Introduction

The Sao Paulo Electoral Department of Public Prosecution has filed over 5,000 suits against companies that have allegedly made more campaign contributions than the legal limit of 2% of their respective gross invoicing in the year before the election. The cases involve a variety of factual and legal issues, such as:

  • the differentiation between revenue and invoicing;
  • the inclusion or exclusion of equity income of holding companies; and
  • the valuation of interests in joint ventures.

The common element in all of these cases is the government's access to and use of the defendants' tax returns. Although this appears to be a clever and powerful investigative and litigation tool, it is also arguably an illegal one, which clearly violates the defendants' privacy rights under Brazilian law. As such, cases that rely on this evidence collection technique – as most of them do – will likely fail.

Use of tax returns to identify possible violators

The procedure is relatively straightforward. Under Resolution 23406/14 of the Superior Electoral Court, the Department of Revenue compares a company's reported cash donations to an electoral campaign to its database of income tax returns. If the reported donations exceed the legal limit, the Department of Revenue includes that company on a list which it sends to the Electoral Court and the Electoral Department of Public Prosecution. Based on this list, the Electoral Department files a complaint with the Electoral Court requesting the disclosure of the defendant's tax records and the imposition of penalties.

This procedure raises the issue of whether the cross-referencing of public data (electoral contributions) with confidential data (tax records) violates the defendants' right to privacy under Brazilian law. Because almost all of the 5,000 pending cases stem from the defendants' names being on the Department of Revenue list, there also is an issue of whether the Department of Revenue's illegal actions have irretrievably tainted the government's case.

Case law

The Superior Electoral Court has accepted the government's argument that as long as the Department of Revenue simply compares the two sources of information – without sending any cash amount data to the Electoral Department of Public Prosecution – the taxpayers' tax records have not been disclosed.

The Federal Supreme Court has long held that any authorisation to disclose confidential records must be based on legitimate grounds and limited in scope. Otherwise, disclosure would be nothing more than a generalised, indiscriminate search, which would be inconsistent with the rights of individuals in a democratic system. Therefore, the court has held that the government must specify, among other essential data, the identity of the specific bank account holder or entity whose records are being sought and a definite period to which the records pertain.(1)

The disclosure must be justified by probable cause, not on, as the Brazilian courts have described, an "indiscriminate inquest" or a "scouring of confidential records of people, despite the fact that there is no real evidence" to warrant such activity.(2)

Some Brazilian courts have rejected the government's claims that cooperation between the Department of Revenue and the Electoral Department of Public Prosecution is permissible as an internal administrative agreement. Courts have held that an administrative rule cannot negate the effect of the tax confidentiality protections set out in the Constitution. The Department of Revenue is, in effect, a trustee of taxpayers' information and must protect that information from disclosure, except where disclosure is ordered by a court in an exceptional case.(3)

In at least one case the Federal Supreme Court has already denied requests for general disclosure of an unspecified class of persons, holding that even the simple submission of a list containing the names of depositors with no amounts would be an unlawful disclosure of confidential information.(4)

Future of electoral law litigation

Brazil's constitutional law appears to support a conclusion that the practice of cross-referencing public electoral donation records with confidential tax records in the hope of detecting electoral law violations is unconstitutional. Moreover, because most of the more than 5,000 pending cases were initiated by the cross-referencing process, it is unlikely that many, if any, of these cases will succeed.

For further information on this topic please contact Eduardo Maffia Queiroz Nobre or Ricardo Tosto de Oliveira Carvalho at Leite Tosto e Barros Advogados Associados by telephone (+55 11 3847 3939) or email (eduardomqn@tostoadv.com or ricardotoc@tostoadv.com). The Leite Tosto e Barros Advogados Associados website can be accessed at www.tostoadv.com.

Endnotes

(1) Habeas Corpus 8475, Go v Goias, Judge Rapporteur Celso de Mello (May 25 2006).

(2) Writ of Mandamus 23851, Distrito Federal, Judge Rapporteur Celso de Mello (September 26 2001).

(3) See, for example, the Superior Electoral Court's judgment in Internal Appeal/Special Appeal 13183.79.2009.6.05.0000/BA; Habeas Corpus 89083, Judge Rapporteur Marco Aurélio First Panel of Judges, Electronic Court Official Gazette (June 2 2009), Ordinary Appeal in Habeas Corpus 90376/RJ, Judge Rapporteur Celso de Mello and Petition 1725, Regional Electoral Court – Distrito Federal (January 26 2010).

(4) Investigation 2245, Court's Internal Appeal, Judge Rapporteur Cármen Lúcia, Court Official Gazette (November 9 2007). This case involved a disclosure of names, but no amounts for dozens of people. The court found that the disclosure of the names of individuals who were not directly related to the investigations violated Article 5, Paragraph X of the Constitution.

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