Embraer Nears Deal With U.S., Brazil on Corruption Probe

  • Agreements are in line with July statement, company says
  • Goldman Sachs upgrades shares of Brazilian planemaker

Embraer SA is close to completing agreements with U.S. and Brazilian investigators to settle allegations of corruption that have hovered over the aircraft maker since 2011.

Final agreements -- with the U.S. Justice Department and Securities and Exchange Commission and with Brazil’s federal public prosecutor and market regulator CVM -- will have terms similar to those Embraer described in July, the company said in a statement Wednesday evening. Those included possible fines, a deferred prosecution agreement and the imposition of an independent monitor to assess compliance.

Embraer shares rose 1.5 percent to 14.22 reais at 1:28 p.m. in Sao Paulo, after three days of declines.

Putting the probes behind Embraer would help wipe the slate clean for Chief Executive Officer Paulo Cesar de Souza e Silva, who replaced Frederico Curado this year. The company set aside $200 million in provisions for the anticipated settlement in the second quarter, leading to a surprise loss.

Goldman Sachs Group Inc. upgraded Embraer shares to a buy late Wednesday, before the company’s statement on the corruption probes. Analyst Noah Poponak cited potentially strong third-quarter results and more detail on cost-improvement plans.

Employee Buyouts

Embraer said Thursday that 180 employees had volunteered in a second round of buyouts. Earlier this month 1,463 people, or about 8 percent of the workforce, accepted the company’s offer. Embraer, which has been struggling with weak demand for executive jets, plans to release third-quarter results on Oct. 31.

The Dominican Republic in August arrested a former defense minister and three others, accused of accepting a $3.5 million bribe from Embraer in exchange for placing an order for military aircraft.

The arrests were part of an investigation by U.S. and Brazilian authorities into the 2009 purchase of eight Super Tucano turboprop planes for $94 million. The Dominican government said it used the aircraft to combat aerial drops of drugs from South America.

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