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#Financial Crime Prevention #Governance, Risk and Compliance

Brazilian firms receive largest ever foreign bribery fines


corruption , Financial , Risk

Odebrecht S.A. and Braskem S.A, two Brazilian companies, have received a total fine of at least US$3.5 billion after after pleading guilty to bribing government officials in a number of countries.

This is biggest ever international foreign bribery resolution, and was conducted by authorities in Brazil, Switzerland and the United States after an investigation by the FBI and the US Department of Justice’s Criminal Division.

Odebrecht, a construction business, and Braskem, a petrochemicals company, both pleaded guilty to paying bribes in exchange for business contracts in countries across three continents. 

The global financial system, including the US banking system, was used to process the bribes.

US Deputy Attorney General Sung-Hee Suh described Odebrecht as having a ‘Department of Bribery’, with senior executives at the highest level involved in facilitating bribes. The bribes were organised via a ‘Division of Structured Operations’, which the Department of Justice said ‘effectively functioned as a stand-alone bribe department’.

Both companies, as part of their plea agreements, have agreed to cooperate with ongoing criminal investigations and to implement enhanced compliance procedures, in addition to independent compliance monitors for three years.  

The company paid corrupt officials in a variety of countries to win contracts in those countries.

Here are a few of the starting details of the case:

Odebrecht are estimated to have paid around US$788 million to government officials and political parties since 2001.

  • They agreed to pay a fine of US$4.5 billion but have said they can only pay US$2.6 billion. The fine will be decided on 17 April 2017 and could be higher or lower than the agreed sum.
  • Braskem will pay a fine of US$632 million to the US Justice Department and US$325 million to the Securities and Exchange Commission.
  • As things stand, Braskem and Odebrecht will pay a combined US$3.5 billion.
  • Odebrecht and Petrobras own 97.1% of voting capital in Braskem. Braskem are estimated to have paid approximately US$250 million in bribes between 2006 and 2014.
  • Former Odebrecht CEO Marcelo Odebrecht was jailed for 19 years’ in March 2016 for paying US$30 million in bribes to Petrobras, the Brazilian state-owned energy giant.
  • Such prosecutions in Brazil are part of Operation Car Wash, a major corruption and money laundering investigation that has reached the highest levels of politics and business in the country. 
  • The investigation has led to hundreds of arrests and over 90 convictions. 80% of the total fine will go to Brazil, with the remaining 20% split between the US and Switzerland. Brazil’s economy has entered recession has struggled to climb out of recession partly due to the political unrest caused by the scale of corruption in the country.
  • Former Brazilian President Luiz Inácio Lula da Silva was detained in March 2016 in relation to Operation Car Wash. In August, then-President Rousseff was impeached after controversies related to the Petrobras scandal. Rousseff was a board member of Petrobras between 2003 and 2010. She denies any knowledge of wrongdoing.
  • The US Securities and Exchange Commission only filed a case against Braskem, because the company had shares registered with the agency.

The Odebrecht and Braskem penalties stem from a wider investigation into corruption across Brazilian politics and business that began with a probe into illicit payments at Petrobras.

Since then, revelations of corruption and bribery from politicians and senior executives in Brazil’s biggest businesses has contributed to huge social unrest and significant damage to the Brazilian economy, which has been in recession since 2014.

Corruption at first glance appears to be endemic in the political and business culture of the country. It certainly doesn’t seem to be an issue that will go away soon – but the appetite for change appears to be taking hold.

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