Embraer SA, Brazil's flagship aerospace manufacturer and a worldwide competitor across various aviation markets, experienced first-hand the scope and reach of the Foreign Corrupt Practices Act (FCPA). Embraer agreed to pay $205 million to settle allegations by the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) that the company paid millions in bribes to officials in other countries and falsified accounting records.

However, this is not your run-of-the-mill settlement with American authorities. Companies like Embraer should take notice. The FCPA is lethal for domestic and foreign actors not because of stealth or unfamiliarity – most sophisticated businesses that are directly or indirectly involved in U.S. commerce are aware of the FCPA. Rather, the danger lies in the fact that many companies fail to appreciate the vast scope of the FCPA and the aggressive pivot by the DoJ to increase FCPA prosecutions and hold executives civilly and criminally responsible.

As a primer, the FCPA contains antibribery provisions and mandates that companies maintain accounting and internal control and compliance measures to prevent corrupt transactions. The FCPA aims to prevent corporate bribery of foreign officials by making it illegal for companies and supervisors to influence individuals with personal payments or rewards. The FCPA applies to two general categories: 1) individuals and corporations who act in furtherance of a FCPA violation while in the United States and 2) individuals and corporations with formal ties to the United States.

The Embraer case is a cautionary illustration. In 2010, the SEC served Embraer with a subpoena seeking documents related to its foreign aircraft sales practices. The SEC ultimately focused on four transactions involving aircraft sales to the Dominican Republic, Mozambique, Saudi Arabia, and India. To facilitate the deals, Embraer executed several consulting agreements with agents of the payment beneficiaries. The Dominican and Saudi transactions were couched as commissions, although there was no apparent evidence that the recipients had any legitimate role in the transaction. Moreover, the transactions were conducted with active participation by Embraer's legal department. And when Embraer's lawyers concluded the consulting agreements were "high risk," senior executives instructed them to "find a solution" for the commissions.

Embraer ultimately entered into a non-prosecution agreement with the Government and agreed to improve its compliance regime and undergo a three-year Government monitoring program. The DoJ explained that Embraer could have received a lesser punishment had the company adequately disciplined a senior executive who was aware of the alleged scheme.

In today's interconnected global economy, for foreign corporations regularly engaged in international transactions, it is extremely difficult – if not impossible – to avoid the reach of the FCPA. In the Embraer case, no direct party to any of the sales was American. However, Embraer owned a subsidiary incorporated within the U.S. and as a corporation, Embraer was subject to U.S. jurisdiction because its shares traded on the NYSE. Further, because Embraer's U.S. subsidiary wired the payments from a U.S. bank and at least one email in furtherance of the transaction passed through U.S. servers, the company fell within FCPA jurisdiction.

Even through Embraer's code of ethics and internal company directives required due diligence to avoid improper transactions, the company either ignored or circumvented the required internal compliance measures. For example, senior executives circumvented internal accounting controls by making payments to unrelated third parties.

Embraer is not an outlier. The Government will likely continue its aggressive civil and criminal prosecution of FCPA violators. Last year, in a departmental directive commonly referred to as the "Yates Memo," the DoJ announced a policy-shift for prosecutors to hold individuals accountable for corporate wrongdoing by conducting parallel civil and criminal investigations. In addition to an increase in criminal prosecutions, as reflected in the Embraer settlement, the Yate Memo also emphasizes individual culpability through heightened cooperation credit standards. Companies must report individual wrongdoing to qualify for cooperation credit.

Finally, the Embraer settlement should remind companies of the need to conduct routine and comprehensive reviews of its accounting procedures and compliance controls. The failure to maintain such programs is a violation of the FCPA and Embraer paid a costly price for their failure to maintain and abide by comprehensive compliance procedures.