Compliance and Investigations Newsletter No. 13 – January 2023

The Compliance and Investigations Newsletter aims to provide information on the main media news, trends, cases and legislation concerning compliance matters, in Brazil and abroad. This material is for informational purposes and should not be used for decision making. Specific legal advice can be provided by our lawyers.

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Justice Alexandre de Moraes partially suspends amendments to the Administrative Improbity Law

Justice Alexandre de Moraes, of the Federal Supreme Court (“STF”), granted an injunction in the Direct Action for the Declaration of Unconstitutionality No. 7236 to suspend provisions of the Administrative Improbity Law (Lei No. 8,429/1992) that had been amended through Law No. 14,230/2021.

The decision impacts matters such as:

• the autonomy of the Public Prosecutor’s Office;

• loss of public function;

• the autonomy of civil, criminal and political-administrative sanctioning instances; and

• controversial case law.

The following provisions were suspended:

(i) article 1, paragraph 8, which ruled out improbity in cases where the case law regarding the conduct is controversial;

(ii) article 12, paragraph 1, which determines that the loss of public function affects only the function of the same quality and nature that the government official had with the public power at the time the improbity act occurred;

(iii) article 12, paragraph 10, which provides for the retroactive calculation of the period between the collegiate decision and the final and unappealable conviction, in regard to the calculation of the period of suspension of political rights;

(iv) article 17-B, paragraph 3, which requires the competent Audit Court to issue an opinion regarding the calculation of compensation in non-prosecution agreements with the Public Prosecutor’s Office;

(v) article 21, paragraph 4, which prevents the filing of administrative improbity actions if the defendant has been acquitted in another action that addressed the same facts of such improbity action – if confirmed by a collegiate decision;

(vi) article 23-C, which establishes that conduct involving public resources of political parties will be judged under the terms of the “Political Parties Law” (Law No. 9,096/1995).

For more information, please see the STF article.[

CGU and AGU enter into three leniency agreements that surpass BRL 671,8 million

The Brazilian Office of the Comptroller General (“CGU”) and the Brazilian Office of the General Counsel (“AGU”) announced, on December 28, 2021, that three leniency agreements were entered into with BRF S.A. (“BRF”), Resource Tecnologia e Informática Ltda. (“Resource”), Mar Holding Participações S.A. (“Mar Holding”) and Agência de Viagens TUR Ltda. (“Agência TUR”).

Together, the agreements amount to more than BRL 671.8 million:

• The BRL 583 million agreement entered into with BRF is based on the payment of undue advantages to government agents investigated in “Operation Carne Fraca” and “Operation Trapaça”. Negotiations between the company, the AGU and the CGU began in 2018 and the agreement provides for offenses within the scope of the Brazilian Clean Company Act (Law No. 12,846/2013) and the Administrative Improbity Law (Law No. 8,429/92).

• The second agreement, signed with Resource, concerns violations provided for in the Brazilian Clean Company Act, that were committed by the company between 2014 and 2015, according to investigations within the scope of Operation Chiaroscuro. The total amount of the leniency agreement is BRL 14.5 million.

• The third agreement announced was entered into by CGU and AGU with Mar Holding and Agência TUR, in regard to undue payments made to government officials through third parties, between 2013 and 2015, which were investigated within the scope of Operation Descarte. The agreement is valued at BRL 74.3 million and negotiations were coordinated in collaboration with the Federal Public Prosecutor’s Office, which had been sought by the companies in 2019.

For more information, please see the releases regarding the leniency agreements signed by BRF, Resource, Mar Holding and Agência TUR.

Ericsson sets USD 220 million aside for potential DOJ resolution over breach of DPA

On January 12, 2023, Ericsson announced that it set aside approximately USD 220 million for a potential resolution with the U.S. Department of Justice (“DOJ”) for breach of a Deferred Prosecution Agreement (“DPA”) settled in 2019, which imposed a payment of approximately USD 1 billion in penalties due to violations to the Foreign Corrupt Practices Act (FCPA) in several countries.

The USD 220 million amount is expected to  offset any fines resulting from the DOJ settlement, in addition to potential expenses due to the extension of the independent monitoring period until June 2024.

In March 2022, Ericsson had issued a press release regarding a second warning issued by the DOJ. Such warning concerned violations of the DPA due to failure to disclose information regarding an internal investigation into potential misconduct in Iraq between 2011 and 2019.

The warning was issued days after an article was published by the International Consortium of Investigative Journalists (ICIJ), which reported that Ericsson allegedly paid millions of dollars in bribes to the Islamic State in Iraq, so that the company could operate in the regions controlled by the terrorist group.

For more information, please see the Global Investigations Review article and the Ericsson press release.

DOJ announces updates to Corporate Enforcement Policy

On January 17, 2023, Kenneth Polite, Assistant Attorney General of the Criminal Division of the U.S. Department of Justice (“DOJ”), announced significant updates to the Corporate Enforcement Policy, which applies to all cases relating to violations of the Foreign Corrupt Practices Act and other corporate criminal cases handled by the Criminal Division of the DOJ.

In this regard, even if aggravating circumstances are present, companies that seek declination must demonstrate:

• immediate and voluntary self-disclosure;

• the existence of an effective compliance program at the time of the misconduct and the disclosure, which enabled the identification of the violation and led to the subsequent voluntary self-disclosure; and

• cooperation with authorities and extraordinary remediation.

In the event that declination is not possible, a substantial reduction in penalties is still possible, provided that the company self-disclosed misconduct, fully cooperated and appropriately remediated the situation.

The Criminal Division now provides for granting or recommending a reduction of 50% to 75% off the low-end of the applicable fine range. In the case of a criminal recidivist, the reduction will generally start from another amount within the applicable range, according to the circumstances of the case. In addition, the Criminal Division has determined that, in general, a corporate guilty plea will not be mandatory, including for recidivists.

What is more, in the event that the company did not self-disclose, the Corporate Enforcement Policy will recognize efforts to fully cooperate and remediate, recommending a reduction of up to 50% off the low end of the applicable fine range – twice the maximum amount of reduction established under the previous version of the policy.

The updates aim to encourage the implementation of more robust compliance programs in order to prevent violations against anti-corruption legislation, as well as to require more effective cooperation and remediation practices from companies in the case of FCPA violations. The updates also aim to further the DOJ’s ability to prosecute individual wrongdoers within the civil and criminal scopes.

For more information, please see the DOJ press release and the updated Corporate Enforcement Policy.