10 years of Brazil’s Anti-Corruption Law: Incorporating lessons learned to move forward
Brazil’s Federal Law 12,846/2013, which celebrated its tenth anniversary in August 2023, came to be during a turbulent period in the country, when citizens demanded more transparency from the government and effective prosecution of crimes involving corporations and businessmen.
The law introduced several new enforcement mechanisms, among them the possibility of its enforcement by federal, state and municipal entities; strict liability for corporations accused of illegal acts against national and foreign administrations; corporations’ liability for wrongful acts practiced on their behalf or interest; the possibility of extension of liability to entities pertaining to the same economic group; sanctioning in administrative and civil proceedings; leniency agreements; and compliance programs as a mitigator factor for sanctions imposed based on the law.
The law was largely enforced by federal law enforcement agencies after its first regulation in 2015 by Federal Decree 8,420/2015. Many of the corporations initially sanctioned were involved in the Car Wash Operation, the largest government investigation ever seen in Brazil, which ultimately drew in several politicians and corporations that had links with Petrobras. [1]
Anecdotally, 2023 also marked the end of the Car Wash Operation, after scandals involving leakage of confidential information, controversial investigation methods adopted by prosecutors and judges, and political changes that led to the termination of the task forces in charge of the operation.
The Car Wash case is now past, but its legacy remains alive. Despite the recent political turbulence, Brazil remains a relevant player in the fight against transnational corruption, having had a relevant role in recent FCPA resolutions. The DOJ, the SEC, and Brazilian law enforcement agencies have improved its cooperation channels and continue to work together to prosecute multijurisdictional corruption violations. Recently, the DOJ and the SEC coordinated major resolutions and credited fines and penalties paid in Brazil.
The CGU [2] and the AGU [3] participated in the agreement signed by Gol Linhas Aéreas Inteligentes S.A. Full cooperation credit was granted to the company considering its collaboration that counted with massive transaction testing. No monitorship program was imposed, based on improvements made in the company’s compliance program. [4]
The CGU, the AGU, and the MPF [5] also participated in an agreement signed with Honeywell UOP resulting in compensation paid to Petrobras. No monitorship program was imposed to the company in consideration of improvements made in its compliance program. [6]
There is much more to expect in the coming years.
Federal Decree No 11,129/2022 incorporates lessons learned
Federal Decree No. 11,129/2022 replaces Federal Decree 8,420/2015 and is based on lessons learned from years of the Anti-Corruption Law enforcement. The new Decree marks a significant milestone in enhancing Brazil’s anti-corruption framework, offering detailed regulation on government investigations and the administrative proceedings to enforce sanctions (PARs), clarity on fines calculation, leniency agreements, monitorship programs for lenient companies, and updates to the parameters for assessing effective compliance programs.
The new Decree changed the percentages of the factors used to calculate and measure the fines under the Anti-Corruption Law, which can vary from 0.1 percent to 20 percent of gross revenue, excluding taxes, of the legal entity in the year before the launching of the administrative proceeding. The updates allow fines to be increased when there are multiple violations, when senior management has participated, and according to the amount of the contract affected by the wrongdoing. The new Decree also emphasizes that fines may be reduced if the illicit conduct was not concluded, if compensation is being paid for damages, and if the company had a compliance program in place at the time of the violation. A specific methodology for estimating the undue advantage perceived by the company was introduced to set out such calculations with transparency and consistency.
The Decree also set forth new regulations for the preliminary investigation of acts against the public administration, expanding the scope of investigative measures. For instance, the commission overseeing the preliminary investigation now has the authority to request confidential bank information regarding the movement of public funds and tax-related information.
There have been updates in leniency agreements as well. The Decree set forth that leniency agreements should be used as a tool to improve government’s investigative capabilities, strengthening the recovery of assets, and contributing to a culture of public integrity. Monitorships – until then not regulated – are now highlighted as a potential condition for such agreements, except in cases of minor offenses, in the public interest, or when other measures are sufficient to dismiss a monitorship program.
The Decree also updated the guidelines for evaluating the effectiveness of compliance programs. The new guidelines include evidence on the commitment from senior management with the program, emphasizing the proper allocation of resources. The relevance of risk management was increased, requiring periodic assessment and effective allocation of resources. The Decree also emphasized the importance of due diligence in hiring and monitoring third parties, particularly brokers, consultants, sales agents, and politically exposed persons (PEPs) and their families. Due diligence and monitoring are now formally recommended for donations and sponsorships, promoting greater transparency and compliance in such transactions.
A significant change was made in the context of PARs. The new regulation requires the investigative commission to specify the harmful act under investigation, to provide evidence of the occurrence of the violation, and to determine the legal framework assigned to the company during the indictment. It allows for the possible notification and prosecution of foreign companies, regardless of the presence of legal representatives in Brazilian branches. It also establishes that potential violations of the Anti-Corruption Law that also constitute administrative violations under the Public Procurement Law (Law No. 14.133/21) or other regulations on bidding and contracting with the public administration should be considered jointly in the PAR proceedings.
The updates are expected to increment the government capacity to investigate and sanction misconduct while defending corporations have more transparency and legal certainty throughout the process.
The CGU in the lead
The MPF had a key role in the first years of the Brazilian Anti-Corruption Law as it already had the power to prosecute individuals, both private and public officials, for crimes and corruption-related violations. That led to the interpretation that the MPF also has the authority to enforce the Anti-Corruption Law against corporations and, for instance, sign leniency agreements, although the law does not explicitly provide the MPF with the authority for signing such agreements.
During the Car Wash Operation, the MPF signed several leniency agreements with corporations and individuals. Many of these later were called into question. Whether the MPF had the authority to enter into these agreements was only part of the problem – the methods the MPF applied during the negotiations were also cited. Although the Brazilian Supreme Court has not yet explicitly ruled on the issue, there is an ongoing lawsuit arguing that the agreements signed by the MPF in the context of the operation are invalid. [7]
After the end of the Car Wash Operation and the federal prosecutors task forces, the CGU took the lead in Anti-Corruption Law enforcement, especially in cases where the public entity victimized by the wrongdoing belongs to the Federal Executive Administration. The CGU’s authority is in line with the provisions of the Anti-Corruption Law, as well as with Federal Law No. 13,341/2016 that defines the attributions of the CGU. [8]
The CGU has been publishing data relating to the celebration of leniency agreements since 2015. Since then, a total of 88 agreement proposals were published, of which 27 were already concluded. [9] Around BRL 8.8 billion was collected by the Federal Administration until 2023, and another BRL 9.5 million is expected to be paid by corporations under leniency agreements. [10]
The CGU also has the authority to issue rules relating to the administrative proceedings set forth by the Anti-Corruption Law. On July 22, 2022, Regulatory Ordinance No. 19 was published, establishing the possibility of an anticipated trial, a new settlement tool that enables a quicker conclusion of the case for the government with the possibility of large reduction of sanctions for defending corporations. The new settlement mechanism is applicable to corporations that do not meet all the criteria for leniency agreements, such as the ability to collaborate with the government investigation. [11]
Several corporations implicated under the Brazil’s Anti-Corruption Law have been taking the anticipated trial path, especially in the context of the so-called Spy Operation, a large investigation on the selling of confidential data from IRS internal systems by public officials to corporations.
Focus on private sector integrity
The 10 years of the Brazil’s Anti-Corruption Law are being celebrated not only for its achievements but also with a look to the future and anticipated new law enforcement efforts. One of the CGU’s goals will be to encourage corporations to implement integrity mechanisms, with incentives and new requirements.
As part of incentives, the CGU has launched the “Brazil pact for business integrity,” an initiative that encourages corporations with activities in the country to voluntarily commit to business integrity. [12] The pact is recommended to corporations willing to contract with the Federal Administration in the context of the new PAC, a government program that expects to invest BRL 1.7 trillion in all states of Brazil by 2026. [13]
The well-established Empresa Pró-Ética program will be updated to include ESG factors in the assessment of corporate compliance programs. From now on, corporations with compliance programs recognized as effective by the CGU will have to implement and fulfill an ESG agenda. [14]
From a requirements standpoint, the CGU has signed a technical cooperation agreement with the National Bank for Economic and Social Development (BNDES). The purpose of the agreement is to implement a set of mandatory integrity parameters and requirements to be met by entities willing to obtain financing lines with the Bank. [15]
Conclusion
Brazil plays a leading role in Latin America, having been listed by the International Monetary Fund as the world’s ninth largest economy in 2023. [16] Despite recent political turbulence, the country celebrated 10 years of its Anti-Corruption Law with many achievements, lessons learned, and high expectations for the growing independence and effectiveness of its regulators and law enforcement agencies.
Follow DLA Piper and Campos Mello Advogados in cooperation with DLA Piper, and contact any of the authors, for more news and trends on the Brazilian anti-corruption landscape.
[1] Brazil’s largest state-controlled oil company.
[2] Federal Comptroller General.
[3] Federal Attorney General.
[4] https://www.justice.gov/opa/pr/gol-linhas-reas-inteligentes-sa-will-pay-over-41-million-resolution-foreign-bribery
[5] Federal Public Prosecutors.
[6] https://www.justice.gov/opa/pr/honeywell-uop-pay-over-160-million-resolve-foreign-bribery-investigations-us-and-brazil
[7] https://portal.stf.jus.br/noticias/verNoticiaDetalhe.asp?idConteudo=511235&ori=1
[8] https://www.gov.br/cgu/pt-br/assuntos/integridade-privada/acordo-leniencia#:~:text=Acordo%20Leni%C3%AAncia,- Info&text=Conforme%20previsto%20na%20Lei%20Anticorrup%C3%A7%C3%A3o,contra%20a%20administra%C3%A7%C3%A3o%20p%C3%BAblica%20estrangeira
[9] https://app.powerbi.com/view?r=eyJrIjoiZTU2MWI0MjYtY2EzOS00NzYyLTg3MWQtYWE3MmFiMmY0ODM4IiwidCI6IjY2NzhkOWZlLTA5MjEtNDE3ZC04NDExLTVmMWMxOGRlZmJiYiJ9
[10] https://www.gov.br/cgu/pt-br/assuntos/integridade-privada/acordo-leniencia
[11] https://valor.globo.com/legislacao/coluna/uma-boa-opcao-para-litigios-por-corrupcao.ghtml
[12] https://www.gov.br/cgu/pt-br/assuntos/integridade-privada/pacto-brasil#pq
[13] https://www.gov.br/casacivil/pt-br/novopac
[14] https://agenciagov.ebc.com.br/noticias/202311/cgu-promove-dia-da-integridade-empresarial-para-incentivar-boas-praticas-em-ambientes-corporativos#
[15] https://www.gov.br/cgu/pt-br/assuntos/noticias/2023/08/cgu-celebra-parceria-com-o-bndes-para-promover-integridade-no-setor-privado
[16] https://agenciabrasil.ebc.com.br/en/economia/noticia/2023-12/brazil-jumps-two-places-becomes-worlds-ninth-largest-economy-2023
