As highlighted in this prior post, last week’s Foreign Corrupt Practices Act enforcement action against Odebrecht / Braskem was egregious and largely centered on a business unit, the Division of Structured Operations, housed within an Odebrecht subsidiary that allegedly served as little more than a bribe-paying department for the benefit of Odebrecht and Braskem in connection with projects and other issues in Brazil and eleven other countries.
Given the egregious and wide-spread improper conduct, the Odebrecht / Braskem global (Brazil, U.S. and Switzerland) settlement of approximately $3.5 billion set a record. After accounting for various credits and deductions (including for payments to Brazil and Swiss law enforcement agencies and a claimed inability to pay) the net FCPA settlement amount (subject to potential future adjustments) was approximately $420 million (the 5th largest FCPA settlement amount of all-time). [Note, in April 2017 the DOJ trimmed the Odebrecht criminal penalty by $167 million to $93 million (it originally was $260 million). Thus, the overall net FCPA settlement amount is $252 million].
Just because the conduct was egregious does not mean that there are not legal and policy issues to consider from the enforcement action. This prior post highlighted why the Odebrecht / Braskem enforcement action was unique (the bulk of the conduct focused on Brazil and it is believed to be the first FCPA enforcement action ever against a foreign issuer for bribing its own “domestic” officials) and this post continues the analysis by highlighting additional issues to consider.
According to this May 2016 Bloomberg report:
“Although the Justice Department and SEC opened their investigations in October 2014 with a focus on Petrobras, much of the work early on was done by Brazilian investigators […]. The wider examination of companies that had dealings with Petrobras [including Odebrecht and Braskem] started more recently.”
On this note, Braskem disclosed in this April 2015 SEC filing that “as of April 24, 2015, to the knowledge of the management, Braskem has not received any notification of the filing of any proceeding or investigation by Brazilian or U.S. authorities.”
Regardless of the precise date the DOJ and/or SEC began to formally investigate Odebrecht / Braskem (see this Law360 article for additional information), the FCPA scrutiny of the companies was super speedy compared to the normal timeline of an FCPA inquiry (typically between 2.5 – 4 years). If the DOJ and SEC can conclude a major instance of FCPA scrutiny with a broad scope in the approximate 1 to 1.5 years it took to resolve Odebrecht / Braskem’s FCPA scrutiny, why can’t it resolve most other instances of FCPA scrutiny in a similar fashion?
There is no question that the Odebrecht / Braskem enforcement action involved egregious conduct. However, both companies are foreign companies and can thus only be found in violation of the FCPA’s anti-bribery provisions to the extent certain jurisdictional elements are met.
FCPA Training Doesn't Need To Be Boring
Legal information presented in dozens of slides is so old-school. FCPA training doesn't need to be this way. Make FCPA training memorable and effective by engaging learners through gaming and other active learning techniques.
For instance, the DOJ charged Odebrecht with conspiracy to violate the FCPA’s anti-bribery provisions, specifically under the dd-3 prong of the FCPA which contains the following jurisdictional element:
“while in the territory of the United States, corruptly … make[s] use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance [of an improper payment scheme.]”
The DOJ’s criminal information alleges six overt acts with an explicit U.S. nexus.
Five of the overt acts allege that Odebrecht caused money to be transferred from New York accounts. However, it is an open question whether such acts meet dd-3’s prefatory language of “while in the territory” of the U.S. In this regard, recall in the Africa Sting case that the DOJ’s dd-3 anti-bribery charge (premised on a defendant sending a DHL package from the U.K. to the U.S.) was dismissed by a federal court judge because there was no conduct “while in the territory” of the U.S.
The only other overt act in the criminal information with an explicit U.S. nexus states that “Odebrecht Employee 4 [a citizen of Brazil] attended a meeting in Miami, Florida with the agent of a high-level government official in Antigua, and agreed to pay $4 million to the government official, if the government official refrained from providing banking records revealing illicit payments made by the Division of Structured Operations to international authorities.”
However, this overt act is presumably alleged in connection with the conspiracy to obstruct justice charge that Odebrecht was also charged with, not the FCPA charge.
The DOJ charged Braskem (an issuer in FCPA-speak) with conspiracy to violate the FCPA’s anti-bribery provisions, specifically under the dd-1 prong of the FCPA which contains a less demanding jurisdictional element compared to dd-3. The jurisdictional element of dd-1 as it relates to foreign issuers is:
” use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance [of an improper payment scheme]”
Unlike the DOJ’s action against Odebrecht which also contained allegations about eleven other countries, the DOJ’s action against Braskem was uniquely focused on conduct in Brazil including alleged payments to political parties, individual candidates and other government officials at the local, regional and national level in connection with political acts including seeking legislation that would advantage the company.
For instance, on several occasions the DOJ alleged that Braskem made contributions to political campaigns followed with the following type of allegation:
“Although the request was framed as a contribution to Brazilian Official’s campaign, Braskem employee knew that the funds were not going to be used for the campaign, [but] rather Braskem employee understood that they would be distributed after the next election for the personal benefit of various politicians.”
On the issue of political donations, it is perhaps useful to remind ourselves that many corporate donations, either direct or indirect, to political parties, political parties, or political action committees are viewed by some as a form of bribery. For several examples, see the article “The Uncomfortable Truths and Double Standards of Bribery Enforcement.”
Yesterday’s post highlighted various policy issues inherent in the U.S. bringing an enforcement action against a Brazilian company for its interactions with its own domestic officials, and the political contribution as a bribe aspect of the Braskem enforcement action certainly raises policy issues as well. The equivalent would be Brazil bringing an enforcement action against a U.S. company for its allegedly problematic contributions to U.S. political actors premised on the notion that the U.S. company may list certain of its securities on a Brazil exchange.