Lava Jato and Mani Pulite: Will Brazil’s Corruption Investigation End Up a Wash?

Pop quiz:

Which corruption investigation was preceded by a massive outcry against corruption, was advanced by federal prosecutors making liberal use of the plea bargain, implicated hundreds of politicians (including former and current heads of state), raised serious questions about the role of the independent judiciary, and ultimately resulted in a dramatic political crisis that led to the replacement of a long-standing populist regime with a conservative government bent on reform?

If you guessed Brazil’s Lava Jato (English: Car Wash), you’d be correct.

But if you answered Italy’s Mani Pulite (English: Clean Hands), you’d also be right.

The similarities between the two anticorruption investigations and subsequent prosecutions are no coincidence. In 2004, Brazilian Judge Sérgio Moro, currently responsible for Lava Jato, penned an essay praising the Clean Hands operation, calling it “one of the most impressive judicial crusades against political and administrative corruption,” lamenting Brazil’s failure to engage in a crusade of similar import, and setting a roadmap for the country to do so, based largely on the perceived successful tactics of Italy’s Clean Hands.

Over the last three years, Brazil’s Car Wash operation has followed Moro’s roadmap. But, as Alberto Vannucci has pointed out, Clean Hands was far from an unqualified success—on the contrary, the headline-grabbing, establishment-shaking operation arguably left the country even more mired in corruption than before. Last year, GAB contributor Daniel Binette (channeling Vannucci) predicted that Brazil could face three major challenges in the wake of Car Wash: (1) a collapse of major political parties, (2) the remote possibility of a coup, as occurred in Thailand in 2014, and (3) a loss of public confidence in the anticorruption probe itself. Some of Binette’s predictions have proven prescient, while the accuracy of others remains to be seen.

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Leniency Agreements Under Brazil’s Clean Company Act: Are They a Good Idea?

Brazil’s 2013 Clean Company Act, the country’s first anti-bribery statute applicable to companies, has grabbed Brazilians’ attention due to its recurrent use in the context of the so-called Car Wash operation. The Clean Company Act has provided the main legal basis for Brazilian public authorities (especially federal prosecutors) to sign leniency agreements with construction corporations whose top executives stand accused of bribing officials in exchange for contracts from Petrobras, Brazil’s state-owned oil giant. Under the Act, Brazilian authorities may enter into a leniency agreement as long as the company admits its participation in the illicit act, ceases any further participation, provides full restitution for damage caused, and cooperates fully and permanently with the ongoing investigation. In exchange, the fines can be reduced by up to two-thirds and, more importantly, the cooperating company may be exempted from judicial and administrative sanctions, including suspension or debarment from public contracts. Over the course of the Car Wash investigation, Brazilian authorities have already signed five leniency agreements with some of Brazil’s largest engineering firms, and at least twelve more companies are currently negotiating leniency deals with Brazilian authorities.

But do these sorts of leniency agreements provide for sufficient deterrence of corrupt behavior? And are they consistent with the interest in punishing those companies that have committed a serious crime? Those who defend Brazil’s increasing use of leniency agreements emphasize that a similar approach has proven to be effective in countries like the United States, one of the most successful countries in the world in the fight against corruption. Indeed, the leniency agreements authorized by the Clean Company Act were modeled on the Non-Prosecution Agreements (NPAs) and Deferred Prosecution Agreements (DPAs) used by US authorities in white-collar criminal law enforcement. However, Brazil is following the US model precisely at a time when the widespread use of NPAs and DPAs is becoming more controversial, in part because of concerns that these sorts of agreements fail to deter economic crimes and allow high-ranking executives to escape accountability for their crimes (for a summary of the criticisms of those agreements, see here and here). Perhaps more importantly, even if one views the US experience with NPAs and DPAs as successful overall, there are several reasons why this model might be more problematic in the Brazilian context. Continue reading

Electoral Systems and Corruption: Proportional Representation in Brazil

The Petrobras scandal currently engulfing Brazil is unprecedented in its scale and scope. Ironically, when the party of President Dilma Rousseff, the Workers’ Party (PT), initially became a major political player in 1989, it was seen as a clean, ethical alternative after President Collor de Mello stepped down from office amidst corruption allegations. Yet in the years following its rise to power, the PT has been dogged by corruption allegations, even before the explosion of the Petrobras investigations. During the presidency of Ms. Rousseff’s predecessor, Lula Inácio da Silva, prosecutors unearthed a major scheme, known as the Mensalão scandal, under which public funds were being used to pay members of Congress in exchange for their support of the PT government in crucial votes. At the end of the inquiry, 25 politicians and businessmen were convicted. Several other smaller corruption schemes (including Caixa Dois, Bingos, Sanguessugas, and Dossier) also implicated high-ranking members of the PT during Mr. da Silva’s tenure.

Despite this clear evidence of corruption within the PT ranks, the PT has been able to maintain its relative dominance in Brazilian politics, with three successive victories in presidential elections following Mr. da Silva’s initial rise to power, including Ms. Rousseff’s re-election in 2014, six months after the launch of the Petrobras investigations. This raises yet again a question that scholars and commentators have asked over and over again: Why do voters keep re-electing corrupt politicians? Democracy is supposed to enable voters to hold their government accountable, and most voters claim to dislike corruption and to value integrity in government. So why do parties like the PT keep winning elections? While there are many possible explanations (maybe, for example, voters don’t really care as much about corruption as they claim), part of the explanation in certain countries may have to do with the particularities of the electoral system.

Brazil has a hybrid electoral system: the President is elected in a two-round majority run-off system, elections for the Senate are based on plurality votes within states, and elections to the Chamber of Deputies are based on open-list proportional representation. An examination of this system suggests that it is particularly inimical to holding corrupt politicians accountable, and may have in fact contributed to the seemingly intractable problem of corruption in Brazilian politics. Three problems in particular stand out:

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