Braskem announces $957 million ‘global settlement’ of Operation Car Wash offenses
Thursday, December 15, 2016 at 7:18AM
Richard L. Cassin in Braskem SA, Brazil, Marcelo Odebrecht, Odebreacht, Petrobras

Brazil petrochemical giant Braskem SA said Wednesday it will pay about $957 million in penalties and damages for a global settlement related to the Operation Car Wash corruption and kickback scandal.

As part of the global settlement, the company will enter into a leniency agreement with authorities in Brazil.

Braskem's announcement about the "global settlement" referred to "negoatiations with competent authorities" but didn't identify them or say if they include enforcement agencies outside Brazil.

The company said it will pay about half of the $957 million "up front, after the ratification of the agreements by the respective competent courts."

The balance will be paid in six annual installments from January 2018 onwards, the announcement said.

Braskem didn't say Wednesday if the "global settlement" will include a resolution of FCPA offenses with the DOJ and SEC.

In early October, the company said it had started discussions with the DOJ and SEC. It said the discussions could "lead to formal settlement negotiations and the resolution" of allegations that it paid bribes in exchange for supply contracts from state oil company Petrobras. 

Negotiations with U.S. and Brazil authorities would happen simultaneously, Braskem said in the October disclosure.

Petrobras and Brazil construction firm Odebrecht SA together control about 97 percent of Braskem's voting stock and about 74 percent of its share capital.

A long-running probe by Brazil prosecutors into corruption at Petrobras has implicated scores of big companies and dozens of executives and politicians. The investigation is called Operation Car Wash.

Earlier this year, in another case linked to Petrobras, the CEO of Odebrecht SA -- Marcelo Odebrecht -- was sentenced to 19 years in prison for money laundering, corruption, and taking part in a criminal association.

In April 2015, São Paulo-based Braskem said it and two former executives were accused of making improper payments for Petrobras raw material supply contracts from 2006 to 2012.

The allegations appeared in lawsuits filed by third parties, the company said.

Braskem is Latin America's biggest petrochemical producer. Revenue last year was about $22.5 billion. It has about 8,000 employees worldwide at 40 production facilities, including five in the United States.

Braskem SA trades on the NYSE under the symbol BAK.

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Here's Braskem's December 14, 2016 announcement:

Braskem S.A. ("Company"), in compliance with CVM Ruling nº 358/02, informs its shareholders and the market that, on this date, it entered into a Leniency Agreement with the Federal Prosecutors Office ("Leniency Agreement"), the effectiveness of which is subject to ratification by the 5th Chamber of Coordination and Revision of the Federal Prosecutors Office and by the 13th Federal Justice Criminal Court of Curitiba/PR.

The Leniency Agreement is the Brazilian part of the global settlement, which the Company previously informed the market is in the advanced stages of negotiation with the competent authorities. 

Under the global settlement, the Company will pay to the competent authorities, in penalties and damages, a total amount of approximately US$ 957 million, equivalent to approximately R$ 3,1 billion.

Out of this amount, approximately R$ 1,6 billion will be paid up front, after the ratification of the agreements by the respective competent courts. The balance of approximately R$ 1,5 billion will be paid in six annual installments, from January 2018 onwards, adjusted by the IPCA variation.

The facts under the Leniency Agreement comprise all the facts ascertained up to now that involve Braskem within the context of the Carwash Operation. As a result of the agreements, the Company will continue to cooperate with the competent authorities and implement improvements in its compliance system. The Company will also be subject to external monitorship.

The remaining terms of the Leniency Agreement are confidential, but comply, in general terms, with the standards adopted in other cases by the Federal Prosecutors Office.

The Company will keep the market informed of relevant updates to this matter.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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