India to seek explanation from Embraer over alleged kickbacks

The Defence Research and Development Organisation (DRDO) will seek an explanation and details from Brazilian aircraft maker Embraer over alleged payment of kickbacks in the $208 million jet deal signed during the previous United Progressive Alliance regime.

After receipt of information further steps may be initiated, the defence ministry said today after the 2008 deal has come under investigation by US authorities, which have been probing Embraer for alleged payment of bribes to secure contracts.

''DRDO will seek explanation and details from manufacture of Embraer aircraft on media reports on aircraft deal signed in 2008. On receipt of information by the DRDO, further steps may be initiated,'' a ministry statement said.

Embraer and the DRDO signed the deal for three aircraft equipped with indigenous radars for AEW&C (airborne early warning and control systems) in 2008. Embraer has been under investigation by the US Justice Department since 2010 when a contract with the Dominican Republic raised the Americans' suspicions.

Since then, the investigation has widened to examine business dealings with eight more countries. ''Investigations that have been opened by the government of the United States to establish whether Embraer paid bribes in order to obtain contracts abroad have affected deals that the Brazilian company closed with Saudi Arabia and India,'' Brazalian newspaper Folha De São Paulo reported.

It is suspected that a leading Indian middleman based in the UK was roped in for the deal. DRDO chief S Christopher, who headed the AEW&S programme earlier, was not available for comment.

Embraer is cooperating with the investigations and announced in July that it was expecting to reach a deal soon with American authorities, the paper said. The company has put $200 million aside to pay any eventual fines that come about as a result of the process. Embraer 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 paper reported.

In both cases, suspicions were underlined in May this year when an employee with more than 30 years at the company reached a plea-bargain agreement in investigations being conducted by the Federal Public Prosecutor's Office in Brazil. Albert Phillip Close, manager of Embraer's defence area, told prosecutor Marcello Miller that he had heard a former sales director who worked in Europe admit to American investigators of payment of commissions to facilitate the sale of aircraft to the Saudis.

In November 2010, the company announced the delivery of two Embraer 170 executive jets to the Saudi Arabian state-owned oil company Aramco. The amount of the deal was not announced at the time.