Aircraft giant Embraer SA is under investigation by U.S. and Brazilian authorities amid allegations that it made improper payments to a government official in the Dominican Republic.

Embraer is being probed over allegations that its executives made bribery payments to officials in the Dominican Republic in exchange for a $90 million contract to furnish the country's armed forces with military planes, according to documents obtained by The Wall Street Journal.

In those documents, prosecutors cited evidence that Embraer executives approved a $3.4 million bribe to Carlos Piccini, the former director of special projects for the country's armed forces, in exchange for the sale of eight military planes to be used to combat drug trafficking and run border patrol missions in the Dominican Republic.

The bribery payments allegedly were routed through bank accounts maintained by three shell companies. Embraer executives attempted to conceal the payments by booking them as fees in a bogus deal to sell aircraft to the Kingdom of Jordan, according to the documents.

The latest news of the probe comes three years after the Securities and Exchange Commission issued a subpoena to Embraer over possible violations of the Foreign Corrupt Practices Act, according to a Nov. 3, 2011 regulatory filing. In response, the company said it retained law firm Baker & McKenzie “to conduct an internal investigation into transactions in three specific countries” but did not identify the names of those specific countries.

Embraer said its outside counsel has been in regular conduct with both the SEC and Department of Justice, and has provided both agencies with relevant documents and other information.

Brazil's Anti-Bribery Law

The investigation into Embraer comes just months after Brazilian President Dilma Vana Rousseff signed into law on Aug. 12 a new anti-corruption law that establishes direct civil liability for companies for the bribery of both Brazilian and foreign public officials.

Prior to the law's enactment, only individuals could be prosecuted for corruption. Under the new anti-corruption law, however, civil and administrative liability will be imposed on corporate entities doing business in Brazil that engage in bribery of Brazilian or non-Brazilian officials.

This effectively means that foreign companies operating within Brazil could be subject to penalties for bribery of local officials, including employees of Brazilian subsidiaries of U.S. companies; major Brazilian companies that are publicly listed on U.S. stock exchanges; Brazilian agents of U.S. companies that have been subject to due diligence reviews; and Brazilian companies acquired by U.S. companies.

Moreover, the new law establishes civil liability against companies for the anti-bribery acts of its directors, officers, employees, and other agents acting on its behalf.

The law creates stiff penalties as well. A company found guilty of corruption can face fines up to 20 percent of its gross revenue from the previous year. In addition, penalties can include disgorgement of benefits obtained, suspension of the company's activities, and even the dissolution of the offending entity.

Léo Torresan, president of Transparency International's partner organization in Brazil, Amarribo Brasil, called the law a “wake-up call” for the management and shareholders of Brazilian companies.

“This should make management more vigilant about how it goes about business because the stakes just got seriously higher,” Torresan wrote in a blog on TI's Website. “This new law, which aims to provide a level playing field when it comes to business, is a serious step in the right direction.”