Panellists urge anti-corruption enforcers not to “break” companies

Panellists urge anti-corruption enforcers not to “break” companies Credit: Marcos Mesquita

Brazilian agencies handing down fines for corruption must prioritise punishing individuals rather than the company as a legal entity, heard delegates at Latin Lawyer - GIR Live 7th Annual Anti-Corruption & Investigations, held yesterday in São Paulo.

The Federal Prosecutor’s Office (MPF), Comptroller General (CGU) and Attorney General (AGU) offices have handed down harsh fines to extract the maximum possible from companies, which has ultimately had a negative effect, according to Ana Paula Martínez of Levy & Salomão Advogados.

Several construction companies have been hit hardest by corruption probes. A widely publicised example is Odebrecht, which filed for bankruptcy protection in June this year. Its workforce has shrivelled from 180,000 to a mere 48,000 employees.

“Prosecutors and the CGU tend to forget that companies are a set of interconnected contracts involving employees, suppliers and consumers,” she said. “Millions of people have become unemployed since the Lava Jato investigations began. It is imperative to find a balance in the form of a corporation framework to distinguish the punishment of individuals and companies as legal entities,” added Martínez.

Some estimates put the number of jobs lost since the beginning of the Lava Jato investigations between 5 and 7 million.

This sentiment was echoed by Eric Snyder, a Jones Day partner who splits his time between São Paulo and Washington, DC.

Snyder said “breaking” companies in this manner not only contributes to unemployment, but also means less competition. “The Department of Justice wants to level the playing field, but by barring these companies from bidding for contracts, others willing to pay bribes are more likely to succeed.”

Co-ordination between the MPF, AGU and CGU still requires work, according to Antenor Madruga, a founding partner of Feldens Madruga in Brasília.

The MPF has been known to take action against companies that approach the AGU and CGU without consulting it first. The AGU and CGU will sue companies that approach the MPF without notifying them first.

“The application of the law is not clear,” says Madruga. “The AGU and CGU made it clear from the beginning that they were the authorities to enforce the country’s Clean Company Act [legislation Brazil passed in 2014]. However, the MPF also claims this, which puts companies in a state of confusion about who to go to first,” says Madruga.

Felipe Dantas, federal attorney and general counsel at CGU, said the CGU, AGU and MPF are trying to find common ground. “The most recent phase of this is an effort to establish joint consequences and joint punishments,” he said.

Keynote speaker Sara Martins Gomes Lopes, attorney at the public property and anti-corruption department of the AGU, said there is minimal crossover between fines originating from agreements signed by all three agencies. “If you pay a fine imposed by the MPF, we will not demand payment again. There is no double jeopardy,” she explained.

“One positive is that the agencies have agreed on a methodology to calculate fines and damages,” added Feldens Madruga’s Madruga.

Levy & Salomão’s Martínez voiced her approval, citing difficulty in a previous leniency agreement she negotiated. “I worked on a single agreement for five years before it was completed,” she said. “Every other month there was a new amount on the table.”

The panel was moderated by Shin Jae Kim, a partner at Brazil’s TozziniFreire Advogados.

The conference was chaired by Andrew Levine of Debevoise & Plimpton LLP’s New York office alongside Renata Muzzi Gomes de Almeida and Shin Jae Kim of TozziniFreire in São Paulo. Latin Lawyer will continue to report on the conference in the daily news briefing.

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