Anticorruption Enforcement in Brazil

Some of the more significant headlines related to Brazil's recent anti-corruption push include the following:

In March, Brazil's Supreme Court approved an investigation of 54 high-ranking officials, including former President Fernando Collor de Mello, current Senate Leader Renan Calheiros, and the leader of the lower house Eduardo Cunha. All three are allegedly involved in the Petrobras scandal. Now, federal authorities have charged Collar and Cunha with corruption-related crimes, and charged former federal deputy Solange Almeida with helping Cunha collect bribes.

In July, prosecutors opened a probe into another former president, Luiz Inacio Lula da Silva, focused on whether Lula improperly helped construction giant Oderbrecht win billion-dollar deals in South America and Africa. This follows the arrest of Oderbrecht's CEO in connection with the Petrobras scandal.

In early August, it surfaced that prosecutors had charged Jorge Zelada, the former head of Petrobras' international division, and Hsin Chi Su, the chief executive of the Taiwanese shipping firm TMT, for allegedly favoring Houston-based Vantage Drilling in a bid with Petrobras. Su and others allegedly paid $31 million in bribes to Zelada, other ex-Petrobras officials, and Brazil's PMDB political party. In an SEC filing, Vantage Drilling disclosed it had voluntarily informed the DOJ and SEC of the issues.

In late August, prosecutors in the Vantage Drilling case alleged that Su and Hamylton Padilha, who worked as a third-party agent for Vantage Drilling, met in New York in November 2008 to discuss the bribery scheme. This allegation is the first in the Petrobras scandal to include a connection to the U.S.

Also in late August, demonstrators took to the streets of several Brazilian cities and called for President Rousseff's impeachment. Some even called for a military takeover of the government. It appears the discontent for the widespread corruption plaguing the country and its economy sparked the protests.

In September, the Bill and Melinda Gates Foundation filed a civil suit against Petrobras and third-party auditors claiming that it relied on material misstatements and omissions while investing in Petrobras starting in 2009. The Gates Foundation alleged that institutional fraud and corruption at Petrobras caused it to lose tens of millions of dollars. The case is active in the U.S. District Court for the Southern District of New York.

Conclusion

The Petrobras matter is far-reaching, and more charges against high-ranking officials are likely to come. It is equally likely that more Brazilian and non-Brazilian companies operating in the country will come under scrutiny before the matter resolves, both from local authorities enforcing the Clean Company Act and from U.S. and other authorities with a potential jurisdictional hook under the FCPA or similar laws.

Next month, we discuss recent regulations implementing Brazil's Clean Company Act that corporations may look to for guidance in complying with the Act.

Alex Bracket'is a partner in the Richmond, VA, office of McGuireWoods LLP, and the co-head of the firm's Strategic Risk & Compliance team. Ryan Bonistalli is an associate in the same office.

Brazil's push to fight corruption has been steadily gaining steam over the last year, as the wide-ranging Petrobras scandal has continued to pull politicians and companies from across Brazil and beyond under its wheels. These parallel spectacles of corporate and political intrigue seem to spawn a new headline every day. Now the Petrobras scandal ' which involves contracts worth billions of dollars ' may become increasingly multinational as prosecutors have announced a U.S. connection that could make the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) active participants. Meanwhile, the public is outraged and has called for President Dilma Rousseff's impeachment, as the speaker of Brazil's lower house of Congress and a former president of Brazil face recently-filed corruption charges.

In light of this cascading wave of anti-corruption enforcement, companies operating in Brazil and beyond would be wise to scrutinize the adequacy of their corporate compliance programs. Fortunately, recent regulations further implementing Brazil's Clean Company Act provide guidance that will help them move forward with confidence.

Efforts to Fight Corruption

Some of the more significant headlines related to Brazil's recent anti-corruption push include the following:

In March, Brazil's Supreme Court approved an investigation of 54 high-ranking officials, including former President Fernando Collor de Mello, current Senate Leader Renan Calheiros, and the leader of the lower house Eduardo Cunha. All three are allegedly involved in the Petrobras scandal. Now, federal authorities have charged Collar and Cunha with corruption-related crimes, and charged former federal deputy Solange Almeida with helping Cunha collect bribes.

In July, prosecutors opened a probe into another former president, Luiz Inacio Lula da Silva, focused on whether Lula improperly helped construction giant Oderbrecht win billion-dollar deals in South America and Africa. This follows the arrest of Oderbrecht's CEO in connection with the Petrobras scandal.

In early August, it surfaced that prosecutors had charged Jorge Zelada, the former head of Petrobras' international division, and Hsin Chi Su, the chief executive of the Taiwanese shipping firm TMT, for allegedly favoring Houston-based Vantage Drilling in a bid with Petrobras. Su and others allegedly paid $31 million in bribes to Zelada, other ex-Petrobras officials, and Brazil's PMDB political party. In an SEC filing, Vantage Drilling disclosed it had voluntarily informed the DOJ and SEC of the issues.

In late August, prosecutors in the Vantage Drilling case alleged that Su and Hamylton Padilha, who worked as a third-party agent for Vantage Drilling, met in New York in November 2008 to discuss the bribery scheme. This allegation is the first in the Petrobras scandal to include a connection to the U.S.

Also in late August, demonstrators took to the streets of several Brazilian cities and called for President Rousseff's impeachment. Some even called for a military takeover of the government. It appears the discontent for the widespread corruption plaguing the country and its economy sparked the protests.

In September, the Bill and Melinda Gates Foundation filed a civil suit against Petrobras and third-party auditors claiming that it relied on material misstatements and omissions while investing in Petrobras starting in 2009. The Gates Foundation alleged that institutional fraud and corruption at Petrobras caused it to lose tens of millions of dollars. The case is active in the U.S. District Court for the Southern District of New York.

Conclusion

The Petrobras matter is far-reaching, and more charges against high-ranking officials are likely to come. It is equally likely that more Brazilian and non-Brazilian companies operating in the country will come under scrutiny before the matter resolves, both from local authorities enforcing the Clean Company Act and from U.S. and other authorities with a potential jurisdictional hook under the FCPA or similar laws.

Next month, we discuss recent regulations implementing Brazil's Clean Company Act that corporations may look to for guidance in complying with the Act.

Alex Bracket'is a partner in the Richmond, VA, office of McGuireWoods LLP, and the co-head of the firm's Strategic Risk & Compliance team. Ryan Bonistalli is an associate in the same office.