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PL39/13 | A Chip Off the FCPA


No problem does more to alienate citizens from their political leaders and institutions,and to undermine political stability and economic development, than endemic corruption among the government, politica l party leaders, judges, and bureaucrats. — USAID Anti-Corruption Strategy

Source Valor Econômico | Portal ClippingMP.

Brazilian attorneys Leonardo Guimarães and Flávia Godinho compare recent anti-corruption legislation in Brazil with congeners in the U.S. and Britain.

Corruption indiscriminately affects citizens, public institutions and private organizations. Brazil as a whole is damaged when  corruption distorts the mechanism of the free markets — undermining fair competition, inspiring uncertainty among business owners, and driving away investors. For this reason,  combating corruption has been the subject of diverse international conventions, such as the Interamerican Anti-Corruption Convention organized by the OAS and signed in 1996; the OCDE Anti-Bribery Convention, from 1997; and the UN Anti-Corruption Convention, approved in 2005.

In response to the various international obligations it assumed, Brazil has passed laws designed to combat corruption, such as the Law of Administrative Impropriety and the “Clean Slate” Law.

Brazilian law still suffers from lacunae in its treatment of active corruption by a corporate entity, the only punishment for which is a restriction on the right to enter into contracts with the government.

Existing  mechanisms must be improved if the new law is not to be just another case of legislative inflation.

In the context of adapting our law according to international standards, we now have before us the PLA, the Anti-Corruption Bill (PL 39/13), which will regulate the civil and administrative responsibility of corporate entities for acts injurious to the public administration, both here and abroad. The law was approved in July 2007.

From the point of view of comparative jurisprudence,  PL 39/13 closely resembles the Foreign Corrupt Practices Act (FCPA), an innovative piece of legislation from the U.S.,in force since 1977, which prohibits the bribing of foreign public officials by U.S. corporations. It bears some  resemblance as well with the  Bribery Act, passed in 2011, a British anti-corruption law.

FCPA: Notable Cases

Although you read that the FCPA is too little used, there are at least two very interesting cases of its application: the Wal-Mart Mexico debacle and the record-setting settlement with SIemens.

An April 2012 article in The New York Times reported that a former executive of Walmart de Mexico alleged in September 2005 that Walmart de Mexico had paid bribes to officials throughout Mexico in order to obtain construction permits, that Walmart investigators found credible evidence that Mexican and American laws had been broken, and that Walmart executives in the United States “hushed up” the allegations. According to an article in Bloomberg, Wal-Mart’s “probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn’t take strong enough action, corporate governance experts said.”[6] Eduardo Bohorquez, the director of Transparencia Mexicana, a “watchdog” group in Mexico, urged the Mexican government to investigate the allegations.[7] Wal-Mart and the US Chamber of Commerce had participated in a campaign to amend FCPA; according to proponents, the changes would clarify the law, while according to opponents, the changes would weaken the law.

Siemens, in the Brazilian public eye at the moment, figures in this story, too.

In 2008, Siemens AG paid a $450 million fine for violating the FCPA. This is one of the largest penalties ever collected by the DOJ for an FCPA case

The lede:

In a December 15, 2008 press release, the U.S. Department of Justice (DOJ) revealed the details of a $450 million criminal fine payment made by Siemens AG, a German company, and three of its subsidiaries. The four pleaded guilty of violations related to the Foreign Corrupt Practices Act (FPCA). The three subsidiaries, Siemens S.A. – Argentina; Siemens Bangladesh Limited; and Siemens S.A. – Venezuela pleaded to one-count informations involving conspiracy to violate the anti-bribery and books and records provisions of the FCPA.

Taking One for the Team

Clarifying the line between “physical” and “legal” entities — my physical being and my purely notional translation business, say — is an important objective.

As in the examples just cited, the provisions of  PL 39/13 target the financier of the illegal act and not the receiver of the bribe. This is a completely novel approach with respect to the Brazilian legal system.

Within the spectrum of harmful acts that deserve to be repressed we find the defrauding of contract auctions and administrative contracts, as well as promising, offering or delivering, even if indirectly, an undue advantage to a public official or a third party related to that official.

In addition, it is forbidden to use an intermediary to hide or simulate the real interests or the identity of the beneficiaries of the act in question, or to hamper the work of agencies, institutions or public servants or intervene in their activity.

Administrative sanctions  — including the payment of a fine between 0.1% and 20% of gross income for the previous quarter — are applied independently of whether or not the guilt of a corporate entity is proven.

I read that paragraph carefully, and that is what it says. I suppose it means that if I cheat at poker in my official capacity as VP of Poker, my cheating reflects on my employer, since it was done in his name, even though without his knowledge.

There is a Brazilian legal concept called the domínio do fato that works in a similar manner. It came up frequently during the recent “payola” trial in the Supreme Court, where Zé Dirceu, for example, was not proven to have actively participated in the scheme but who was held responsible for reasons of domínio do fato.

Civil sanctions depend on proof of guilt or guilty intent, excepting the loss of assets and sums of money obtained by means of the infraction. It should be emphasized that the fate of the corporate entity does not let the physical person responsible off the hook — this person may be tried separately and/or simultaneously.

Also worth mentioning is the rule that provides benefits in the application of sentences for companies that adopt corruption prevention practices, such as “internal mechanisms and procedures to preserve integrity, audit carefully, and provide whistleblower incentives, as well as instilling effective ethical codes for the organization as a whole”.

This rule, one of the most beneficial provisions of the bill, stimulates the implementation or updating of “compliance” programs  — the Anglo-Saxon term means to act according to a rule. Compliance programs guarantee the adoption of conduct that conforms with the rules and polices, both internal and external, of the company, as well as fostering a transparent ethical atmosphere conductive to corporate best practices.

This is a major advance in our legislation, which will now take into account the procedures and internal policies of companies as a way of reducing punishments, as has become commonplace in countries like the U.S. and Great Britain.

Observe as well that where there is no regulatory framework to define the pillars of a compliance program, The American guide, A Resource Guide to the U.S. Foreign Corrupt Practices Act (PDF), can be useful. It identifies the “hallmarks” of what are considered to be essential factors in a successful compliance effort.

A integridade e os princípios éticos devem estar presentes em todas as ações realizadas pela empresa, incluindo seu relacionamento com o setor público. A possibilidade de uma mudança de cultura a respeito do relacionamento entre o poder público e o particular, com a incorporação de um compromisso das empresas contra a corrupção, é, certamente, uma boa inovação trazida pelo projeto.

Embora o projeto de lei, de forma geral, represente um avanço no combate à corrupção, principalmente no que se refere ao incentivo da criação de mecanismos internos de controle nas empresas, deve-se ter em mente as vulnerabilidades processuais e investigativas do nosso sistema, cujas leis anticorrupção anteriores não conduziram aos avanços esperados. A melhor resposta que se possa dar à corrupção, antes da criação de mais um aparato formal, é o aprimoramento e a efetivação dos mecanismos já existentes, para que as novas leis não se transformem em mera inflação legislativa, sem qualquer efetividade.