Brazil's New Anti-Bribery Law: Compliance and Enforcement Trends - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A Brazil's New Anti-Bribery Law: Compliance and Enforcement Trends Navigating Key Provisions, Ensuring Compliance, Lessons From Recent Enforcement to Mitigate Legal Risks TUESDAY, OCTOBER 21, 2014 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Roberto di Cillo, Partner, Di Cillo Advogados , São Paulo, Brazil Thaddeus R. McBride, Partner, Sheppard Mullin Richter & Hampton , Washington, D.C. Matthew Schreiber, Director of Legal Affairs and Assistant General Counsel, Juniper Networks , Sunnyvale, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Anti-Bribery in Brazil: Compliance and Enforcement Roberto di Cillo Thad McBride Matt Schreiber Strafford Publications October 21, 2014

Agenda  Introduction  Brazilian Anti-Corruption Act (BAA) of 2013  The U.S. Foreign Corrupt Practices Act (FCPA)  Compliance Challenges and Best Practices  Questions 6

International Scope  Cooperation among different countries and jurisdictions ( e.g. , Siemens, Panalpina)  Non-U.S. laws and enforcement on rise  Transparency International – Corruption Perceptions Index – Global Corruption Barometer 7

Brazil Brazil http://www.transparency.org/cpi2013/results 8

Key facts about Brazil  Population c. 200 million  World’s 7 th wealthiest economy with a GDP of US$ 2.223 trillion in 2012  World Cup / Presidential and Other Elections in 2014  Olympic Games in 2016  Huge unexploited offshore oil reserves  Primarily a civil law system 9

Why was the BAA needed?  “Strict legality” principle (legal entities not liable for corruption until then?)  Domestic and international perception of widespread corruption (Brazil ranked 72 (out of 174 countries) in TI’s Corruption Perceptions Index in 2013) while needing to keep attracting foreign investment and to keep people happy  Signature of OECD, UN and OAS conventions against bribery 10

Strict Legality Explained  No statute (as in act of congress), no law  No law, no enforcement  Existing Anti-misconduct Act from 1992 rarely enforced against companies 11

Perceptions  Facilitated by social media and new technologies  Transparency laws and investigative media  More awareness? >>> Widespread dissatisfaction? 12

Dissatisfaction  With what? – Quality of services • NOT FIFA standard hospitals • NOT FIFA standard schools – How public funds are spent (social programs?) – Economic outlook for years to come – Accountability of government officials 13

Economic Outlook  Brazil ranked 5 in 2014, down from 3 from 2010 to 2013, in A.T. Kearney Foreign Direct Investment Confidence Index.  “Brazil is home to an increasingly large number of investors from other emerging markets.” - See more at: http://www.atkearney.com/research-studies/foreign-direct- investment-confidence-index#sthash.9uhsF7nh.dpuf 14

FDI’s and the oil and gas industry  Does Brazil have all that it takes to exploit oil and gas in the pre salt?  If there is no pre salt oil and gas exploitation, will Brazil be able to feed the Social Fund with royalties?  How will education and health develop without royalties from pre salt oil and gas? 15

Accountability  Arrest of senior officials (a new standard since impeachment of President Collor de Mello in 1992), including former cabinet member  Deferred prosecution agreement signed by Mr. Costa, former senior official of Petrobras  Possible signature of deferred prosecution agreement by others 16

Costa’s Deferred PA  Cooperation with investigations into money laundering, corruption and other crimes at Petrobras (particularly work on refineries): 3% paid by contractors under the table as contributions to campaigns?  Combined c. 2 Million USD cash payment and donation of assets worth c. 2 Million USD plus, all agreed as “damages” (setting the standard?)  Disgorgement of 2.8 Million USD found in a Cayman account and of 23 Million USD found in a Swiss account owned by relatives and expressly recognized illegal 17

International Conventions  What if Brazil had not adopted the BAA or otherwise enforced existing laws to prevent companies from bribing governmental officials? 18

Compliance Challenges 19

Compliance challenges  Trade barriers to protect local industries  Complex laws – Difficult to comply – Incentive to pay to navigate administrative processes 20

Local Custom  More relaxed attitude toward bribery than in U.S.  Bribery may be accepted part of business  Relationships built on trust – Personal and family relationships – Resistance to formal written agreements 21

Third Parties  Reliance on third parties in new markets – Agents or other representatives – Local counsel, accountants – Customs brokers, a must in Brazil ! – Distributors, dealers  In some jurisdictions (Brazil included) / industries, a local rep is required 22

The Brazilian Anti-Corruption Act 23

BAA Overview  Prohibits bribes + to any official (local or foreign), including State Owned Companies’ officials  Gives opportunities for the public administration to (a) investigate and apply fines and penalties and (b) coordinate legal proceedings with prosecutors  Broad scope ( i.e. , any legal entity, branch, office, etc., whether domestic or foreign) 24

BAA Overview (cont’d)  Enforcement policy is outlined in the Act. – Rigid (as in not flexible) settlement policy with regards to settlement always with admission of guilt – No opportunity for administration to waive conditions for settlement agreements – More than 5,000 enforcement authorities (from the Federal Government to Small Town); local regulations 25

BAA Overview (cont’d)  If violated, administration can apply: – Fines will be directly applicable by the Administration: • Fines ranging from 0.1% to 20% of the after-taxes revenue earned in the year preceding the year when investigation or audit started or between $3,000 USD to c. $30 million USD if revenue of the investigated company cannot be used; and/or 26

BAA Overview (cont’d)  If violated, administration can further apply: – Wide disclosure of the event depending on severity and other standards ( i.e. , with added reputational risks) • Regulations issued by local authorities have been issued and in São Paulo (city) name of investigated company will be disclosed at an early stage – Blacklisting • Public financing; • Tenders; • Government Contracts 27

BAA Overview (cont’d)  Administration plus prosecutors can also seek: – At the Judiciary: • Unspecified damages (no cap but no clear criteria either) • Forfeiture of assets, rights or funds which stem directly or indirectly from a violation • Partial suspension or interruption of its activities • Compulsory dissolution of the legal entity • Prohibition from receipt of incentives, subsidies, subventions, donations or loans from public bodies or entities and public or state-controlled financial institutions, for the minimum term of one (1) and maximum term of five (5) years • Freeze of assets, rights or funds 28