Brazil’s Lava Jato (“Car Wash”) Operation, launched in 2014, exposed one of the largest corruption schemes ever, resulting in the conviction of over 361 people for corruption, money-laundering, procurement fraud, and other crimes. Those convicted included prominent members of the Brazilian business and political elite, including the current President, Luiz Inacio Lula da Silva (known as Lula). Over the last few years, however, the Car Wash Operation has unraveled, with several of its most important achievements reversed. In 2019 a Brazilian hacker publicized text messages allegedly exchanged between Sergio Moro, the presiding judge in many of the Car Wash cases (including Lula’s), and the Car Wash prosecutors, prompting allegations of bias. The specialized Car Wash prosecutorial task force was disbanded in February 2021, and the Brazilian Supreme Court annulled Lula’s conviction on procedural grounds in April 2021, paving the way for his re-election to a third presidential term in October 2022. Most recently, as I discussed in a post here, the Brazilian Supreme Court held that key evidence obtained by Car Wash prosecutors in a settlement agreement with one of the companies at the heart of the scandal was inadmissible due to procedural irregularities, potentially rendering dozens of additional convictions subject to reversal.

So, was it all for nothing? I don’t think so. True, some of the operation’s most important successes are vanishing. But Car Wash helped strengthen Brazil’s legal and institutional framework for anticorruption and has helped pave the way for the country to embrace a more transparent, honest, and efficient system. More specifically, Car Wash has left a positive legacy with respect to the Brazilian approach to (1) corruption prevention; (2) corruption investigations; and (3) the resolution of corruption cases.

• With respect to corruption prevention, Brazil has significantly improved its rules regarding compliance programs, creating a regulatory framework that efficiently stimulates them and fosters corporate integrity. The 2013 Clean Companies Act (CCA) made companies strictly liable for civil and administrative acts committed against national and foreign public administrations, enacting severe penalties for entities engaged in corruption and related offenses and establishing that having strong integrity programs could serve as an attenuating factor in prosecutions. While the CCA was enacted a year before the Car Wash Operation started, Car Wash helped clarify and implement the CCA’s compliance rules. Settlements between Car Wash prosecutors and private entities required, among other things, the implementation of stronger integrity programs, often inspired by best practices in other countries (such as the United States) that were also involved in some of the most important Car Wash cases. In 2015, Brazil enacted a decree to further explain the government’s expectations for corporate compliance programs. Shortly after that, the Brazilian Office of the Comptroller General (CGU) implemented its own compliance program manual (last updated in 2018). In 2022, a new decreebrought Brazilian compliance program requirements closer to international standards, increased penalties for top and middle management in cases of willful blindness, and emphasized the need to allocate adequate and efficient resources into integrity programs. As a result, Brazil has today a legal structure that promotes corporate integrity to a degree that probably wouldn’t have been achieved without the Car Wash Operation.
• With respect to corruption investigations, the unusual complexity of the Car Wash Operation led to significant improvements in cooperation among Brazil’s various investigative and regulatory agencies. The investigation of state and federal crimes across multiple locations within the country (and globally) compelled these agencies to strengthen their relationships with each other. In addition to the central role of federal police and prosecutors, Brazil’s IRS auditors meticulously analyzed millions of data points to trace money transfers and illicit payments, the Council for Financial Activities Control shared vital information regarding suspicious activities reported by regulated institutions, the Administrative Council for Economic Defense scrutinized involved cartels, and the Department of Assets Recovery and International Legal Cooperation facilitated collaborations with foreign authorities engaged in parallel investigations. This heightened level of coordination not only bolstered the individual capacities of these agencies but also taught them how to efficiently identify and address crimes on a national scale. Additionally, the central role of leniency agreements in resolving Car Wash cases promoted stronger and more effective inter-agency cooperation, because these leniency agreements often required multiple agencies to sign on. In 2020, an agreement signed by Brazil’s Attorney General’s Office, Office of the Comptroller General, Federal Court of Accounts, Ministry of Justice and Public Security, and Supreme Court established guidelines for joint action among those authorities. The agreement standardized methods, delimited the role of each entity, outlined information sharing protocols, and provided procedures to resolve disagreements regarding negotiated settlements with defendants. These guidelines, while not perfect, represent Brazil’s movement towards a more robust investigative system to combat corruption and irregularities.
• Finally, the Car Wash Operation strengthened and normalized the practice of resolving criminal cases through negotiated settlements, a development that has enhanced Brazil’s ability to investigate criminals and hold them accountable. Brazil’s legal system traditionally gave prosecutors little discretion to decide whether to bring criminal charges against a suspect. Before Car Wash, the country had relatively modest mechanisms authorizing negotiations between defendants and the prosecution. In 2013, the CCA and the Organized Crime Act introduced a more complete, albeit still fragile, set of regulations for plea bargains and leniency agreements. The Car Wash Operation made aggressive use of this authority, resulting in over 209 plea bargain and 17 leniency agreements. It was the popularity of those agreements that fostered the development of negotiated outcomes more generally. In 2020 Brazil adopted a modified version of the “non-prosecution agreement” mechanism, giving suspects more opportunities to formally confess some kinds of criminal activities and agree to fulfill certain obligations, which are less severe than the potential penalties that could be imposed had the case proceeded to judgment. Today, after years of development, Brazil has at least five effective tools for negotiated outcomes in cases involving corruption and other crimes, and this development has substantially improved the effectiveness of the Brazilian system for investigating, prosecuting, and resolving these cases.

These developments—which would not have happened, or at least not have happened as quickly and as fully, if the Car Wash Operation had not existed—have contributed substantially to the development of a more transparent, honest, and efficient business and political environment in Brazil. Even though I share many of the criticisms of how the Car Wash Operation was conducted, the operation played (and still plays) an important role in Brazil’s movement against corruption. Car Wash obtained many achievements that go beyond the criminal convictions now being overturned. Corruption is a complex and elusive problem that cannot be eradicated with a single crackdown—not even a gigantic operation like Car Wash. Instead, it’s the cumulative effect of seemingly small steps that matters the most. And Car Wash helped Brazil move forward down that path.