Mozambicans are a bargain – Hanlon

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Mozambicans are a bargain – Hanlon

10:27 CAT | 31 Oct 2016

The Brazilian airplane company Embraer had to pay smaller bribes to Mozambique than to other countries when selling aircraft, according to the US Securities and Exchange Commission (SEC). The action involved sales to four counties. Bribes in the Dominican Republic were $3.52 mn on a contract of $96.4 mn (3.6%), Saudi Arabia $1.65 mn bribe on a $93 mn order (1.8%), and India $5.76 mn bribe on a $208 mn order (2.8%). For Mozambique, the bribe was $800,000 on a $65 mn order which is just 1.2%. Clearly Mozambicans cost less and should be raising their prices.

According to the SEC, Embraer initially only offered $100,000-$160,000, but this was rejected. The Mozambican intermediary demanded $1 mn. Eventually $800,000 was offered and accepted. The money was paid by Embraer’s US subsidiary to a Portuguese bank account. The use of the US subsidiary meant that the SEC could bring the case under the US Foreign Corrupt Practices Act.

The SEC says that the $12 mn in bribes generated a profit to Embraer of $83 mn. On 24 October the SEC announced that Embraer had agreed to pay $205 mn in penalties to the US govenrment to settle the case. Mozambique’s Assistant Attorney-General Taibo Mocubora said on Friday that prosecutors will investigate the case of the bribe to an official of Mozambique Airlines (LAM). Mucobora noted that the Central Office for the Fight against Corruption (GCCC) announced in September that it was prosecuting the former LAM financial director, Jeremias Tchamo, for signing 25 contracts with a building company owned by his brother, who was also a LAM employee. LAM paid this company a total of 5.3 million meticais ($190,000 at the exchange rate of the time). (AIM En 28 Oct)

The SEC complaint is on https://www.sec.gov/litigation/complaints/2016/comp-pr2016-224.pdf

By: Joseph Hanlon

Source: News Reports & Clippings