/>iCompanies that do business both in the United States and in Brazil must monitor pertinent legal developments in each of these jurisdictions. While the U.S. and Brazilian governments share many of the same priorities, there are also key differences between the enforcement regimes and legal systems in these nations. As a result, U.S. law enforcement efforts targeting Brazilian parties—and vice versa—offer key insights, and company owners, executives, and in-house lawyers can learn a lot from examining the latest litigation developments.
Recent DOJ Litigation Targeting Brazilian (and U.S.) Parties
Here is an overview of some of the U.S. Department of Justice’s (DOJ) recent litigation targeting Brazilian entities and individuals over the past year:
DOJ Prosecutes U.S. Resident and Foreign National for Alleged Scheme to Bribe Brazilian Officials
On February 17, 2023, the DOJ announced the unsealing of an indictment charging a U.S. resident and dual Brazilian and Italian citizen with executing a scheme to pay bribes to Brazilian officials to secure contracts with Petróleo Brasileiro S.A. – Petrobras (“Petrobras”), Brazil’s state-owned energy company. As alleged by the DOJ, these two individuals paid the bribes in exchange for assistance with retaining business with Petrobras, including obtaining access to “confidential information regarding Petrobras’ fuel oil business.”
According to the DOJ’s press release, both individuals are facing charges of violating the Foreign Corrupt Practices Act (FCPA), conspiracy to violate the FCPA, money laundering, and conspiracy to commit money laundering. If convicted, they each face an aggregate sentence of 80 years of federal imprisonment.
In a superseding indictment filed on August 29, 2023, the DOJ filed additional FCPA and money laundering charges carrying the potential for another 50 years behind bars.
Brazilian Reinsurance Company Agrees to Pay $5 Million to Settle Investigation into Alleged Securities Fraud Scheme
On April 24, 2023, the DOJ announced that it has entered into a non-prosecution agreement (NPA) with the Brazilian reinsurance company IRB Brasil Resseguros SA (“IRB Brasil”). Under the NPA, IRB Brasil will pay $5 million to shareholders to resolve allegations that the company perpetrated a securities fraud scheme designed to “fraudulently prop up IRB’s stock price by spreading false information that U.S. investment firm Berkshire Hathaway Inc. had invested in the company.”
According to the DOJ, IRB Brasil’s former CFO executed the fraud scheme after a report questioning the accuracy of the company’s financial statements resulted in a drop in the company’s stock price. The DOJ’s press release states that the former CFO “circulated, and caused subordinate IRB investor relations employees to circulate, false materials to members of the press, analysts, and members of IRB’s board of directors to spread the false information regarding Berkshire Hathaway’s purported investment.” After Berkshire Hathaway denied the company’s claims, its stock price “dropped precipitously,” resulting in substantial shareholder losses.
While the DOJ found that these losses were “significantly more than $5 million,” it agreed to a $5 million settlement amount after conducting an independent forensic accounting analysis which revealed that a larger settlement amount “reasonably likely to threaten the continued viability of IRB, which in turn may expose the company’s shareholders to a further risk of loss.” The CFO who perpetrated the scheme is also facing criminal charges in the United States.
Honeywell Subsidiary Agrees to Pay $160 Million to Resolve Parallel Bribery Investigations in the U.S. and Brazil
Just before the start of the year, the DOJ closed a long-running investigation into UOP LLC, a subsidiary of Honeywell International Inc. doing business in the United States and Brazil. As stated in the DOJ’s December 19, 2022 Press Release, on top of agreeing to pay more than $160 million, the company has also agreed to undertake various compliance and cooperation measures in 2023.
The settlement serves as a resolution to a coordinated law enforcement effort between the DOJ, U.S. Securities and Exchange Commission (SEC), and prosecutorial authorities in Brazil. According to the DOJ, authorities began investigating following allegations that the company “offered to pay millions of dollars in bribes to a high-ranking executive at Brazil’s state-owned oil company to win a lucrative contract.” These bribes resulted in the company winning an oil refinery construction contract in Brazil worth approximately $425 million, which resulted in profits of around $105.5 million.
Besides paying approximately $160 million to U.S. authorities, the company also agreed to pay criminal penalties imposed by Brazil’s Attorney General’s Office, Controladoria-Geral da União (CGU), and Ministério Público Federal (MPF). Along with these financial penalties, Honeywell International Inc. and its subsidiary agreed to continue to cooperate “in any ongoing or future criminal investigations relating to this conduct,” and to report to the DOJ regarding its efforts to implement the compliance measures required under its three-year deferred prosecution agreement (DPA).
Brazilian Airline Agrees to Pay $41 Million to Resolve Parallel Bribery Investigations in the U.S. and Brazil
Late last year, Brazilian airline GOL Linhas Aéreas Inteligentes S.A. (“GOL”) entered a three-year DPA and agreed to pay more than $41 million to resolve parallel bribery investigations in the U.S. and Brazil. According to a September 15, 2022 DOJ Press Release, the settlement relates to charges in the U.S. filed under the FCPA. The Press Release indicates that GOL has also agreed to pay fines in Brazil and will pay an additional $24.5 million over two years to resolve a third investigation involving the SEC.
The DOJ’s Press Release quotes a department representative as stating that “GOL paid millions of dollars in bribes to foreign officials in Brazil in exchange for the passage of legislation that was beneficial to the airline.” The representative is also quoted as stating that the company “entered into fraudulent contracts with third-party vendors for the purpose of generating and concealing the funds necessary to perpetrate this criminal conduct, and then falsely recorded the sham payments.” The company reportedly admitted to paying approximately $3.8 million to Brazilian officials over a two-year period.
Key Points from the DOJ’s Recent U.S./Brazil Litigation
What can (and should) owners and executives whose companies do business in the U.S. and Brazil take away from these litigation developments? The DOJ’s recent prosecutions targeting Brazilian entities and individuals share some threads, including:
- The DOJ Often Works with Its Counterparts in Brazil – As these recent cases show, the DOJ frequently works with its counterparts in Brazil, including Brazil’s Office of the Attorney General, CGU, and MPF. These cross-border law enforcement efforts can subject targeted entities and individuals to prosecution in both countries, and targets can face penalties in both countries as well. As a result, when facing DOJ scrutiny in relation to commercial activities in Brazil, it is important to address the possibility of also facing scrutiny from Brazil’s national law enforcement authorities.
- Bribery is a Key Focus in Enforcement Litigation Targeting Commercial Activities in Brazil – Several of the DOJ’s recent cases targeting Brazilian entities and individuals (and individuals in the U.S.) have focused on bribery of Brazilian officials. Even when these cases do not directly involve U.S. interests, the DOJ may nonetheless choose to pursue litigation due to the impacts on U.S. investors or consumers.
- The DOJ (and Brazilian Authorities) Are Targeting Both Entities and Individuals – The DOJ and its Brazilian counterparts have been willing to target both entities and individuals in cross-border bribery and corruption cases. While entities can face substantial fines and repayment liability, individuals can face both fines and federal imprisonment in the United States.
- Authorities Are Targeting Companies of All Sizes in a Broad Range of Industries – The DOJ is not solely targeting large companies. While it is targeting large companies like GOL and Honeywell, it is also targeting much smaller businesses. It is also targeting companies in a broad range of industries, from energy to reinsurance to transportation.
- Brazilian Entities Targeted in U.S. Litigation Can Face Substantial Penalties – When targeted by the DOJ, Brazilian entities can face substantial penalties in the U.S. courts. Again, this is true even when these entities are also facing governmental enforcement litigation at home.
Of course, while these are shared characteristics of the DOJ’s recent litigation targeting Brazilian parties, cross-border litigation can involve a wide range of other issues and circumstances as well. When facing scrutiny from law enforcement authorities in the U.S. or Brazil (or both), a prompt response is crucial, and targeted entities and individuals must work with their litigation counsel to avoid unnecessary consequences. While negotiating an NPA or DPA may be the most advantageous approach in some cases, targeted parties may have other options as well—including options that even further limit the consequences of facing government scrutiny.
Speak with a U.S. Federal Litigation Attorney at Oberheiden P.C.
Our federal litigation attorneys represent U.S. and Brazilian companies and individuals in litigation involving allegations of bribery, corruption, money laundering, and other federal crimes. If you are under investigation or facing charges, we encourage you to contact us promptly for more information. To speak with a senior attorney at Oberheiden P.C. in confidence as soon as possible, call 888-680-1745 or tell us how we can reach you online now.
