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hat began as a money-
laundering investigation by the
Brazilian state police in the
autumn of 2014, two years later become
a four-continent, 12-nation global
corruption investigation that, to this day,
continues to generate legal and political
aftershocks throughout Latin America
and the Caribbean. It was one of the
largest corruption scandals in Brazilian
history, and indeed, most of Latin
America and the world. The primary
targets of the probes the Brazilian
construction giant Odebrecht and
Brazils state-run energy company,
Petrobras have a long road ahead. In
addition to the massive debt
seems to be fast-tracking an anti- which US attorney Sung-Hee Suh aptly any other recently uncovered by the
corruption law aimed at Nicaragua that, called the Department of Bribery Justice Department. It stretched across 12
under certain conditions, would require through which it vetted potential nations in Africa and Latin America,
US representatives at international transactions, such as large public works including Angola, Argentina, Brazil,
nancial institutions (IFIs) to veto loans projects. The department targeted Colombia, Dominican Republic, Ecuador,
and other guarantees to Nicaragua if, politicians that it needed to buy o in Guatemala, Mexico, Mozambique,
among other things, Nicaragua fails to order to secure the work. Panama, Peru, and Venezuela.
take steps to deal with rampant public Unlike in the United States and Using what the US authorities call an
corruption. Similar legislation is under Europe, in many of these countries there elaborate, secret nancial structure, the
consideration for other countries, are weak or non-existent mandatory department funneled approximately $788
including Venezuela and Cuba. public disclosure and lobbying laws, so million in illegal payments or gifts to
Latin America and the Caribbean there is no way to know who is talking to obtain and retain business. They even
possess fantastic growth potential. But whom or about what. The US Justice created an o-book communications
the extremely high rates of poverty Department has described how, using at system called Drousys to communicate
prevalent in most of them are a breeding least three unaliated shell companies in outside ocial company channels, using
ground for corruption. This creates email, instant messages, codenames, and
particular development challenges As a means of securing passwords. They had another system for
commonly seen throughout the world in payment called MyWebDay. The $788
emerging economies. Amongst the best projects on at least two million bribery scheme led by the
antidotes, of course, are greater economic continents, Odebrecht department helped companies secure
activity and better education. There $3.3 billion in new projects. In other
remain plenty of people looking to
developed a bid-rigging words, about 23% of the new work
improve matters and support the scheme with cartel amounted to money that had been used
democratic institutions, but most
companies other or oset to fund an illegal scheme
importantly free markets, that help foster targeting government ocials,
the right sort of investment climate to construction firms. politicians, and political parties.
make corruption less tempting.
Policymakers and companies need to the British Virgin Islands and Belize, Margin of error
nd and empower these agents of Odebrecht ocials carried out the As a means of securing projects on at
change. bribery scheme to conceal and disguise least two continents, Odebrecht
improper payments to foreign political developed a bid-rigging scheme with
A corruption scheme unlike and government ocials in at least 12 cartel companies other construction
any other countries. US residents in New York and rms. The scheme resulted in about 30%
It was one remarkable Christmas present Florida were used to facilitate the of all new business coming to the
that ultimately led to the Odebrecht CEO, payments using, among other things, a company, and in some countries,
Mr. Marcelo Odebrecht, being sentenced bank account in the United States. especially the poorest, the corruption
to close to 20 years in prison. On 21 This is the largest ever resolution of a margin appears to have been as high as
December 2016, the US Justice global foreign bribery case: for at least 15 60%. In addition to bribing members of
Department announced a nearly $3.5 years, and likely more, senior Odebrecht the Brazilian Congress for lucrative
global billion (gross) settlement with ocials, employees, and other third infrastructure projects in Brazil, the
Odebrecht and a company it controls, parties, including ocials from Brazils department paid almost $10 million in
Braskem, which trades on the NYSE. In state-owned energy company, Petrobras, bribes in Angola, $35 million in
the US portion of the case, $159 million engaged in a corruption scheme unlike Argentina, $11 million in Colombia, and
was to be paid to the Department of
Justice (DOJ) and the Securities and
Exchange Commission (SEC) on top of
a criminal penalty of $94.8 million to the
DOJ.
Odebrecht must also disgorge $65
million in prot to the SEC.
Approximately 10% of the criminal ne
will be paid to Brazil, and 80% to
Switzerland. The SEC charged Braskem
with creating false books and records to
conceal the bribes. Braskem was slapped
with a criminal penalty of $630 million,
with 70% going to Brazil, 15% to
Switzerland, and 15% to the United
States. An independent compliance
manager will be stationed in both
a katz / Shutterstock.com
The government further noted that the more than tripling the budget for
parties also helped to collect, analyse, 2017. Links and notes
produce, and organise voluminous 1
Plea agreement available at
https://www.justice.gov/opa/press-
evidence and information; provided non- Opportunity for reform or more release/le/919916/download (last accessed Apr. 15,
privileged facts relating to projects political contagion? 2017).
obtained or retained through bribery; Despite its regional impact, the case has
2
This company created the worlds biggest bribery
ring, CNNMoney, available at
and provided non-privileged facts yet to reach US Congressional oversight http://money.cnn.com/2017/04/05/news/economy/ode
relating to individuals and companies committees in a way that would be of brecht-latin-america-corruption/ (last accessed 11
April 2017).
involved in various illegal schemes, along concern to involved parties. But, based on 3
Odebrecht Mess Leaves Devastation Trial from Andes
with facilitating and encouraging the conversations Ive had with several to Caribbean, Bloomberg, 13 March 2017, available at
https://www.bloomberg.com/news/articles/2017-03-
cooperation and voluntary disclosure of Congressional aides, I think its safe to 13/odebrecht-mess-leaves-devastation-trail-from-and
information and documents by current say that may change if the ripple eect of es-to-caribbean (last accessed 11 April 2017).
and former company personnel. the case continues. In Latin America, a
The government also noted that the signicant number of politicians,
companies engaged in extensive remedial lawyers, and others in public oce are Brazils Lula da Silva, the popular
measures, including ring 51 individuals now on the defensive or, depending on former left-wing president, faces prison
who participated in the misconduct, as which side of the matter they were on, time, and his successor, Dilma Rousse,
well as disciplining an additional 26 have launched or even restarted long- has been impeached. The former Speaker
individuals. dead political careers, as a result of the of the Brazilian Parliament is in jail, and
The suspensions are lengthy, some up other investigations are underway that
to 18 months, and include signicant In Argentina, a federal may result in more political gures going
nancial penalties and demotions to non- to prison or paying nes. In Peru,
managerial, non-supervisory, and prosecutor said that the case is Odebrecht has failed to complete work
non-decision-making roles. The parties the most important and on a major infrastructure project that is
are requiring individualised anti- causing political headaches for ocials in
corruption compliance and business momentous investigation into that Andean nation, and one of their
ethics training for each of the 26 corruption crimes in the history former presidents, Angel Toledo, is
suspended employees and are requiring supposedly wanted for questioning for
that each be subject to heightened
of the region, but calls for taking bribes.3 There are also
oversight and day-to-day supervision, legal reform have been few and investigations expected in other nations,
including ensuring that the independent
compliance monitor has full access and
far between. but it appears these are being structured
for political purposes, and not advancing
authority to evaluate the business much-needed rule of law and anti-
activities and ongoing compliance of scandal. Will this new crop of political corruption eorts.
those individuals. leaders take the necessary steps to create One measure legislators should be
Other remedial measures include: the legal and regulatory infrastructure seriously pursuing is the drafting of
needed across Latin America? legislation requiring the disclosure of
l the creation of a chief compliance As part of the settlement process, lobbying activities along the lines of The
ocer position that reports directly to Odebrecht is to pay close to $200 million Lobbying Disclosure Act of 1995 (2 U.S.C.
the audit committee of the board of to the Dominican Republic, but 1601) and the Honest Leadership and
directors; opposition party leaders have urged their Open Government Act of 2007 (2 U.S.C.
l adopting heightened controls and Ministry of Justice towards more ch. 26 1601 et seq.) in the United States.
anti-corruption compliance protocols, investigations and prison time for Lobbyists would register with the
including hospitality and gift politicians who broke the law. If the past appropriate government agency, and the
approval procedures; is any indication, I expect huge political information would be posted on the
l incorporating adherence to struggles not only regarding how the internet.
compliance principles into employee $200 million will be spent but also how Colleagues who have done business in
performance evaluation and government procurement will work, Latin America describe procurement
compensation; moving forward. In Argentina, a federal laws and regulations in several nations as
l increasing the number of employees prosecutor said that the case is the most antiquated. Greater transparency could
dedicated to compliance by 50%; and important and momentous investigation help create the right climate needed to
nally, into corruption crimes in the history of boost condence in the public sector.
l more than doubling the resources the region,2 but calls for legal reform Other recommendations, of a more long-
devoted to compliance in 2016 and have been few and far between. term viewpoint would involve
improving the rule of law.
In the long run, it is business which
Jason I. Poblete is a partner of PobleteTamargo LLP, a law and should set the right tone for long-term
public policy practice located in Washington, D.C. He advises on economic development in these rough
cross-border transactions, international trade regulation, as markets. While companies are not and
well as U.S. policy-making on matters related to national should not be social engineers, they are
security law and international claims law. nonetheless in a position to make a
jpoblete@pobletetamargo.com lasting, positive impact in nations
struggling to emerge from political or
economic ruts. n
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