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Business Crimes Hotline
Petrobras Pays $853.2 Million to U.S. and Brazil Authorities to Settle FCPA Charges
In March 2014, Brazilian authorities launched an investigation known as Operation Car Wash (or Lava Jato in Portuguese). Operation Car Wash initially began as a money laundering investigation of black market money dealers (doleiros), who used small businesses to launder criminal profits. As the investigation developed, Operation Car Wash uncovered pervasive corruption and bribery at Petróleo Brasileiro S.A. (Petrobras), the Brazilian state-owned oil company. The doleiros acted on behalf of — and at the direction of — Petrobras managers and executives (including members of the Board of Directors) who overpaid on contracts with companies, in order to funnel a percentage of deals to slush funds for politicians and political parties and keep the officials in power within Petrobras. To-date, hundreds of legislators, governors, mayors, political bosses, and business executives — including the former president — have been implicated, arrested, and/or convicted as part of the scheme in which billions of dollars in improper payments are suspected to have been made.
The Sept. 27, 2018, global settlement resolves charges with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) developed as part of the U.S. government's investigation into Petrobras — working in close collaboration with the Brazilian authorities. This resolution follows the December 2016 resolution where Odrebrecht S.A. and Braskem S.A. pleaded guilty to Foreign Corrupt Practices Act (FCPA) violations related to Operation Car Wash. As a result, the two Brazilian companies agreed to pay $3.6 billion in monetary penalties to authorities in the United States, Brazil, and Switzerland.
The Petrobras three-year Non-Prosecution Agreement with the DOJ reflects a reduction in the monetary penalty consistent with the company's significant remediation and its cooperation after learning of the allegations of misconduct, albeit without voluntary disclosure.
Likewise, Petrobras also reached a settlement with the SEC. The Order Instituting Cease-and-Desist Proceedings calls for a monetary penalty of $853 million, for a total of $933 million, including disgorgement and prejudgment interest to be paid by Petrobras in connection with the SEC resolution. This amount will be reduced based on any payments made by Petrobras to a settlement fund for a class action in the Southern District of New York. Brazil will receive 80% of the $853 million ($682,560,000), with DOJ and SEC receiving 10% ($85,320,000) each.
– Collen Snow, Mayer Brown
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