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$853 Million in Penalties to Settle Charges of Bribery in Brazil

Friday, September 28, 2018
Sandler, Travis & Rosenberg Trade Report

The Securities and Exchange Commission announced Sept. 27 that a Brazilian state-owned and -controlled company has agreed to pay $853.2 million in penalties to resolve the U.S. government’s investigation into violations of the Foreign Corrupt Practices Act in connection with the company’s role in facilitating payments to politicians and political parties in Brazil as well as a related Brazilian investigation. This penalty amount reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation.

According to an SEC press release, the company admitted that while its American depository shares traded on the New York Stock Exchange members of its executive board were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil. In addition, members of the company’s board of directors were involved in facilitating bribes that a major company contractor was paying to Brazilian politicians. The company admitted that it failed to make and keep books, records, and accounts that accurately and fairly reflected its capitalization of property, plant, and equipment as a result of the bribes being generated by the company’s contractors and that certain executives failed to implement internal financial and accounting controls in order to continue to facilitate bribe payments.

The press release notes that while the company did not voluntarily disclose the conduct it did notify the government of its intent to fully cooperate after learning of the allegations of misconduct. The company’s cooperation included conducting a thorough internal investigation, proactively sharing in real-time facts discovered during that investigation, and sharing information that would not have been otherwise available to the DOJ, making regular factual presentations to the department, facilitating interviews of and information from foreign witnesses, and voluntarily collecting, analyzing, and organizing voluminous evidence and information for the DOJ in response to requests, including translating key documents. The company also took extensive remedial measures, including replacing the board of directors and the executive board, implementing governance reforms, disciplining employees, and ensuring that it no longer employs or is affiliated with any of the individuals known to be implicated in the conduct at issue.

Under a non-prosecution agreement, the Department of Justice and the SEC will each receive $85.3 million of the penalty and Brazil will receive the remaining $682.6 million. The company has also agreed to continue to cooperate with the DOJ in any ongoing investigations and prosecutions relating to the conduct, including of individuals; to enhance its compliance program; and to report to the DOJ on the implementation of its enhanced compliance program.

In a related SEC matter the company agreed to pay $933.5 million in disgorgement and prejudgment interest, which will be reduced by the amount of any payment the company makes in a class action settlement.

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