7 December 2017

Mozambique: Embraer Bribe - Former Minister and Two Others Detained

Maputo — Mozambique's Central Office for the Fight against Corruption (GCCC) has announced the detention, on Wednesday, of the former chairperson of the national airline, LAM, Jose Viegas, in connection with LAM's acquisition of two aircraft from the Brazilian company Embraer in 2009, against an 800,000 US dollar bribe paid by Embraer.

Also detained were the former Transport Minister Paulo Zucula, and Mateus Zimba, once the head in Mozambique of the South African petrochemical company, Sasol, who acted as a middleman in the bribe.

A statement from the GCCC said it has been investigating since 2016 “suspicions of the undue use of public funds” in the purchase of aircraft from the Canadian company Bombardier. It was while this investigation was under way that the GCCC became aware of the lawsuit in Brazil brought by the Federal Prosecutor's Office against Embraer, accused of securing its business through bribery in several countries, including Mozambique. Since the accused are the same in both the Bombardier and Embraer investigations, the GCCC decided to put them into a single case.

The Embraer case is well-known since the company pleaded guilty, and reached a settlement with the authorities in both Brazil and the United States. The settlement involved paying total fines of around 225 million US dollars, and giving full details of the bribes.

Documents from the Brazilian prosecutors named both Viegas and Zimba. According to these documents, it was Viegas who insisted that LAM's purchase of the Embraer E-190 aircraft would not go ahead without payment of a bribe.

Embraer was at first reluctant to “offer” more than 80,000 dollars. But Viegas allegedly said he had received reactions from unnamed other people who regarded the Embraer offer “as an insult and to some extent it would have been less offensive to offer nothing at all”. He thought a million dollars would be acceptable, but eventually settled on 800,000.

When Viegas was told that Embraer did not have that sort of money to pay for what would be passed off as “consultancy services”, he suggested simply increasing the price of the aircraft. Instead of the original price of 32 million US dollars. Each aircraft would now cost 32.69 million dollars. This was the price in the sales agreement between Embraer and LAM signed on 13 September 2008.

At this point Zimba entered the picture as a middleman. To channel the money, Zimba set up a company called Xihevele, registered in São Tomé and Príncipe, the sole purpose of which was to move the money from Embraer to the recipients of the bribe.

On 22 April 2009, Embraer signed a “commercial representation agreement” with Xihevele. The stated purpose of this company was to promote the sale of E-190 aircraft to LAM, even though LAM had already signed the purchase agreement. Xihevele had not existed during the negotiations between LAM and Embraer. The Brazilian prosecutors' document noted that the contract with Zimba's company falsely stated that its sales promotion work began in March 2008.

Although Zimba had provided no services at all to Embraer, the Brazilian company accepted two invoices from him for 400,000 dollars each, and the money was paid into the Xihevele account in Portugal. Embraer's accounts explained these payments as “sales commissions”. From Embraer's viewpoint the bribe appeared successful, since it resulted in LAM acquiring two Embraer planes, for the inflated price of 32.69 million dollars each.

The Brazilian documents do not mention Zucula's name, and it is possible that his involvement was with the Bombardier purchase, full details of which have yet to come to light.

The GCCC's sparse statement gives few details. It merely states that the three accused will now be brought before a judge, to formalize their detention, and they will then be interrogated while under custody.

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