Much ink has been spilled celebrating the extraordinary crackdown on corruption in Brazil over the past few years (including on this blog). Headlined by the massive Operation Car Wash (Portuguese: Lava Jato)—in which officials received nearly $3 billion in bribes to overcharge Petrobras, Brazil’s state-controlled oil company, for construction and service work—high-profile corruption investigations have swept through Brazil, threatening to upend its reputation as a bastion for unchecked graft. Although corruption in Brazil remains a serious problem, the extensive investigations have worked to elevate the nation as an inspiration for countries looking to address their own corrupt political systems and hoping to become “the next Brazil.”
In addition to the headline-grabbing investigations targeting the upper echelons of the Brazilian government, Brazilian authorities have also worked closely with U.S. authorities investigating bribery activity in Brazil, leading to significant penalties both under Brazilian law and under the U.S. Foreign Corrupt Practices Act (FCPA). This is a significant development, because it demonstrates the possibility for close collaboration on cross-border bribery cases between a developed country (usually on the “supply side” of transnational bribery cases) and a developing country (on the “demand side”). Commentators have complained that too often supply-side enforcers like the United States take an outsized role in transnational bribery cases, with the countries where the bribery takes place doing too little. Other commentators have cautioned that an increase in prosecutions by other countries, in the absence of some sort of global coordination mechanism, may lead to races to prosecution or to over-enforcement. China’s nearly $500 million fine of British pharmaceutical giant GlaxoSmithKline in 2014 for bribing Chinese doctors and hospitals was emblematic of these fears, providing an example of an aggressive, unilateral approach to demand-side enforcement – while putting DOJ in the unfamiliar position of pursuing FCPA violations as a cop late to the scene.
Through its recent enforcement actions, Brazil has provided a different model. While there have been successful joint enforcement actions in the past—such as the Siemens case—the recent series of coordinated U.S.-Brazil actions exhibit how developed and developing countries can work together in anti-bribery enforcement, sharing in the investigative responsibilities, negotiations with companies, and even the financial returns.
The recent matters in Brazil include:
- Embraer S.A.: The Brazilian aircraft manufacturer reached a combined settlement with Brazilian and U.S. authorities to resolve bribery allegations concerning aircraft sales in the Dominican Republic, India, Mozambique, and Saudi Arabia. Embraer agreed to pay a total of $205 million, including $185 million to the DOJ and SEC, after crediting the $20 million that the company agreed to pay to Brazilian authorities.
- Odebrecht S.A.: The Brazilian construction conglomerate and its subsidiary, Braskem S.A., admitted to bribery in over a dozen countries (including Brazil) and agreed to a global settlement of at least $3.5 billion (subject to later reductions based on inability to pay). The DOJ fully credited Odebrecht’s payments to Swiss and Brazilian authorities, with the United States and Switzerland each receiving 10% of the total criminal fine and Brazil receiving the remaining 80%.
- Rolls-Royce plc: The British engine manufacturer settled with U.S., U.K., and Brazilian authorities to resolve allegations of bribes in eight countries (including Brazil) from 1989 to 2013. As part of an $800 million global settlement, the company agreed to pay $25.6 million to Brazilian authorities, which the DOJ fully credited against the company’s fine in the United States.
- SBM Offshore N.V.: The Dutch oil drilling manufacturer resolved criminal charges over allegations of bribery in Angola, Brazil, Equatorial Guinea, Kazakhstan, and Iraq via agreements with U.S., Dutch, and Brazilian authorities. Of an approximately $820 million settlement, the DOJ collected $238 million after crediting amounts paid in a 2014 Dutch settlement and an anticipated $342 million settlement with Brazil.
- Keppel Offshore and Marine Ltd.: The Singapore-based shipyard operator agreed to pay more than $422 million to American, Brazilian, and Singaporean authorities stemming from allegations of bribes given to Brazilian politicians and Petrobras officials. The DOJ’s $422.2 million penalty was reduced to $105.6 million, in recognition of offsetting payments of $211.1 million and $105.5 million to Brazilian and Singaporean entities, respectively.
These settlements notably include instances where Brazil was positioned in both supply-side (Embraer, Odebrecht) and demand-side (Odebrecht, Rolls-Royce, SBM, and Keppel) enforcement roles. The combined settlements also exhibit an increased trust in Brazil as a foreign enforcement partner. This recognition extends far beyond boilerplate praise in DOJ settlement announcements for investigatory assistance; it has also translated into significant crediting of the fines paid to Brazilian authorities when calculating the penalties for liable companies. These offsets by U.S. authorities, which are discretionary and determined on a case-by-case basis, telegraph what the parties perceive as the relative victimization of the countries and the roles played by the prosecuting countries in the investigations. The prospect of sharing in the monetary payments—and even getting priority over DOJ penalties—provides a substantial incentive for other demand-side countries to emulate Brazil and join coordinated enforcement activities. To that end, features of Brazil’s recent settlements provide a roadmap for other developing/demand-side countries looking to become the “next Brazil” in this regard:
- Capacity to Lead Investigations and Willingness to Target Individuals. In the Odebrecht settlement, Brazilian prosecutors took the lead in the investigation – a first for an FCPA case of that size. Of course, Brazil’s investigative capabilities are unusually developed as a result of the country’s long-term commitment to eradicating public corruption. But even in those cases where Brazil’s federal prosecutor’s office (the Ministério Público Federal, or MPF) did not formally lead an investigation, it pulled its weight through a willingness to aggressively pursue individuals within its reach, including when the bribery occurred outside of Brazil. For example, Brazil charged eight individuals in the Embraer case for activity in the Dominican Republic – individuals whose conduct likely would have fallen outside U.S. jurisdiction.
- Information Sharing Capacity. In a July 2017 speech, then-Acting Assistant Attorney General Kenneth Blanco cited the importance of information-sharing capacities when building enforcement coalitions. Mr. Blanco stated, “Given the close relationship between [U.S. and Brazilian] prosecutors, we don’t need to rely solely on formal processes such as mutual legal assistance treaties, which often take significant time and resources to draft, translate, formally transmit, and respond to,” and are only necessary for evidence to be admissible at trial. Consider, for example, the SBM matter. In 2014, after SBM resolved charges with Dutch prosecutors, the DOJ announced that it had closed its own inquiry without charges due to a lack of jurisdiction over SBM personnel. But further investigation by Brazilian authorities uncovered bribery activity by SBM’s U.S. subsidiary; with information from Brazilian officials, the U.S. reopened the investigation that led to the final settlement.
- Respect for Brazil’s Settlement Regime. Until 2014, Brazil did not have a specific law imposing liability on corporations for acts of corruption committed by their employees or agents. Brazil’s Clean Company Act filled this gap, but controversially provided for leniency agreements (similar to Deferred Prosecution Agreements) whereby companies may reduce fines by up to two-thirds and avoid certain sanctions by cooperating with investigators and providing full restitution. In August 2017, Brazilian officials released detailed guidelines for negotiating and drafting such agreements, in response to early struggles in ratifying settlements. Such settlement agreements have been crucial in resolving recent corporate investigations, including those listed above. Brazil’s settlements—typically requiring admissions of wrongdoing, compliance overhauls, and serious financial penalties—exhibit sufficient strength and reliability to earn respect and off-setting credit from the DOJ and SEC.
While other nations and commentators may find inspiration in Brazil’s extensive assault on public corruption, the partnership with the United States in FCPA investigations provides another, perhaps more accessible way for Brazil to serve as a model for other countries around the globe. The United States and peer supply-side nations have shown a willingness to collaborate with demand-side partners in anti-bribery enforcement, and Brazil has illustrated what that partnership can look like.