Securities and Exchange Commission did not immediately respond
to requests for comment. Brazilian federal prosecutors,
Dominican defense officials and representatives for Argentina's
state airline could not immediately be reached for comment.
International cooperation on the investigation reflects a
rare instance of Brazilian authorities probing a local company
for its foreign business practices.
Brazil has criminal laws against bribing foreign officials,
but no direct equivalent of the Foreign Corrupt Practices Act,
which gives U.S. authorities grounds to investigate U.S.-listed
companies for bribery overseas. Embraer shares called American
Depositary Receipts trade on the New York Stock Exchange.
RETIRED COLONEL
In 2008, as Embraer was trying to sell its Super Tucanos to
the Dominican Republic, investigators say the company was
approached by the director of special projects for the country's
armed forces, now-retired Colonel Carlos Piccini.
Piccini sought a payment of $3.4 million to facilitate the
sale, which Embraer delivered in 2009 through a shell company in
Uruguay, according to investigators. Attempts to reach Piccini
through the Dominican armed forces were not successful.
Embraer delivered the first two of eight Super Tucano
aircraft to the Dominican Republic in December 2009 to be used
to combat drug trafficking and run border patrol missions.
The Super Tucano is Embraer's top-selling military plane. A
rugged design and low cost make the turboprop popular in
counterinsurgency missions from Africa to Southeast Asia. In
February, the U.S. Air Force ordered 20 Super Tucanos for
missions in Afghanistan.
In documents reviewed by Reuters, officials also cite a
corruption investigation raising red flags about dealings
between Embraer and an unnamed Argentine public official
involved in an airline deal.
The official helped negotiate a contract for 20 commercial
jets for Austral Lineas Aereas Cielos del Sur between 2008 and
2009, investigators said, without elaborating in the documents
on evidence of wrongdoing.
In May 2009, Embraer announced an agreement to supply
Austral, a subsidiary of state airline Aerolineas Argentinas,
with 20 of its E-190 jets seating 96 passengers. Delivery of the
planes started in September 2010.
Austral ordered two more E-190s in April this year. Embraer
and Austral did not respond to questions about the contracts.
Embraer has notified investors of the ongoing legal probe
through its quarterly earnings reports. The company has said it
voluntarily expanded the scope of its internal investigation
following a 2010 subpoena to include sales in other countries,
which it has reported to U.S. authorities.
Embraer could face substantial fines or sanctions due to the
investigation, the company said in its earnings report this
week, but based on outside legal counsel the plane maker said
there was no basis to estimate how much money to set aside.