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Tuesday
Apr142015

Dispatch from Brazil: Corruption and enforcement report for 2015 Q1

Here are some notable items from January through March this year in Brazil in connection with corruption, enforcement, and compliance.

Protests. According to military police, on March 15 about 2 million people took to the streets, in all Brazilian states, protesting against the federal government and corruption.

One year of Operation Carwash. March 1 was the first anniversary of the biggest investigation of corruption and money laundering in Brazilian history. Operation Carwash revealed the so-called Big Oily scandal -- a series of huge suspicious kickbacks and payments to political parties and politicians to win contracts with Petrobras, the Brazilian state-owned oil giant.

Estimates of resources diverted from Petrobras are around BRL 2.1 billion (more than $600 million). So far, the country’s main construction companies and more than 100 individuals have been charged with corruption, bribery, anti-competitive practices, and money laundering.

Since the start of 2015, Operation Carwash has led to the following:

  • The Ministério Público Federal (Federal Public Prosecutor Office) filed 5 suits related to administrative misconduct against construction companies, all of them involved in the Big Oily scandal. The overall figures involves a US$ 103.8 million disgorgement payment, plus US$ 312.1 million in civil fines and a US$ 1,04 billion compensation from collective moral damages.
  • Valdir Simão, the Chief Ministry of Controladoria Geral da União (Federal Comptroller’s Office), is filing administrative enforcement actions against 29 companies.
  • Attorney General Rodrigo Janot submitted to Supreme Court a list of 47 politicians to be investigated for involvement in the Big Oily scandal. The list includes high-ranking politicians, such as the leaders of the Senate and Lower House, two current state governors, and a former state govern. Brazil President Dilma Rousseff isn't on the list and will not be investigated.
  • The Federal Public Prosecutor Office repatriated $59 million found in overseas accounts of former Petrobras manager Pedro Barusco

Anti-corruption Package. On March 18, right after the March 15 protests, President Rousseff sent to Congress a set of measures to prevent and punish irregularities in public administration, the so-called Anti-corruption Package.

It proposes (i) the criminalization of caixa dois (off-the-books contributions); (ii) anticipated disposal of impounded assets from corrupt actions; (iii) a bill of law proposing that holders of positions of trust in federal government shall have no criminal records; (iv) criminal responsibility for public officials who cannot prove how their assets were obtained; (v) impounding of assets from civil servants who had enrichment incompatible with its earnings; and (vi) the enactment of Decree 8.420, which regulates the Brazilian anti-bribery law, known as the Clean Company Act.

An English-language version of Decree 8.420 can be found here.

Agreement to enforce the war against corruption. Authorities from the Public Prosecutors Office, and the Executive branch and the judiciary, along with civil society representatives, on March 25 signed a cooperation agreement to strengthen the fight against corruption and impunity. Among other issues, it provides for the creation of a group to discuss and propose means to expedite the handling of legal and administrative enforcement against corrupt practices. No one from Brazil's Legislative branch signed the accord.

Zealots operation. The federal police are investigating one of the biggest alleged tax dodging scheme in Brazilian history. Companies operated by the CARF (Board of Tax Appeals), an agency linked to the Ministry of Finance, are suspected of bribing judges to revert or cancel fines. There are now 74 proceedings, totaling BRL 19 billion ($6 billion), under investigation.

Limos operation. The federal public prosecutor's office, the federal police, and the federal comptroller’s office launched an investigation in state of Amapá, with the goal of dismantling a fraud scheme in Bolsa Familia -- the Brazilian income transfer program.

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Lucas Zanoni is an undergraduate student of law at University of São Paulo and a intern in the compliance and anti-bribery team of Chediak Advogados. The firm offers legal assistance for both Brazilian and international clients across different industries and business sectors.