Compliance and Investigations Newsletter – September 2024

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 legal team.

Enjoy reading!

Compliance and Investigations Team

DOJ updates Evaluation of Corporate Compliance Programs

On September 23, 2024, the U.S. Department of Justice (“DOJ”) updated its Evaluation of Corporate Compliance Programs (“ECCP”). The recent publication reflects DOJ’s focus on critical topics, such as emerging risks involving technology and whistleblower protection.

The most substantial amendments to the ECCP concentrate on the corporate use of data and technology, encompassing six key matters. Some of which concern the risks posed by emerging technologies, while others address the use of technology by a company as part of its compliance and control program.

The updated ECCP states: “Where relevant, prosecutors should consider the technology – especially new and emerging technology – that the company and its employees are using to conduct company business, whether the company has conducted a risk assessment regarding the use of that technology, and whether the company has taken appropriate steps to mitigate any risks associated with the use of that technology.” According to the DOJ, companies must include emerging technologies in their enterprise risk management (ERM) and compliance risk assessment processes, further adjusting their programs and controls to address the risks verified.

In support of the recent changes in DOJ’s policy – which focused on encouraging and rewarding whistleblowers for serving in good faith –, the new ECCP version reinforced the importance of the reporting mechanisms and incentives in the section “Confidential Reporting Structure and Investigation Process”. Notably, the DOJ edited this section in order to instruct prosecutors to question whether companies encourage denunciations of misconduct or whether they adopt practices that “chill such reporting”.

The DOJ recommends that prosecutors analyze how companies are assessing whether employees are willing to report any misconduct verified in the workplace. More importantly, the DOJ added the topic “Commitment to Whistleblower Protection and Anti-Retaliation”, in which there is a question about whether companies adopt anti-retaliation policies, whether they carry out training sessions on these policies, whether there is room for internal and external denunciations, and whether they treat employees who reported issues differently from those who have not in disciplinary matters.

For more information, access the updated Evaluation of Corporate Compliance Programs (ECCP).

CGU publishes assessment on adherence to Brazilian national registers of disreputable, suspended, and punished companies by States and Municipalities

On August 21, 2024, the Brazilian Office of the Comptroller-General (“CGU”) published a report on States’ and Municipalities’ adherence to the National Registry of Disreputable and Suspended Companies (“CEIS”), the National Registry of Penalized Companies (“CNEP”), and the Sanctions Bank (Banco de Sanções).

The sanctions recorded by all states and the fifty largest Brazilian municipalities – in terms of population, including all capitals – have been analyzed. Four state governments have recorded no sanctions in the systems in the past five years (until February 07, 2024), as follows: Alagoas, Amapá, Sergipe, and Piauí.

In addition, nine capitals have recorded no sanctions in the period assessed: Palmas (TO), Aracaju (SE), Boa Vista (RR), Campo Grande (MS), Cuiabá (MT), Fortaleza (CE), Macapá (AP), Natal (RN), and Porto Velho (RO).

According to the topic “Definition of Indicators” provided for in the report, in order to compare states and municipalities with different levels of infrastructure and resources, the indicator “Total sanctions applied / total population” – called “S/pop” – was initially defined, assuming that the population indicator is one of the key criteria for the distribution of budgetary and financial resources by the State, and allows conclusions to be drawn about the state’s capacity to implement public policies and its measures within context of sanctions.

The states with the highest proportion of registered sanctions in relation to their populations are Bahia, Espírito Santo, and the Federal District.

For more information, access the CGU’s article.

Company sentenced to pay BRL 15 million for collective moral damages

The company Biotronik Comercial Médica was sentenced to pay compensation worth  BRL 15 million for collective moral damages arising from violations of the Anti-Corruption Law.  The German multinational was one of those involved in the millionaire fraud scheme, which became known as the “Prosthetic Mafia”. The violations involved abusive commercialization of orthoses, prostheses, and similar materials, at overpriced rates, to the detriment of the Brazilian Unified Health System (“SUS”).

In the lawsuit filed in 2018, the Brazilian Federal Prosecution Office (“MPF”) verified that Biotronik paid BRL 2.5 million in subsidies to four doctors in Montes Claros/MG only between 2010 and 2015. They treated mainly SUS patients.

According to the MPF, to appear legal, the company paid doctors and clinics under the guise of consultancies, congresses, and lectures, among other events. Fraudulent invoices were issued without specifying the services provided.

For more information, access the MPF’s article.

 U.S. Securities and Exchange Commission fines companies USD 3 million for violating whistleblower protection regulations

On September 09, 2024, the Securities and Exchange Commission (“SEC”) announced the filing of charges against seven companies for using employment, separation, and other agreements that violated rules prohibiting actions to impede whistleblowers from reporting potential misconduct to the SEC. To close these charges, the companies agreed to pay more than USD 3 million combined in civil penalties.

“The SEC’s whistleblower program strengthens the market integrity by providing protection and incentives for those who come forward and report potential violations of the securities laws,” said Jason J. Burt, Director of the SEC’s Denver Regional Office. “According to the SEC’s orders, among other things, these companies required employees to waive their right to possible whistleblower monetary awards. This severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC.”

“Ensuring that potential whistleblowers can communicate directly with the Commission is a critical part of the SEC’s oversight mandate,” said Nicole Creola Kelly, Chief of the SEC’s Office of the Whistleblower.

For more information, access the SEC’s article.