Embraer and India
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10 key facts
After the August Westland chopper scam, the Congress Party has found itself at the center of yet another potential defence scandal. A Brazilian newspaper reported on Thursday that Brazilian and US authorities were investigating bribes Brazilian aircraft manufacturer Embraer allegedly paid to acquire deals with Saudi Arabia and India. The deal with the Indian government was signed during former Prime Minister Manmohan Singh's tenure.
Here's your 10-point cheat-sheet on the Embraer controversy.
1.A $208 million deal
In 2008, the Defence Research and Development Organization (DRDO) signed a $208 million deal with Embraer for three EMB-145 planes modified to suit the DRDO's and the Indian Air Force's (IAF) requirements. The purchase was made after the UPA governent in 2004 sanctioned a Rs 1,800 DRDO project to develop 3 AEW&C (airborne early warning & control systems) to be mounted on EMB-145 jets.
2. Planes delivered
The first of these planes was delivered to DRDO in 2011, and the other two were delivered in 2013. The DRDO is expected to finish making the AEW&C systems in December this year.
3.What's an AWACS / an AEW&C ?
AWACS or AEW&C can detect incoming hostile fighter jets and cruise missiles faster than ground-based radars, and can also direct fighter jets during air combat operations. India currently has three AWACs - all of which are Israeli Phalcon radars mounted on Russian IL-46 aircraft. India acquired these in a Rs 5,024 crore deal ($1.1 billion) in 2004.
A $ 1 billion deal for two more AWACS is in its final stages. In March last year, the government approved a DRDO project for 2 AWACS, which will be mounted on Airbus A330 jets.
4. The report surfaces
On Thursday, Brazilian newspaper Folha de Sao Paulo reported that the US government had launched an investigation into the bribes allegedly paid by company to acquire deals with a state-owned Saudi company and the DRDO. "The company has not released details regarding the state of the investigations, but three people who have been following the case have confirmed to Folha that the deals concluded in Saudi Arabia and India are being examined," the report said.
5.An Indian middleman in the UK?
Embraer allegedly bribed an agent in the UK to secure the EMB-145 deal with the Congress-led government. There are suspicions that the middleman is an Indian businessman.
6. Embraer ready to pay fines
The paper added that Embraer expected to reach a deal with investigating US authorities, and had earmarked $200 million to pay any fines that it might be slapped with.
7.A long investigation
Embraer has been under the US Department of Justice's scanner since 2010. It was a contract with the Dominican Republic that first attracted the US' attention, but the scope of that investigation has now expanded. Deals with eight more countries, including India and Saudi Arabia, are now being looked into.
8. An employee's confession
In May, a veteran Embraer employee informed a Brazilian prosecutor that he'd heard a former sales director at the company reveal to American authorities that foul play was involved in the Saudi deal, Folha de Sao Paulo’s report said. The director had said that kickbacks had been paid ahead of the sale of 170 executive Embraer jets to state-owned Saudi oil company Aramco.
9. DRDO seeks explanation from Embraer
The Defence ministry on Saturday said the DRDO would seek an explanation from Embraer. "The DRDO to seek explanation and details from manufacturers of Embraer aircraft on the media reports on the deal signed for the aircraft in 2008. On receipt of information by DRDO, further steps may be initiated," the ministry explained in a tweet. However, it was reported that DRDO chief S Christopher couldn't be reached for comment on the phone or by mail today.
Union Minister Ravi Shankar Prasad slammed the Congress on Saturday after the report surfaced. "The past of the UPA always keeps on appearing with alarming regularity," he said.
With inputs from agencies
The story as it broke
Brazil, US probe graft in $208m Embraer jet deal inked by UPA
Payment Made To UK-Based Agent: Reports
In yet another major defence scandal to hit the country after the VVIP helicopter scam, prosecutors in Brazil and the US justice department are now investigating alleged payment of bribes by Brazilian aircraft manufacturer Embraer to swing deals with India and Saudi Arabia.
Embraer is alleged to have paid commissions to a UK-based defence agent -such mid dlemen or unauthorised agents are banned under the Indian defence procurement system -in the $208 million deal for three EMB-145 jets inked by the UPA government in 2008. The three EMB-145 aircraft have been equipped with indigenous radars in a Rs 2,520 crore DRDO project to serve as AEW&C (airborne early-warning and control systems) air craft for IAF. The first “modified“ aircraft was delivered to DRDO in 2011, with the other two following later. After several missed deadlines, the AEW&C project is now slated to be completed by December.
“DRDO says it is not aware of these developments,“ said the defence ministry spokesperson on Friday . Despite telephone calls and text messages, DRDO chief S Christopher did not respond to questions. Christopher, incidentally, was the AEW&C programme director and head of the Centre for Airborne Systems (CABS) before he was chosen to head DRDO in May 2015 by the NDA government. Brazil's top newspaper, the `Folha de Sao Paulo', reported on Thursday that the possible bribery in the 2008 Indian deal was under the scanner of the US justice department, which has been investigating Embraer since 2010, after a contract with the Dominican Republic raised suspicion.
The scope of the investigation has now been widened to examine Embraer's dealings with eight other countries, including India and Saudi Arabia.
The newspaper quoted Embraer's defence sales manager Albert Phillip Close as stating that a former sales director of the company who served in Europe told US investigators that the firm had contracted a representative to assist in the sale of the surveillance systems to India.
As India prohibited hiring of de fence agents, the representative was hired in the UK for the purpose of striking the deal. “The contract with that representative would have been kept in a safe, with one key held by Embraer and another held by the representative,“ said Close. The Sao Paulo-based Embraer, one of the largest manufacturers of commercial, private and military jets in the world, has not publicly commented on the Indian deal. But the Folha report said at least three company officials confirmed to the newspaper that the Indian deal was being examined for corruption.
The details of bribery emerged in May this year when an employee with more than 30 years of experience at the company made a plea-bargain agreement with the Brazilian federal public prose cutor's office, which is also probing the allegations. The scale of the alleged bribery or the identity of the UK-based agent is yet to be ascertained. In the case of the Dominican Republic, a former defence minister and three others have been arrested for allegedly accepting a $3.5 million bribe from Embraer.
The Dominican Republic deal, signed a year after India placed its order for the three aircraft, was worth $94 million, less than half the amount of the Indian deal. TOI spoke to some Embraer officials but they refused to officially comment on the ongoing investigation.
A senior executive of the company , however, said the investigation was in a preliminary stage.“It's all in the realm of speculation unless they reveal the identity of the agent in the UK and establish that money was paid in bribes. India is an important market for us and we would like to continue to do business there. Americans are our competitors in certain sectors in India,“ he said.
The 2008 deal was a major step in defence cooperation between India and Brazil. As per a statement released by Embraer on July 4, 2008, the contract signed with DRDO included a “comprehensive logistics package comprising ng, technical support, spare parts, training, technical support, spare parts, and ground support equipment“.
Embraer has a strong presence in India with a total of 28 aircraft of different market segments, including 21 executive jets across six different models. The company has emerged as the market leader, delivering 35% of the total executive jets in India over the last five years.
Embraer to pay $205m in graft settlement
Brazilian aircraft maker Embraer has agreed to pay over $205 million to resolve charges of corruption and bribing officials in four countries: India, the Dominican Republic, Saudi Arabia and Mozambique.
The charges include $5.76 million allegedly paid to an agent in India in kickbacks for clinching a deal for the sale of three highly specialised military aircraft for the IAF's Airborne Early Warning and Control System.The CBI already registered an FIR in the case. Apart from $107 million penalty to US justice department, Embraer must pay over $98 million in disgorgement and interest to the Securities and Exchange Commission.