Guest Post: Why Disclosures in Foreign Settlements Don’t Spur Domestic Prosecutions in Argentina

Natalia Volosin, a doctoral candidate at Yale Law School and clerk in the Asset Recovery Unit at Argentina’s Attorney General’s Office, contributes the following guest post (adapted and from an op-ed previously published in Spanish in the Argentine newspaper Infobae):

The so-called “Lavo Jato” investigation into bribery and money laundering at Brazil’s state-owned oil company Petrobras led to the biggest transnational bribery settlement in history: In December 2016, the Brazilian construction conglomerate Odebrecht reached a settlement with law enforcement authorities in the United States, Brazil, and Switzerland; in exchange for its guilty plea, Odebrecht and its affiliate Braskem agreed to pay the three countries a total of $3.5 billion, of which the first firm alone will pay $2.6 billion. (Odebrecht agreed that the total criminal penalty amounts to $4.5 billion, but the final number will be determined according to its ability to pay, though it will be no less than $2.6 billion.) According to the agreement, Brazil will get 80 per cent of the penalty, while the United States and Switzerland will get 10 per cent each.

Some hope that the Odebrecht settlement will provide a boost to anticorruption investigations in other countries. After all, in the settlement documents, the firm acknowledged to having made illegal payments worth $788 million between 2001 and 2016, not only in Brazil, but in a dozen countries including Angola, Argentina, Colombia, Mexico, and Venezuela. In Argentina specifically, Odebrecht admitted that between 2007 and 2014, in three separate infrastructure projects, it paid intermediaries a total of $35 million knowing that they would be partially transferred to government officials. These criminal practices earned the company a $278 million benefit—a return on “investment” of over 694% (the highest among all the recipient countries). Will these revelations have significant consequences for the prosecution of corruption cases in Argentina?

The answer is probably no, at least not in the short term.

One reason is the complexity of corruption cases in Argentina, and the associated delay. According to data from the Corruption Cases Observatory managed by the Asociación Civil por la Igualdad y la Justicia (ACIJ), criminal corruption cases in Argentina take 14 years on average, and there have only been seven convictions in the last 20 years.

Another, related reason concerns the necessity of international cooperation—and its attendant frustrations—in gathering the evidence needed to successfully prosecute these cases. In this area, the data is also discouraging: a 2009 study shows that 60% of mutual legal assistance requests by Argentine criminal judges in corruption cases were either unanswered or rejected. Although foreign reluctance to cooperate is often blamed for these failures, the study shows that in fact failure is mostly a consequence of negligence and, at times, deliberate mistakes.

The Siemens case (the biggest transnational bribery case until Odebrecht’s plea) illustrates many of the problems. In 2008, Siemens signed a plea bargain with U.S. and German authorities, admitting to having made illegal payments to government officials, including at $106 million payment to Argentine officials in connection with a contract to make national identity cards. Yet this case shows that even an admission of guilt by the bribe payer is not enough for the bribe-takers and wrongdoers to be held accountable in Argentina. Today, eight years after the Siemens plea bargain, part of the separate domestic criminal investigation in Argentina is finally moving to trial, but only with regards to 17 Siemens executives. Meanwhile, the government officials who were mentioned by name by foreign law enforcement agencies (including former President Carlos Menem) have been charged but, after years of working the system, have so far avoided trial.

Nothing suggests that the Odebrecht case will be any different, especially when it may turn out that those involved in the three bribery incidents acknowledged in Odebrecht’s plea bargain might include individuals with close associations with the current administration, including the firm IECSA, owned by President Mauricio Macri’s cousin, Ángelo Calcaterra. Indeed, the always-present political factors reduce the chances that Odebrecht plea bargain will produce additional convictions of government officials in Argentina.

Ultimately, Argentina still needs to improve its criminal justice system, but must also reform its government procurement system. It is the extreme weaknesses of this system (which I describe here) that explains most Argentine corruption scandals. These weaknesses not only make it is very unlikely that the plea bargains signed in the United States or elsewhere will lead to convictions in Argentina, but also that procurement related corruption schemes will continue.

2 thoughts on “Guest Post: Why Disclosures in Foreign Settlements Don’t Spur Domestic Prosecutions in Argentina

  1. Matthew, a very interesting article and you’re correct in respect of all the other affected countries and their ability to see justice and ultimately compensation. As you’ll know there are a number of legal reasons that act as barriers for others to see justice; the absence of settlement laws or an ability to recognise or participate in a settlement being one.

    I suggest there is another reason why those countries affected can be overlooked, it is one I have witnessed previously on a number of occasions. I liken the US, UK (Serious Fraud Office), Swiss and possibly a couple of others as ‘premier league’ investigators and prosecutors. They have the resources, political backing and finances to take this sought of case on, a bit like Arsenal and Manchester Utd seem capable of buying whoever they want. Other countries, often blighted by corruption simply don’t have the resources, political backing or finances to first lodge an interest in this type of case and second make a claim on the fines or proceeds of corruption.

    Developed western countries are, as stated in the article, are proactive and look to prosecute large corruption cases. Those same countries are also, so often, the ones who harboured intermediaries, corrupt professionals or illicit banking all of which may have facilitated the corruption. Therefore, is there not a duty on them to proactively support the participation of all affected countries in proceedings?

  2. Pingback: Why Disclosures in Foreign Settlements Don’t Spur Domestic Prosecutions in Argentina | Anti Corruption Digest

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