Brazilian Companies Settle $3.5 Billion Plus Foreign Corrupt Practices Act Bribery Case With DOJ And SEC – Largest Settlement In History
29th December 2016
The U.S. Justice Department (“DOJ”) announced on Wednesday, December 21, 2016, that two Brazilian companies, Odebrecht S.A. (“Odebrecht”) and Braskem S.A. (“Braskem”), each pleading guilty to a massive bribery case and agreed to pay the largest settlement ever in a foreign bribery case – an unprecedented $3.5 billion dollars.
According to the DOJ, the companies systematically paid hundreds of millions of dollars in bribes to corrupt government officials in countries on three continents in order to secure lucrative business deals. Although the companies are not charged with bribing any U.S. officials, the U.S. authorities were able to claim jurisdiction in the case because Braskem’s shares trade on the NYSE and some of the bribes flowed through the U.S. banking system and some of the bribery schemes were planned in the U.S.
Odebrecht, a Brazilian global construction conglomerate, and Braskem, a Brazilian petrochemical company that is jointly owned by Odebrecht and Petrobras, each separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York. Both companies were charged with conspiracy to violate the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (“FCPA”).
The FCPA is a U.S. law that applies to a U.S. company or foreign companies listed on stock exchanges in the United States or which are required to file periodic reports with the U.S. Securities and Exchange Commission (“SEC”). Braskem’s American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange. The FCPA prohibits such companies from making corrupt payments to foreign officials to obtain or retain business. Also, it requires such companies to make and keep accurate books and records and to devise and maintain an adequate system of internal accounting controls.
For more information on applicable whistleblower laws involving Brazilian companies, please see Moss & Gilmore’s August 24, 2015 article published in Folha de S.Paulo on SEC/FCPA Whistleblowing and What Brazilians Can do to Fight Corruption. The article is available in the In The News section of the Moss & Gilmore website or you can Click here for PDF of unedited English version of Article.
The bribery scheme was uncovered due to another unprecedented investigation in Brazil dubbed “Operation Car Wash”, a lengthy and complex investigation into political kickbacks and corruption at Petrobras that led to political upheaval in Brazil and dozens of arrests. The guilty pleas by each of Odebrecht and Braskem are the first by Brazilian companies in the U.S. following Operation Car Wash.
The huge settlement was negotiated as part of a broad settlement with U.S., Brazilian and Swiss authorities.