Embraer bribe: Accused deny everything – AIM report

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Embraer bribe: Accused deny everything – AIM report

8:36 CAT | 03 Mar 2020

in file CoM

All three of the accused in the case of a bribe of 800,000 US dollars paid in 2009 by the Brazilian aircraft manufacturer, Embraer, to ensure that Mozambique Airlines (LAM) would purchase Embraer planes, have denied any wrongdoing.

On Friday, the second day of the trial before the Maputo City Court, the former chairperson of Mozambique Airlines (LAM), Jose Viegas, said he had proposed the acquisition of new aircraft “for reasons of economy of costs and safety”.

He had presented the project to restructure LAM to his fellow accused, the then Transport Minister Paulo Zucula, so that he could give his opinion and channel the matter to the Finance Ministry.

LAM was interested in buying two Embraer E190 aircraft, and the price rose from 31.1 to 32.6 million dollars each. Viegas denied this was over-invoicing which hid the 800,000 dollars bribe. Instead, he claimed “there was an increase in the price because the contractual deadline was not met. The variation in the price is duly envisaged in the contract”.

So, for Viegas, there was no bribe. But this clashes with the admission by Embraer that it paid bribes in several countries, including Mozambique. Embraer was prosecuted for its corrupt practices in both Brazil and the United States, and eventually paid fines of 225 million dollars.

After Embraer agreed to pay the fines, the US Department of Justice, in October 2016, issued a statement listing the company’s corrupt acts. This included the finding that “In 2008, Embraer paid 800,000 dollars via a false agency agreement with an intermediary designated by a high-level official at Mozambique’s state-owned commercial airline, LAM, to secure LAM’s agreement to purchase two aircraft from Embraer for approximately 65 million dollars”.

The defence in the Maputo court has made no attempt to explain why Embraer should have admitted guilt to a bribe which, according to the defendants, never existed.

The “intermediary”, mentioned by the Justice Department, was the co-defendant Mateus Zimba, who at the time was the Maputo representative of the South African petrochemical company Sasol.

Zimba set up a company called Xihivele which was registered, not in Mozambique, but in the West African island state of Sao Tome and Principe. Zimba told the court that he had provided “market assistance” to Embraer. “I provided them with a service, and I funded Xihivele to formalise the service contracted”, he said.

His only explanation for why the company was set up on the other side of the continent was that Sao Tome and Principe “had greater tax advantages. And the work I was doing did not oblige me to go there”.

He admitted that Xihivele only dealt with the 800,000 dollars from Embraer. During its brief existence, it did nothing else, and it employed nobody apart from himself.

Zimba had no prior experience of the aircraft industry, and no prior contact with Embraer. According to the US Justice Department documents, which Embraer executives agreed to, it was Zimba, or “Agent C”, who contacted the Brazilian company and said he would be serving as “a consultant”.

Negotiations on the size of the bribe (referred to by the polite word “commission”) then followed

A “Mozambique Official” (subsequently identified as Viegas) suggested that a million dollars should be paid, but then agreed to cut this down to 800,000.

Embraer then signed an “agency agreement” with Xihivele, athorising Xihivele to promote sales of the Embraer E190 aircraft to LAM, even though the sale agreement with LAM had been concluded seven months earlier.

The Justice Department concluded “Agent C’s company did not exist at the time the purchase agreement was signed, and Agent C’s company did not perform any legitimate work in connection with the purchase agreement. The agreement with Agent C’s company falsely stated that the sales promotion efforts identified therein had begun in or around March 2008. Neither Agent C nor Agent C’s company ever provided any legitimate services to Embraer”.

When the 800,000 dollars arrived, it was divided between Zimba and Zucula, who were close friends. Zucula admitted receiving 425,000 dollars from Zimba, but said the money was to buy a house in the tourist resort of Vilankulo, in the southern province of Inhambane.

Zucula said he did not know how Zimba obtained the money. “I always knew him as a businessman. I never thought that he was poor”, he said.

But there is no documentation proving that Zucula sold a house to Zimba. “The deal was done on the basis of a memorandum of understanding”, claimed Zucula.

Viegas denied all prior knowledge of Zimba. “I didn’t know about Zimba’s presence in this project. There is no working relationship between him and LAM”, he said.

The trial resumes on Tuesday, when the first witnesses will be called.

Source: AIM