On 21 December 2016, Odebrecht S.A. ("Odebrecht"), a global construction conglomerate based in Brazil, and its affiliate Braskem S.A. ("Braskem"), a Brazilian petrochemical company, pleaded guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act ("FCPA"), as well as anti-corruption claims brought by authorities in Brazil and Switzerland. The companies agreed to pay $3.5 billion in total— the largest sum ever paid to resolve a global foreign bribery scheme—to settle charges that they paid approximately $1 billion in bribes to government officials around the world. Both companies pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA.
The bribery scheme in this case took place between 2001 and 2016 and involved payments of approximately $788 million by Odebrecht to government officials in 12 countries in Central and South America and Africa in order to obtain business in connection with over 100 projects. According to the US Department of Justice (the "DOJ"), Odebrecht had an internal division called the Division of Structured Operations that was dedicated to overseeing the company's bribe payments and, until 2009, reported to the highest levels of the company. To make the illicit payments, this division used sophisticated communications and computer systems, a shadow budget and offshore entities. In addition, Braskem, which was charged by both the DOJ and the SEC, was alleged to have paid approximately $250 million (partly through Odebrecht) between 2006 and 2014 to Brazilian officials, including an official at Petróleo Brasileiro S.A. – Petrobras, the state-controlled oil company of Brazil, in exchange for various benefits from Petrobras and other government entities.
The DOJ and SEC worked alongside Brazilian and Swiss authorities on this enforcement action. Under the settlement, the penalties of at least $2.6 billion against Odebrecht and $957 million against Braskem will be split between the United States, Brazil and Switzerland, with the vast majority paid to Brazil. Odebrecht and Braskem received 25 percent and 15 percent reductions in their penalties for their full and partial co- operation with authorities, respectively. Odebrecht also represented that it would not be able to pay more than $2.6 billion, but agreed that a criminal fine of $4.5 billion would be appropriate under the circumstances. The DOJ and Brazilian authorities are therefore continuing to determine the precise amount of Odebrecht's fine based on its ability to pay. While the companies received some co-operation credit, they were penalised for their failure to voluntarily disclose the underlying conduct in the first place, and for the nature and seriousness of the long- term bribery scheme, which involved sophisticated techniques to bribe high-level government officials in many countries and reached to the highest levels of the companies. Among other remedial measures, the companies agreed to adopt better internal controls and anti-corruption compliance protocols, devote more resources to those efforts, engage an independent compliance monitor and terminate and discipline individuals involved in the bribery scheme.
This FCPA enforcement action is noteworthy not only because of the record size of the settlement and the far-reaching level of activity involved, but also because US regulators worked with their counterparts in other countries to punish corrupt activity by companies based in Brazil. As the DOJ stated when announcing the settlement, "[j]ust because [foreign officials are] out of our sight, doesn't mean they're beyond our reach".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
