Yesterday, the DOJ and SEC announced (here and here) a Foreign Corrupt Practices Act enforcement action against Odebrecht S.A. (a Brazilian holding company) and Braskem S.A. (a Brazil-based petrochemical company in which Odebrecht owns 50.1% of the voting shares, 38.1% of the total share capital and which Odebrecht “effectively controlled” according to the DOJ). Braskem has American Depositary Receipts registered with the SEC and traded on the NYSE and thus the enforcement action also included an SEC component.
Perhaps because of the less than clear DOJ release (clear once one actually reads the original source documents), this action is being reported in various places as a $3.5 billion FCPA enforcement action. While that figure represents the overall global settlement amount (Brazil and Swiss law enforcement also brought related actions), yesterday’s action was most certainly not a $3.5 billion FCPA enforcement action. Not even close.
After accounting for various credits and deductions (including for payments to Brazil and Swiss law enforcement agencies and a claimed inability to pay) the net FCPA settlement amount (subject to potential future adjustments) is approximately $420 million (the 4th largest FCPA settlement amount of all-time). The $420 settlement amount consists of approximately $260 million in connection with the Odebrecht criminal information and plea agreement, $94.8 million in connection with the Braskem criminal information and plea agreement, and $65 million in connection with the SEC’s related enforcement action against Braskem.
The conduct at issue was egregious and largely centered on a business unit, the Division of Structured Operations, housed within an Odebrecht subsidiary that allegedly served as little more than a bribe-paying department for the benefit of Odebrecht and Braskem. According to the resolution documents, former senior executives authorized approximately $788 million in bribes, largely through the Division of Structured Operations, to alleged foreign officials in at least twelve countries. While the principal focus of the DOJ’s action (and the exclusive focus of the SEC action) concerned conduct in Brazil including the companies relationships with Petrobras, the DOJ action also alleges improper payments in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.
The remainder of this post goes in-depth into the resolution documents released by the DOJ and SEC.
Elevate Your FCPA Research
There are several subject matter tags in this post. However, only subscribers to FCPA Professor's premium search feature can see and use them in research. Efficient and cost-effective FCPA research is just a click away.
Elevate Your Research
DOJ
Odebrecht Criminal Information
The information alleges that between 2001 and 2016, Odebrecht and its co-conspirators knowingly and willfully conspired and agreed with others to corruptly provide hundreds of million of dollars in payments and other things of value to various foreign officials.
According to the DOJ:
“During the relevant time period, Odebrecht, together with its co-conspirators, paid approximately $788 million in bribes in association with more than 100 projects in twelve countries, including Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.”
The DOJ alleges that “to further the criminal bribery scheme,” Odebrecht and its co-conspirators “created and funded an elaborate, secret financial structure that operated to account for and disburse corrupt bribe payments, to, and for the benefit of” of various foreign officials.”
Specifically, the DOJ alleges that in or about 2006 Odebrecht established the Division of Structured Operations, a standalone division within Odebrecht that “effectively functioned as a bribe department within Odebrecht and its related entities.”
The information alleges:
“To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system called ‘Drousys,’ which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes through the use of secure e-mails and instant messages, utilizing codenames and passwords.”
According to the information, Odebrecht and its employees and agents took a number of steps while in the territory of the U.S. in furtherance of the corrupt scheme including that some of the offshore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the U.S.”
In addition, the information alleges that former Odebrecht executives took steps in furtherance of the bribery scheme while located in the U.S. such as Miami where the information alleges that various executives “engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct.”
The information states:
“In all, Odebrecht, together with its co-conspirators, paid more than $788 million in bribes to illegally secure projects in multiple countries – including … corrupt payments to Petrobras employees and executives; corrupt payments to other government officials in Brazil; and corrupt payments to foreign officials in eleven other countries – with ill-gotten benefits to Odebrecht and its co-conspirators of approximately $3.336 billion.”
The information alleges that the Division of Structured Operations managed and distributed funds that Odebrecht never recorded on its balance sheet and that these “unrecorded funds” were generated by Odebrecht through a variety of methods including: (i) standing overhead charges collected from subsidiaries; (ii) overcharges and fees that were attributed as legitimate to service providers and subcontractors but not included in project budgets; (iii) undeclared retainers and success fees for the purchase of company assets; and (iv) self-insurance and self-guarantee transactions.
According to the information, “once generated, unrecorded funds were funneled by the Division of Structured Operations to a series of offshore entities that were not included on Odebrecht’s balance sheet as related entities.” According to the DOJ, “many of the transactions were layered through multiple levels of offshore entities and bank accounts throughout the world, often transferring the illicit funds through up to four levels of offshore bank accounts before reaching the final recipient.” According to the DOJ, Odebrecht and its co-conspirators “also utilized banks with distinct features that would aid the scheme; specifically small banks located in countries with strict laws regarding the protection of bank secrecy and sharing of information with international law enforcement.” Further, the information alleges that Odebrecht and its co-conspirators “frequently paid remuneration fees and higher rates to the banking institutions, and a percentage of each illicit transaction to certain complicit bank executives.” In addition, the DOJ alleges that Odebrecht caused wire transfers to be made to various accounts located in New York.
As to Brazil, the information alleges that Odebrecht paid approximately $349 million corrupt bribe payments to political parties, foreign officials and their representatives in order to secure an improper advantage to obtain and retain business that Odebrecht benefited more than $1.9 billion. The Brazilian officials specifically referenced were:
An executive and director of Petrobras;
An executive and director of Petrobras;
A manager at Petrobras;
A high-level state elected official in Brazil; and
A high-level officials in the legislative breanch of government in Brazil
In addition, the information alleges that Odebrecht made or caused to be made approximately $439 million in corrupt payments to foreign political parties, foreign officials, and their representatives in eleven other countries in order to secure an improper advantage to obtain and retain business that Odebrecht benefited more than $1.4 billion.
As to Angola, the information alleges payments to government officials (including a high-level official of an Angolan state-owned and state-controlled company) to secure public works projects.
As to Argentina, the information alleges payments to intermediaries with the understanding that these payments would be passed, in part, to government officials, in connection with at least infrastructure projects.
As to Colombia, the information alleges payments to a government official to secure public works projects.
As to the Dominican Republic, the information alleges payments to government officials and intermediaries working on their behalf to secure public works projects.
As to Ecuador, the information alleges payments to government officials to “solve” problems related to a construction contract.
As to Guatemala, the information alleges payments to government officials in order to secure public works contracts.
As to Mexico, the information alleges payments to government officials (including a high-level official of a Mexican state-owned and state-controlled company) in order to secure public works contracts.
As to Mozambique, the information alleges payments to a high-level government official “in exchange for Odebrecht obtaining favorable terms on a government construction project, which the government had not been inclined to accept before Odebrecht offered to make the corrupt payments.”
As to Panama, the information alleges payments to government officials and intermediaries working on their behalf to secure, among other things, public works contracts. Of note, the information alleges that Odebrecht “agreed to pay $6 million to two close relatives of a high-level Panamanian government official in connection with government infrastructure projects, with the understanding that, in exchange for the payments, the government official would ensure Odebrecht’s participation in and payments under the contracts.”
As to Peru, the information alleges payments to government officials in order to secure public works contracts.
As to Venezuela, the information alleges payments to government officials (including those associated with a state-owned and state-controlled company) and intermediaries working on their behalf in order to obtain and retain public works contracts.
The information also contains a section titled “Obstruction of Justice” which alleges that after Brazilian law enforcement authorities began an initially covert investigation into corruption related to Petrobras, and thereafter related investigations were launched in the U.S. and Switzerland, that various Odebrecht employees “took steps to conceal or destroy evidence of criminal activities, and to hinder the various investigations.”
Based on the above, the information charges conspiracy to violate the FCPA’s anti-bribery provisions (dd-3) and alleges various overt acts including use of New York based bank accounts and the above-mentioned meeting in Miami.
FCPA Institute - Miami (Jan. 12-13, 2017)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active active. Learn more, spend less. CLE credit is available.
Learn More & Register
Odebrecht Plea Agreement
The plea agreement lists the following “relevant considerations.”
the company did not voluntarily disclose;
the company received full cooperation credit by, among other things, (i) gathering evidence and performing forensic data collections in multiple jurisdictions; (ii) producing documents, including translations from foreign countries in ways that did not implicate foreign data privacy laws; (iii) collecting, analyzing, organizing, and producing voluminous evidence and information; (iv) providing non-privileged facts relating to projects obtained or retained through bribery; (v) providing non-privileged facts relating to individuals and companies involved in various illegal schemes; and (vi) facilitating and encouraging the cooperation and voluntary disclosure of information and documents by current and former company personnel;
the company engaged in extensive remedial measures, including: (i) terminating the employment of 51 individuals who participated in the misconduct; (ii) disciplining an additional 26 individuals who were engaged in the misconduct, including suspensions of up to a year and a half, significant financial penalties, and demotion to non-managerial, non-supervisory, non-decision making roles, for each of the 26 individuals; (iii) requiring individualized anti-corruption compliance and business ethics training for each of the 26 individuals, and requiring each to be subject to heightened oversight and day-to-day supervision, including ensuring that the independent compliance monitor has full access and authority to evaluate the business activities and ongoing compliance of those individuals; (iv) creating a Chief Compliance Officer position that reports directly to the Audit Committee of the Board of Directors; (v) adopting heightened controls and anti-corruption compliance protocols, including hospitality and gift approval procedures; (vi) incorporating adherence to compliance principles into employee performance evaluation and compensation; (vii) increasing the number of employees dedicated to compliance by 50 percent; and (viii) more than doubling the resources devoted to compliance in 2016 and more than tripling the budget for 2017.
the nature and seriousness of the offense including a scheme to pay hundreds of millions of dollars in bribes to a large number of high-level government officials for a 15 year span carried out by high-level executives and directors at the company.
Based on the above factors, including that the company has agreed to the imposition of an independent compliance monitor, the plea agreement states that the company received an aggregate discount of 25% off of the bottom of the applicable U.S. Sentencing Guidelines fine range.
The plea agreement contains a Guidelines fine range calculation of $6.0048 billion to $12.0096 billion and states that the parties agreed that “the appropriate total criminal penalty is $4.503 billion.”
Next the plea agreement states:
“[The company] has made representations [to the DOJ] and Brazilian authorities that [it] has an inability to pay a criminal fine in excess of $2.6 billion including anticipated adjustments for exchange rates between the United States Dollar and the Brazilian Real and interest payments. Based on those representations, the [company] has agreed to pay a criminal penalty of $2.6 billion payable to the United States, Brazil, and Switzerland. […] The [DOJ] and the Brazilian authorities will conduct an independent analysis to verify the accuracy of the [company’s] representations with such verification to be completed no later than March 31, 2017. Upon completion, if any additional amount is determined by the [DOJ] and the Brazilian authorities to be available, consistent with [the company’s] ability to pay, such additional amount will be added to the total criminal penalty of $2.6 billion (Total Criminal Penalty).”
Next, the plea agreement states that the company “agrees to pay into an escrow account for the benefit of the U.S. Treasury an amount equal to 10% of the principal of Total Criminal Penalty.”
As is typical in corporate FCPA enforcement actions, the company agreed to a so-called muzzle clause in which it or others authorized to speak on its behalf agreed not to make any public statements contradicting the acceptance of responsibility set forth in the plea agreement.
The plea agreement also requires the company to retain a compliance monitor for a three-year term.
Braskem Criminal Information
The information is based on the same core Brazil conduct alleged in the Odebrecht information.
Specifically, the information alleges that Braskem authorized a division of Odebrecht known as the Division of Structured Operations to pay bribes to Brazilian politicians and political parties, as well as to an official at Petrobras, in exchange for helping Braskem maintain a joint venture contract with Petrobras, a reduction in pricing for raw materials that Braskem purchased from Petrobras, as well as reductions in Braskem’s tax liabilities, and other benefits.
According to the information, Braskem provided funds to the Division of Structured Operations and benefited from the payments made due to its status as an Odebrecht subsidiary.
According to the information:
“In total, Braskem diverted approximately [$250 million] into offshore shell companies for transfer into accounts managed by the Division of Structured Operations, and it also directed the Division of Structured Operations to make bribe payments on its behalf. Approximately $75 million of the money Braskem paid into the Division of Structured Operations was used to make bribe payments to secure benefits to Braskem of approximately $289 million, including .. corrupt payments to a Petrobras executive and corrupt payments to other government officials in Brazil. Braskem also paid an additional $175 million into the Division of Structured Operations for which a direct benefit has not been identified but which payments otherwise reflect a failure of Braskem’s internal controls and a falsification of Braskem’s books and records.”
According to the information, Braskem falsely recorded the payments that were diverted into the Division of Structured Operations-managed bank accounts as “commissions for agents” and knowingly and willfully created fake and fraudulent agency contracts and other documentation in order to mask the true purpose of these payments.
Like the Odebrech information, the information also alleges that Braskem caused wire transfers to be made from banks accounts located in Brazil and the United States into shell company accounts located outside of the U.S. and that Braskem also took acts in furtherance of the corrupt scheme while in the territory of the U.S.
The Braskem information contains additional allegations about other alleged corrupt activity in Brazil. As stated in the information:
“Braskem … made payments to various government officials in the Brazilian government with the understanding that such payments would serve as, in essence, a retainer that would permit Braskem … to call in favors when necessary to assist with Braskem’s business.
In addition, Braskem made corrupt payments in connection with specific contracts and benefits that Braskem sought in Brazil.”
Specifically, the information alleges payments (a contribution to a Brazilian Official’s upcoming political campaign) in connection with securing approval of favorable tax legislation; additional payments to help secure a favorable outcome of a tax issue in connection with Braskem’s use of raw materials at a plant; additional payments to retain a Petrobras contract that Braskem became concerned might be given to a competitor; additional payments in connection with the negotiation of a supply contract with Petrobras; additional payments (including campaign contributions to influence Brazilian state government officials in connection with tax credit negotiations ; additional payments in connection with tax incentive legislation; and additional payments in connection with tax exemption legislation.
Based on the above alleged conduct, the information charges Braskem with conspiracy to violate the FCPA’s anti-bribery provisions (dd-1).
Braskem Plea Agreement
The plea agreement is very similar to the Odebrecht plea agreement with the following differences.
Braskem only received partial cooperation credit because, in the words of the plea agreement, the company “did nto receive additional cooperation credit because the [company] did not begin to fully cooperate until [the DOJ] developed significant independent evidence of the [company’s conduct]. For example, the [company] failed to produce any documents, information about witness statements, or information about the facts gathered from its internal investigation until seven months after its initial contact with the [the DOJ].”
Among the remedial measures listed in the plea agreement were the following:
“[S]teps to improve its anti-corruption compliance program by, among other things, increasing the number of independent board members, creating a board-level compliance committee, hiring a chief compliance officer, instructing outside counsel to conduct a global anti-corruption compliance risk assessment and adopting the recommendations arising from that risk assessment, increasing the importance of anti-corruption compliance messaging within the company with regular statements from the company’s new CEO, conducting an independent risk assessment of the company’s financial controls and enhancing those controls, in conjunction with the parent company, developing a new comprehensive anti-corruption compliance policy, designing an enhanced anti-corruption third-party due diligence process, standardizing anti-corruption language in its contracts, and providing anti-corruption training to the board, senior management, and other company employees. Because the senior management at the [company] were in a position to discipline employees were themselves involved in the misconduct, the [company] was unable to discipline wrongdoers until after the senior management resigned or were terminated, at which point there were no longer employees left at the [company] who had been engaged in the misconduct or had failed to effectively supervise or detect the misconduct.”
The plea agreement contains a Guidelines fine range of $744 million to $1.488 billion and the agreement states that the parties agree that the “appropriate criminal penalty is $632 million” which reflects a 15% discount off the bottom of the applicable Guidelines fine range. The plea agreement then states that the company will pay $94.8 million to the U.S. Treasury with the remaining amount ($442 million or 70% being paid to Brazil and $94.8 million or 15% being paid to Switzerland).
In the DOJ’s release Deputy Assistant Attorney General Sung-Hee Suh states:
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents. Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that. I hope that today’s action will serve as a model for future efforts.”
U.S. Attorney Robert Capers (E.D.N.Y.) stated:
“These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries. In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies. The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme.”
Stephen Richardson (Assistant Director of the FBI’s Criminal Investigative Division) stated:
“This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest. The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises. Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort.”
William Sweeney (Assistant Director in Charge of the FCPA’s New York Field Office) stated:
“No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade. Just because they’re out of our sight, doesn’t mean they’re beyond our reach. The FBI will use all available resources to put an end to this type of corrupt behavior.”
SEC
The SEC’s complaint is based on the same Brazil conduct alleged in the DOJ’s action. In summary fashion, the complaint alleges:
This action arises from violations of the FCPA by Braskem, a Brazilian petrochemical company.
“Beginning in at least 2006 and through approximately 2014, Braskem paid bribes to foreign political parties and foreign officials in the government of Brazil in order to assist Braskem in obtaining or retaining business in that country. Braskem paid theses bribes through a complex web of international intermediaries and offshore bank accounts. Certain senior Braskem executives authorized and approved these payments while knowing that all or a portion of the funds would be passed onto foreign officials in the government of Brazil.
Braskem made approximately $250 million in improper payments to an illicit network that its controlling shareholder operated and used to make improper payments during the relevant time period. At least $75 million of the amount paid into the illicit network was used for bribes that directly benefited Braskem.
The bribes Braskem paid during the relevant time period went to various foreign officials in Brazil, including at least one official at Petróleo Brasileiro S.A. (“Petrobras”), the Brazilian state-owned petroleum company, senators and representatives of the Brazilian congress, and foreign political party officials with at least two leading political parties in Brazil.
In exchange for the bribes, a government official at Petrobras intervened on Braskem’s behalf in connection with the pricing formula for a 2009 supply agreement for the purchase from Petrobras of naphtha, the raw material used in Braskem’s production of petrochemicals. This favorable pricing formula reduced Braskem’s price of naphtha by approximately $94 million from approximately March 2009 until February 2014.
Braskem also received several tax credits and benefited from other legislative measures over the relevant time period of time that allowed it to avoid approximately $187 million in consolidated expenses and costs. Finally, Braskem netted approximately $8 million when certain executives at the Company bribed officials in the Brazilian government, who used their influence with Petrobras to prevent Petrobras from terminating a joint venture agreement involving a polypropylene plant. Petrobras’s continued involvement in the polypropylene plant made it more profitable for Braskem.
The illicit payments were paid directly by Braskem, or by its Cayman Islandsbased subsidiary, Braskem Incorporated Ltd., to intermediaries disguised as export consulting companies using accounts in the U.S., among other jurisdictions.
Braskem and its subsidiary, at the direction of these senior executives, created false books and records to conceal the bribe payments. These payments were improperly recorded as legitimate commission expenses in Braskem’s books and records and were consolidated into Braskem’s financial statements. Braskem’s internal accounting controls were inadequate because they failed to prevent such payments or detect red flags that should have alerted its employees that these payments, in whole or in part, were fictitious and used to bribe foreign officials.
As a result of its conduct, Braskem violated [the FCPA’s anti-bribery provisions] when it authorized or paid bribes to foreign political parties and foreign officials in the government of Brazil to influence their decisions securing improper advantages or to induce them to use their influence to affect the acts or decisions of a foreign government or instrumentality in order to assist Braskem in obtaining or retaining business. Braskem violated [the FCPA’s books and records provisions] when it created false books and records to conceal the bribery scheme. Braskem also violated [the FCPA’s internal controls provisions] by failing to have sufficient internal accounting controls in place to detect and prevent the authorization of the illicit payments over an extended period of time.”
Under the heading “Lack of Compliance and Failure to Maintain Adequate Internal Accounting Controls,” the complaint alleges:
“During the relevant time period, Braskem’s policies, procedures, or controls did not specifically address the FCPA. For example, Braskem’s Code of Conduct during the relevant time period referred to employees’ relationship with clients and shareholders and governed the use of privileged information. However, Braskem’s Code of Conduct in effect at the time failed to prohibit improper payments to foreign officials or political parties or reference the FCPA.
Braskem had an ethics committee comprising four full members, including a legal representative, who decided matters relating to Braskem’s Code of Ethics and other policies. Braskem employees were encouraged to report potential misconduct by Company employees, third-party suppliers, and clients through an ethics line. The allegations contained in this Complaint were never reported through Braskem’s ethics line or to its ethics committee even though the improper payments were significant over time and the approval of such payments involved certain senior Company managers who understood the purpose of the “commission” payments to the intermediary companies.
Braskem’s procurement and accounts payable processes during the relevant time period lacked adequate payment approval standards and were easily manipulated by the senior executives. For example, Company employees could manually add commission payments to third parties without verification of the existence of a contract. The same employee that added the commission payment could then send the request for payment without the need for approval by a second employee.
The improper payments to third-party agents such as Consultant A and Consultant B could have been prevented or detected if Braskem’s internal accounting controls had required the payments to be attached to a valid contract, which they did not. In fact, Braskem did not have a valid agency or consulting agreement with Consultant A, Consultant B, or Consultant C. The improper payments to Consultant A, Consultant B, and Consultant C were made without the identification of a legitimate sale or a customer connected to the payment of the commission remitted. As a result, Braskem’s limited internal procurement controls lacked the creation of records to provide reasonable assurances that payments were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in Brazil and the U.S. and failed to maintain accountability for its assets.”
In the SEC’s release, Stephanie Avakian (Deputy Director of the SEC Enforcement Division) states:
“As alleged in our complaint, Braskem lacked the internal controls to prevent its use of third parties, off-book accounts, and other intermediaries to bribe government officials in Brazil during an eight-year period. Braskem’s misconduct was exposed through the investigative work of authorities in three countries.”
As noted in the SEC’s release, “Braskem agreed to pay $325 million in disgorgement, including $65 million to the SEC and $260 million to Brazilian authorities.”
Odebrecht issued this release which states in full:
“Odebrecht S.A. announced … the execution of an agreement with the Brazilian Federal Prosecution Office, the U.S. Department of Justice and the Swiss Office of the Attorney General to resolve the investigation into the group’s involvement in wrongdoings to benefit companies in its economic group.
Under the agreement, the group’s holding company agreed to reveal wrongdoings unveiled by the internal investigation conducted in Brazil and abroad involving various instances of power, and to plead guilty to violating applicable Brazilian and Swiss laws and, more specifically, the U.S. Foreign Corrupt Practices Act (FCPA). Odebrecht S.A. will pay a fine in the amount of R$3.828 billion to authorities in Brazil, the United States and Switzerland. The amount will be paid over 23 years and the sum of the installments will be adjusted by the variation in the SELIC interest rate. The amount of the fine will draw on resources from a combination of previously planned divestitures and cash generation from continuing operations. In calculating the fine, authorities took into consideration the Company’s full cooperation with the investigation and the extensive remedial measures taken to address Odebrecht’s past compliance failures.
As Odebrecht has previously acknowledged, it deeply regrets its role in the conduct giving rise to this resolution and apologizes for violating its own principles of honesty and ethics. The group reaffirms that it will continue to cooperate with the authorities and to adopt the appropriate and necessary measures to enhance its commitment to ethical business practices and transparency in its actions. Among other things that the group has done to move forward in a positive and productive manner is instituting significant compliance reforms, which include major increases in the personnel and budget devoted to compliance. Odebrecht also has agreed to engage an external and independent compliance monitor for a period up to three years, during which it will continue to enhance its compliance system, in accordance with the terms of the agreement, and to expand the extensive remedial steps that authorities acknowledge the group already has taken.
In addition, Odebrecht has created the Odebrecht Commitment to Act with Ethics, Integrity and Transparency, which will be implemented immediately across all Odebrecht businesses. This Commitment will become a core principle embraced by all Odebrecht Team Members and will guide every aspect of the group’s future.
Odebrecht is grateful for the opportunity to put this painful episode behind it. The group and its Team members will not forget the lessons learned through this experience, which will serve as constant reminders of what is expected as it works to earn back the public’s trust. Odebrecht is eager to turn its attention back to developing and operating projects that work to better communities in Brazil and abroad and to create value for its clients.”
Braskem issued this release which states in full:
“Braskem concluded … an agreement with U.S. authorities, as well as the closure of Switzerland’s investigation by the Office of the Attorney General pursuant to written order, which completes a global agreement resolving all allegations against the company arising from the “Car Wash” investigation. The agreements follow one week after the execution of the settlement agreement with the Brazilian Federal Prosecution Office (MPF).
Under the global agreement, Braskem will pay authorities the total amount of approximately US$957 million, equivalent to approximately R$3.1 billion, in penalty and damages. Of this total amount, approximately R$1.6 billion will be paid shortly after ratification of the agreements, with US$95 million paid to the U.S. Department of Justice (DoJ), US$65 million to the U.S. Securities and Exchange Commission (SEC), CHF 94.5 million to the Swiss Office of the Attorney General, and R$736 million to the Brazilian Federal Prosecution Office. The remaining balance of approximately R$1.5 billion will be paid to the Brazilian Federal Prosecution Office in six annual installments, restated by the variation in the IPCA consumer price index to adjust for inflation. The amount paid to the MPF will be directed to third party indemnification.
“We have reached the end of this long and detailed process of independent investigation and negotiations with the authorities,” said Fernando Musa, CEO of Braskem since May 2016. “We are pleased now to be able to put this matter behind us and focus on the future. We are implementing more robust practices, policies and processes across the organization to enhance our governance and compliance system. With this final phase of the agreement in place, Braskem enjoys solid financial conditions and will continue to pursue its growth and international expansion strategy with the highest ethical business practices,” said Musa.
Braskem acknowledges its responsibility for the acts of its former team members and agents, and regrets its past conduct. The company reaffirms its commitment to continue to cooperate with the authorities, and to adopting the appropriate and necessary measures to enhance its commitment to ethical business practices and transparency in its actions. As part of the resolution, Braskem has also agreed to engage an external and independent anti-corruption compliance monitor for three years, during which the Company will continue to enhance its anti-corruption compliance program above and beyond the extensive remedial steps already taken.
With the new structure of the Compliance Area, which reports directly to the Board of Directors, Braskem is implementing several initiatives which will help to avoid that the actions from the past be repeated in the future. In March 2015, when the first allegations of wrongdoings emerged, Braskem launched an independent investigation conducted by external law firms to clarify the matter. In October 2016, the company opened formal negotiations with the applicable authorities to resolve these allegations, which culminated in the agreements that were just signed. Braskem operates 40 industrial units in Brazil, United States, Germany and Mexico and serves clients in over 70 countries.”
William Burck (Quinn Emanuel) represented Odebrecht and Joan Meyer (Baker & McKenzie) and Jay Darden (Paul Hastings) represent Braskem.
Braskem’s ADR shares closed up 4% on the day of the enforcement action.
The post Odebrecht / Braskem Bribery Schemes Net Approximate $420 Million FCPA Enforcement Action appeared first on FCPA Professor.