As highlighted in this prior post, in late 2016 the DOJ and SEC brought a Foreign Corrupt Practices Act enforcement action against Odebrecht S.A. (a Brazilian holding company) and Braskem S.A. (a Brazil-based petrochemical company with shares traded on the NYSE in which Odebrecht owned a majority of voting shares).
The conduct at issue 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. According to the resolution documents, former senior executives authorized approximately $788 million in bribes, largely through the Division of Structured Operations, to alleged foreign officials in at least twelve countries. While the principal focus of the DOJ’s action (and the exclusive focus of the SEC action) concerned conduct in Brazil including the companies relationships with Petrobras, the DOJ action also alleges improper payments in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.
As highlighted in this prior post, in November 2019, in connection with the Brazil prong of the Odebrecht and Braskem enforcement action, the DOJ announced that Jose Carlos Grubisich (pictured – a citizen of Brazil who served as the CEO and a member of the board of directors of Braskem, as well as in various capacities for Odebrecht) was charged with one count of conspiracy to violate the anti-bribery provision of the FCPA, one count of conspiracy to violate the books and records provision of the FCPA and to fail as a corporate officer to certify financial reports and one count of conspiracy to commit international money laundering.
Earlier this week, the DOJ announced that Grubisich has pleaded guilty.
As stated in the DOJ release:
“According to court documents, between approximately 2002 and 2014, Grubisich engaged in a scheme to bribe Brazilian government officials in violation of the FCPA. As part of the scheme, Grubisich and his co-conspirators diverted approximately $250 million from Braskem into a secret slush fund, which Grubisich and others had generated through fraudulent contracts and offshore shell companies secretly controlled by Braskem.
Grubisich admitted that while CEO of Braskem, he agreed to pay bribes to Brazilian government officials to ensure Braskem’s retention of a contract for a significant petrochemical project from Petrobras, Brazil’s state-owned and state-controlled oil company. Grubisich also admitted that, as Braskem’s CEO, he falsified Braskem’s books and records by falsely recording the payments to Braskem’s offshore shell companies as payments for legitimate services. Grubisich also signed false Sarbanes-Oxley certifications submitted to the SEC that, among other things, attested that Braskem’s annual reports fairly and accurately represented Braskem’s financial condition, and that Grubisich, as Braskem’s principal officer, had disclosed all fraudulent conduct by Braskem’s management and other employees with control over Braskem’s financial reporting.”
In the release, Acting Assistant Attorney General Nicholas McQuaid stated:
“As CEO of a publicly traded company, Grubisich and other senior executives at Braskem engaged in a large-scale, sophisticated international bribery and fraud scheme and then lied to U.S. shareholders and authorities to conceal their criminal conduct. [The] guilty plea demonstrates the Department’s commitment to holding individuals accountable for corrupt and fraudulent conduct, including those at the highest corporate echelons.”
Acting U.S. Attorney Mark Lesko of the Eastern District of New York stated:
“Grubisich abused his position of trust as CEO of Braskem to both facilitate and conceal the payment of millions of dollars in bribes so that Braskem could increase its profits and its senior executives — including Grubisich himself — could personally benefit. This office is committed to the prosecution of corrupt gatekeepers, including officers and directors of public companies, who, like Grubisich, use the United States’ financial system to commit crimes.”
Grubisich agreed to pay approximately $2.2 million in forfeiture and is to be sentenced on August 5th.