3. The Implications of Greater Inter-Agency Cooperation

Introduction

The introduction of inter-agency cooperation was a major step forward for enforcement authorities and in the fight against corruption. Understanding the core characteristics of this exchange of efforts is crucial to comprehending the current scenario and implications of greater inter-agency cooperation that have resulted in multilateral leniency agreement and plea deals.

Inter-agency cooperation is a broad term given to several different categories of cooperation among public bodies at both the national and international levels. Although this article cannot address all the different categories of possible inter-agency cooperation, we will address initial aspects of international inter-agency cooperation, analyse inter-agency cooperation as currently operating in Brazil, and address the legal framework and role of relevant Brazilian authorities.

International inter-agency cooperation

International inter-agency cooperation is by no means a new feature of nation states’ relationships. The most traditional tools used for this purpose are letter rogatory, extradition, recognition and enforcement of foreign court decisions, and, if there is no international agreement executed between the two or more nation states, diplomatic requests. Each of those instruments can be employed in different circumstances but share the common thread of being understood as quite bureaucratic and slow-paced.

This shared characteristic presents a particular challenge in today’s world, where criminal activity has greatly benefited from the more interconnected society to flourish – the textbook example often cited is the use of offshore bank accounts during the layering stage of money laundering processes. The transnational nature of 21st century white-collar criminal activity has demanded quicker and more effective means of international inter-agency cooperation, and a solution presented was to promote ‘direct assistance’. Through direct assistance, the prosecution authority of one nation state is able to request that an investigative or enforcement action is undertaken by a foreign prosecution authority as it would be in its own jurisdiction. As a result, not only has there been an increase in co­operation among agencies from different nation states in the various stages of the criminal prosecution, but also the international community has begun to effectively combat trans-border criminal activity.

The cooperation between prosecution authorities of different countries, greatly enhanced by the direct assistance approach, is sometimes best-known for the promotion of international inter-agency leniency agreements.^[2] In 2016, the US Department of Justice entered into a plea agreement with the Brazilian construction company Odebrecht S.A. to resolve a dispute regarding the payment of bribes to government officials in several countries.^[3] The plea agreement followed years of investigation, with evidence shared among Brazilian, Swiss and US prosecution authorities. Under the plea agreement, as reported by the Department of Justice’s press release:

the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent.^[4]

In this case, international cooperation between prosecution authorities guaranteed that the facts surrounding the criminal scheme were uncovered and that the relevant nation states imposed penalties for the damage caused by the payments of bribe.

A more recent example in 2020 of international inter-agency cooperation is the European plane manufacturer Airbus SE (Airbus)’s deferred prosecution agreement entered into with the United Kingdom’s Serious Fraud Office, deferred prosecution agreement entered into with the US Department of Justice and convention judiciaire d’intérêt public entered into with France’s Parquet National Financier.^[5] The agreements aimed to settle disputes related to the company’s scheme to use third-party business partners to bribe government officials and non-government airline executives in multiple countries. In total, these agreements required Airbus to pay approximately €3.6 billion in combined penalties, from which around €1 billion were directed to the Serious Fraud Office, €2 billion to the Parquet National Financier and €500 million to United States authorities.^[6] Once again, international inter-agency cooperation enabled the prosecution of criminal activities and assured restitution for the relevant nation states.

Similarly, in the 2020 plea agreement entered into by J&F Investimentos S.A., a Brazil-based investment company that owns several companies in various industries, including one of the largest food and meatpacking company in the world, the DOJ granted a credit of up to 50 per cent in the fine applied to J&F owing to the company’s former leniency agreement with Brazilian authorities. The case is another example of relevant Brazilian and US collaboration, which was essential for uncovering a variety of long-running bribery schemes.^[7]

These three brief case examples show the paramount importance of international inter-agency cooperation in the prosecution of transnational criminal offenses, which increases the investigative capacity and boosts efforts to fight trans-border criminal activity. However, there is still much room for improvement. Tools such as the direct assistance do represent a way forward, with increased international inter-agency cooperation, but the legal framework remains mostly based on bilateral agreements between nation states, which creates an amalgamate of different rules and regulations. International conventions and treaties granting effective prosecution powers to act in the international arena, with multiple nation states taking part, is a possible next step in the response to trans-border criminal activity. For the moment, international inter-agency cooperation has proven to be a growing trend and in the future may involve more interconnected activity among agencies from different nation states.

Thus, greater international inter-agency cooperation sheds light on complex legal frameworks that, with frequency, have proven to be obstacles in the fight against organised and cross-border crimes. A clear challenge of international inter-agency cooperation is managing powers, deciding what rules prevail and how to compensate each involved nation state proportionally but fairly.

Nonetheless, if self-reporting is considered the adequate path, challenges and potential overlapping penalties must be considered. International inter-agency cooperation has not matured to the extent that all authorities involved are willing to give up their share of authority and right for compensation in favour of a global deal. For companies and individuals seeking to self-disclose, e-discovery and independent investigations have been crucial. Providing authorities with evidence that facilitate their own investigations have provided assertive and agile collaborations. In this sense, evidence such as emails, invoices, bank statements, notes and calendar appointments not only corroborate allegations, but also lend efficiency to negotiation processes by avoiding a new e-discovery process led by the authorities themselves.

It is noteworthy that, with self-reporting negotiations, authorities have requested independent investigators to present the methodology of their work with the intent to understand whether the investigation was performed observing best practices in connection with data collection, preservation, processing and review. Relying on the authority’s contribution to confirm illicit practices and obtain evidence is not recommended, as with international inter-agency cooperation there may be multiple sources of information to gather and the collaboration may take much longer than expected. A company undergoing negotiations can face several difficulties in connection to the sale of shares, to new acquisitions, to obtaining licences, while undergoing due diligence processes and several others.

Hence, despite self-reporting being considerated an act of good faith, it does immediately provide relief – disclosures that are considered insufficient will stall negotiations or result in higher penalties. The main obstacles faced with international inter-agency negotiations, such as navigating multiple authorities and facing overlapping penalties, are not restricted to the international component but rather to inter-agency interactions, as such challenges are also faced in domestic settlement negotiations, as this chapter sets out in the following section.

Inter-agency cooperation in Brazil

There is no doubt that inter-agency cooperation has bloomed since Brazilian enforcement authorities launched the Car Wash probe. As with any orchestrated negotiation, inter-agency cooperation for the purpose of entering into a settlement creates a natural expectation of a fresh start. This is a dominant and clear implication of inter-agency cooperation, an expectation that joint negotiations will result in a clean slate. However, this has not always been the case with inter-agency negotiations in Brazil for the settlement of acts of corruption.

A patchwork of anti-corruption laws, and multiple and overlapping authorities have created an ambience of unease and uncertainty as parties seek resolution. One would imagine that inter-agency cooperation would solve such problem, creating a ‘one stop shop’ for leniency agreements or plea bargains. But that is far from the reality, making what would seem as a solution an obstacle: parties often encounter multiple authorities that, rather than promote joint efforts for inter-agency cooperation, constitute coincidental authorities that may withhold their respective signatures from cooperative agreements.

To address this matter, in August 2020, several Brazilian government agencies attempted to come to an agreement and make inter-agency cooperation for leniency agreement negotiations possible, but in the end one significant entity did not become a signatory, as explained further below. To understand the jurisdiction and conflict, a brief explanation of the legal framework and relevant authorities is crucial.

The Brazilian Clean Company Act (Federal Law No. 12,846/2013) is the primary anti-corruption legislation and introduced the leniency agreement for corruption practices and other harmful acts against the public administration.

Regarding the benefits of a leniency agreement, a company could have its penalties reduced as follows: exemption from the obligation to publish the penalty and from the prohibition on receiving incentives, subsidies and loans by the federal government, in addition to a reduction of up to two-thirds of the fine.

The leniency agreement may encompass not only the harmful acts provided for in the Brazilian Clean Company Act, but also the harmful acts provided for in the Administrative Improbity Law (Federal Law No. 8,429 / 1992) and the Public Procurement Law (Law No. 8,666 / 1993). Thus, in addition to the benefits described in the previous paragraph, by entering into a leniency agreement, the company may receive an exemption or reduction of the penalty of prohibition on contracting with the government (penalty provided for in the Administrative Improbity Law and the Public Procurement Law).

The Brazilian Clean Company Act provides that ‘the highest authority of each public body or entity’ has jurisdiction to enforce its provisions. Additionally, the Federal Constitution and other anti-corruption legislation (such as the Administrative Improbity Law, the Public Procurement Law and the Brazilian Criminal Code) invest multiple authorities to enforce anti-corruption provisions and seek compensation for damages. At the federal level, four main agencies have power to enter into leniency agreements and could promote inter-agency cooperation efforts:

• Office of the Comptroller General (CGU), which is the federal government’s internal control body responsible for activities related to the defence of public assets and the increase of transparency, through audit activities, preventing and combating corruption, as well as for the administrative proceeding under the terms of the Brazilian Clean Company Act.
• Federal Attorney General (AGU) responsible for the executive branch’s legal advisory activities, as well as representing the Federal Union in lawsuits for administrative improbity acts. CGU and AGU have promoted solid inter-agency cooperation efforts, entering into joint agreements with companies and individuals.
• Federal Public Prosecutor’s Office (MPF) responsible for the criminal prosecution of individuals for corruption and other crimes (including the crimes provided for in the Public Procurement Law), as well as for bringing lawsuits for administrative improbity acts. It is currently the entity with the greatest number of signed leniency and plea bargain agreements.
• Federal Court of Audit (TCU) administrative court responsible for auditing and overseeing the financial aspects of governmental contracts with powers to impose administrative penalties such as debarment of companies from participating in bids to perform work for the federal government.

After the Brazilian Clean Company Act came into force in January 2014, the first leniency agreements for corrupt practices in Brazil were signed by the MPF and CGU, separately. In December 2016, CGU and AGU published Ordinance No. 2,278 that defines the procedures for entering into a leniency agreement. Then, CGU and AGU published Normative Instruction No. 2 in May 2018 that provides for the methodology for calculating the fine provided for in the Brazilian Clean Company Act in the context of leniency agreements. Moreover, the 5th Coordination and Review Chamber of MPF published Guideline No. 07 in August 2017 for the elaboration and signing of leniency agreements. In December 2019, the MPF published its Practical Guide based on the Guideline No. 07/2017 and the best practices developed in the agreements already approved by the Chamber, serving as guidance for new agreements.

Although the first agreements were signed by the MPF and CGU separately, there were initial inter-agency cooperation efforts. Odebrecht is an example of a Brazilian company that entered into leniency agreements with these authorities separately, first with the MPF (jointly with US Department of Justice and Swiss authorities) in December 2016, and with CGU/AGU in July 2018. One important aspect is that the agreement with CGU/AGU bears in mind the fine imposed by the MPF in December 2016, avoiding any sort of bis in idem allegation. The agreement with CGU/AGU led to the termination of the lawsuits for administrative improbity acts and the administrative processes of competence of the Federal Union promoted by AGU and CGU against Odebrecht and companies from its economic group for the facts revealed.

Noteworthy is the fact that, not only federal agencies have competence over corruption acts, depending on the specifics of the case, such as the public officials who received bribes, the states in which the acts of corruptions were promoted and other particularities. These facts can result in other Brazilian authorities having authority over companies seeking a corporate resolution, such as: the Antitrust Authority (CADE); the Securities and Exchange Commission (CVM); the Central Bank (BACEN) and state agencies.

A web of authorities poses significant challenges for companies and individuals seeking to cooperate. CGU has recently bound other authorities to its agreements – although all other authorities mentioned have promoted agreements on their own and without the requirement of any kind of joint review of consultation before a settlement is reached. Thus, the lack of inter-agency cooperation results not only in uncertainty, but in an ineffective fight against corruption and the misuse of public resources.

After several attempts of inter-agency cooperation, tension reached a point where, on August 2020, the TCU issued a proposal to the Brazilian Federal Supreme Court (STF) for an inter-agency cooperation framework encompassing all the authorities involved with leniency agreements. Minister Dias Toffoli, president of the STF, mediated the agreement and emphasized that inter-agency cooperation is the only tool capable of establishing a culture of cooperation. Moreover, Minister Dias Toffoli stated that the proposed framework is unprecedented in Brazil’s constitutional and institutional history and could be the most effective approach to formalise all agencies’ duties in the fight against corruption.

AGU, CGU, TCU, STF and Brazil’s Ministry of Justice signed the inter-agency cooperation framework, but the MPF suggested that it restricted its powers as a prosecuting agency and indeed the agency that has entered into the greatest number of agreements in recent years.^[8] The ‘one-stop-shop’ was not achieved, but this was definitely a great step in favour of inter-agency cooperation. Critics claim MPF’s stance demonstrated hostility and incentivised competition as opposed to coordination.

An example of the lack of full inter-agency cooperation involved SBM Offshore N.V., and its subsidiary SBM Holding Inc. S.A., which settled with AGU and CGU but faced a lawsuit, over the same facts covered by the settlement agreement, by the MPF pursuant to the Administrative Improbity Law.

Other companies such as Andrade Gutierrez were punished for the same facts more than once and appealed to the STF attempting to have the terms of a leniency agreement bind all authorities. Despite the worrisome and delicate situation, there have been previous harmonised actions that prove inter-agency cooperation despite bringing challenges and conflicts avoids bis in idem and attracts companies and individuals who legitimately seek to confess to wrongdoings and cease acts of corruption. In June 2018, Technip S.A. entered into a resolution simultaneously with the CGU, AGU, MPF and the US Department of Justice. There is no doubt this is the ideal model of inter-agency cooperation, that is, full cooperation at a national and international level with multiple authorities.

As of 2021, Brazil’s inter-agency cooperation framework establishes that CGU/AGU are responsible for conducting leniency agreement negotiations and that TCU will have visibility over information necessary for the calculation of fines and damages. Authorities that respect this inter-agency cooperation framework will receive all information and original evidence to review the terms of the agreement and commit not to apply sanctions to the company or individuals regarding the same facts. Nonetheless, there is still additional exposure involving the MPF.

Conclusion

For the purposed of preventing and fighting corruption, the Brazilian legal framework has a system of multiple layers of powers and responsibilities, with relative independence among them. And in this system with multiple spheres of responsibility, there are multiple agencies for entering into agreements and combating corruption practices as well as an overlap of responsibilities among them. This scenario creates legal uncertainty, potential conflict among institutions and overlapping functions.

Although the MPF refused to sign the inter-agency cooperation framework in 2020 on the grounds that such agreement would not respect the legal attribution of each institution, the leniency agreement signed in February 2021 by Samsung Heavy Industries with MPF, CGU and AGU could be seen as a successful example of coordinated actions taken by the Brazilian and US authorities and a step further in improving the system for preventing and combating corruption through inter-agency cooperation.

Clearly there is strong incentive for supporting inter-agency cooperation, despite the efforts it demands. Conciliating multiple legal frameworks, and overcoming numerous jurisdictions and bureaucratic structures requires decisive action and taking a strong stance. On the other hand, a lack of inter-agency cooperation results not only in uncertainty, but in an ineffective fight against corruption and the misuse of public resources. The greatest positive implication of inter-agency cooperation is legal certainty, fair sentencing and compensation among full immunity elements that together are capable of attracting companies who seek to start fresh. One could argue inter-agency cooperation is the solution for integrated settlement processes that, for so long, have been idealised and overthought to the point that companies and individuals are in disbelief that effective inter-agency negotiations processes will become day-to-day practice.

Footnotes