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 criminally charged 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) with one count of conspiracy to violate the anti-bribery provisions of the FCPA, one count of conspiracy to violate the books and records provision of the FCPA, and one count of conspiracy to commit international money laundering.
In April 2021, Grubisich pleaded guilty (see here).
Yesterday, the DOJ announced that Grubisich was sentenced to 20 months in federal prison. In addition, Grubisich was ordered to forfeit $2.2 million and pay a $1 million fine.
Sentencing documents generally make for interesting reads and Grubisich requested a sentence of time served (approximately four months).
However, the DOJ recommended a 60 month sentence. Specifically, the DOJ stated:
“[A]s the top executive at Braskem, the defendant agreed to create an off-the-books slush fund to divert funds from Braskem, to hide the existence of that slush fund through the use of offshore shell companies, to falsify Braskem’s books and records in connection with payments into the slush fund, to pay bribes to Brazilian officials, and to provide false certifications to shareholders and regulators that concealed the bribery and fraud schemes. The defendant knew his conduct was illegal, but nevertheless chose to engage in that conduct over a course of many years.
In his sentencing memorandum, the defendant does not wrestle with the nature and seriousness of the crimes for which he is being sentenced and devotes barely two pages to discussing his criminal conduct. Instead, he appears to place the blame for the bribery and fraud schemes on his co-conspirators, characterizing himself as an “outsider” in a corrupt corporate culture and stating that “[h]is greatest regret is not walking away.” The defendant submitted more than 100 letters heralding his ethical and moral standards and devotion to humanity, but failed to grapple with his ethical and moral failings with respect to the criminal conduct at issue in this case or the real-world impact of the bribery and fraud schemes in which he participated.”
In recommending the 60 month sentence, the DOJ stated:
“The corrosive effects of corruption of government officials can hardly be debated: among other harms, bribery schemes undercut fair business practices, undermine the rule of law, destabilize countries and even entire regions, and facilitate human rights abuses. Only the corrupt prosper; societies, governments, and legitimate businesses lose. The United States has long recognized the harmful effects caused by bribery of foreign officials and sought to combat them. The defendant’s direct involvement in bribing Brazilian government officials is at the heart of what Congress sought to eradicate with the FCPA.
Indeed, the effects of Operation Car Wash or “Lava Jato,” a years-long investigation that rooted out bribes made by Odebrecht and its related entities, such as Braskem, to government officials at the highest levels in the Brazilian government, including the Brazilian Executive Branch, Congress, political parties, its state-owned and controlled oil giant Petrobras, and other Brazilian government officials, has been profound for Brazil and its citizens. As described in more detail below, the defendant and his co-conspirators had a direct role in causing the corruption at the heart of the investigation in Brazil.
The involvement of Petrobras and Odebrecht—two of the largest companies in Brazil—in this corruption scheme, had a severe impact on the Brazilian economy and resulted in lost jobs for Brazil’s lower and middle class, and for investors worldwide. The rampant corruption in the oil sector has also hurt the rule of law in Brazil, and caused a loss of faith in the Brazilian democracy, national pride and national identity. Lava Jato “provoked something that transcends outrage. Brazilians are in the midst of an identity crisis. Much of Brazil’s recently acquired cachet looks as if it was the product of fraud, and for an added touch of humiliation, a fraud cooked up at a company [Petrobras] long regarded as an emblem of Brazil’s success and aspirations.”
The bribery scheme also had an impact on the shareholders of Braskem and the integrity of the U.S. financial system. American depository shares of Braskem traded on the NYSE and Braskem was required to file annual reports with the SEC attesting to the accuracy of Braskem’s Annual Reports. The defendant himself certified that Braskem fully complied with the law and that the information contained in Braskem’s annual reports fairly represented the financial condition and results of operations and cash flows of Braskem. The defendant knew that this was not the case and knowingly and willfully concealed the bribery and fraud scheme at Braskem.”
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