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Enforcement agencies and corporate liability
What government agencies are principally responsible for the enforcement of civil and criminal laws and regulations applicable to businesses?
The main government agencies responsible for the enforcement of civil and criminal laws and regulations applicable to businesses are the Public Prosecutor’s Office, which comprises federal and state public prosecutors, the Securities and Exchange Commission (CVM), the Administrative Council for Economic Defence (CADE) and local controller agencies. The Public Prosecutor’s Office is the most active, and has sole responsibility for the enforcement of criminal laws. CADE operates more directly in the defence of competition. The CVM regulates financial markets.
Scope of agency authority
What is the scope of each agency’s enforcement authority? Can the agencies pursue actions against corporate employees as well as the company itself? Do they typically do this?
The agencies can pursue actions against corporate managers and employees, as well as the company itself. There is criminal liability for companies only in cases of environmental crimes. For other crimes, only employees, managers and representatives of the companies can be held accountable. Thus, these representatives and employees are the typical targets of the Public Prosecutor’s Office.
Can multiple government entities simultaneously investigate the same target business? Must they coordinate their investigations? May they share information obtained from the target and on what terms?
Multiple government entities may simultaneously investigate the same targets, but the overlapping jurisdiction among agencies and the lack of coordination sometimes present a challenge for the target company or individual. In tax evasion cases, however, a criminal investigation is only initiated after a final decision of the federal or state revenue ruling in favour of the tax debt.
Sharing of information and data among government entities is common in Brazil, although judicial authorisation is mandatory if the data involves bank or tax information, or private communication. To obtain this approval, agencies must assert and provide evidence that the intended data is indispensable for the investigation and cannot be obtained from regular sources.
In what fora can civil charges be brought? In what fora can criminal charges be brought?
Civil action is typically under the jurisdiction of the courts where the damage occurred or the place of residence of the claimant. There are specific rules for criminal procedure but, as a primary rule, the competent jurisdiction will always be the forum in which either the crime was committed or its result occurred.
Corporate criminal liability
Is there a legal concept of corporate criminal liability? How does the government prove that a corporation is criminally liable for the acts of its officers, directors or employees?
There is corporate criminal liability only in cases of environmental crimes. The Constitution and the Environmental Crimes Act rule that legal entities will be administratively, civilly and criminally liable under the provisions of this Act. The company is liable when a violation is committed by decision of its legal or contractual representatives, or its collegiate body, and for its interest and benefit. Although traditionally the courts have demanded concurrent accountability of one of its officers, directors or employees, it is now the case that criminal responsibility can arise from the company alone. For this, however, public prosecutors are obliged to demonstrate that the environmental crime occurred in the interest or benefit of the company, as determined by the environmental law.
Must the government evaluate any particular factors in deciding whether to bring criminal charges against a corporation?
There is no provision for criminal charges to be brought against corporations except for environmental crimes. In this case, the prosecution must provide evidence of the company’s board or manager’s knowledge of wrongdoing and the benefits obtained from it, through its administrative body. In this case, the prosecution may take into consideration the corporate history, a voluntary disclosure or even the existence of effective compliance programmes, in order to decide whether to prosecute or to settle for a non-prosecution agreement by which the company engages with the recovery of the environmental damage caused without pleading guilty.
Initiation of an investigation
What requirements must be met before a government entity can commence a civil or criminal investigation?
Civil or criminal investigations can start whenever the authorities deem it appropriate. Even newspaper articles can serve as a basis for companies or individuals to be investigated. The start of an investigation may occur either at the initiative of a government entity or at the request of the victim. However, some acts of investigation (eg, wiretapping) require judicial authorisation owing to the harm to the target’s privacy.
What events commonly trigger a government investigation? Do different enforcement entities have different triggering events?
In practice, investigations usually start because of press reports, or a notification or request from other authorities. Depending on the subject matter of the investigation, there is the possibility of different triggering events. In the case of environmental crimes, for instance, investigations usually start with a notification from the environmental authorities that a violation has occurred. In the case of tax crimes, however, investigations usually start with an official communication made by fiscal authorities to the Public Prosecutor’s Office. Another example of a triggering event can relate to measures such as the breach of bank secrecy, which can lead the authorities to discover information that points to the commitment of crimes that require investigation proceedings.
What protections are whistle-blowers entitled to?
There are statutes that provide for witness protection; however, the procedure to grant protection to a witness is burdensome and long, and therefore is rarely used. Not uncommonly, whistle-blowers act as anonymous informants to the authorities. Despite there having been several discussions regarding the modification of legislation to provide broad and specific protection for whistle-blowers, the matter is not yet regulated in Brazil.
At what stage will a government entity typically publicly acknowledge an investigation? How may a business under investigation seek anonymity or otherwise protect its reputation?
In recent years, the rule has been that the authorities shall make public all investigations in which such publicity does not imply a risk to the production of evidence. In practice, disclosure of the content of investigations occurs legally (by means of judicial decision) or illegally (by leaks to the press). To seek anonymity and protect its reputation, the company may file a motion requesting that the court maintain the secrecy of the investigation, or counsel may approach enforcement agencies to convince them of the need for confidentiality.
Evidence gathering and investigative techniques
Is there a covert phase of the investigation, before the target business is approached by the government? Approximately how long does that phase last?
Often, a white-collar investigation has a covert phase before the target business is approached by the government. Usually, this covert phase consists of measures to collect evidence, such as wiretapping or infiltration of undercover agents. However, there is no time limit for the confidentiality of investigations provided by law.
What investigative techniques are used during the covert phase?
The investigative techniques used during the covert phase include wiretapping, email monitoring, undercover agents, analysis of tax and bank documents, and cooperation with foreign authorities to obtain information.
After a target business becomes aware of the government’s investigation, what steps should it take to develop its own understanding of the facts?
After a target business becomes aware of the government’s investigation, it is recommended that it contact counsel to request the court to grant it access to the content of the investigation. Usually, this is a trigger for the start of an internal inquiry to collect information on the facts ascertained.
Evidence and materials
Must the target business preserve documents, recorded communications and any other materials in connection with a government investigation? At what stage of the investigation does that duty arise?
Although there is no specific legal obligation binding the target business to preserve documents that may be of interest to investigators, destroying evidence is not recommended as the individuals involved may, depending on the case, face allegations of obstruction. The preservation of documents may be seen by enforcement agencies as a demonstration of good faith and transparency.
During the course of an investigation, what materials - for example, documents, records, recorded communications - can the government entity require the target business to provide? What limitations do data protection and privacy laws impose and how are those limitations addressed?
There are no clear grounds concerning the possibility of a target business denying access to documents required by the authorities based on the company’s own privilege against self-incrimination. Companies normally submit data that is not covered by legal privilege and not related to bank or tax records (which require court authorisation - see question 3).
On what legal grounds can the target business oppose the government’s demand for materials? Can corporate documents be privileged? Can advice from an in-house attorney be privileged?
The target business can use the privilege against self-incrimination and the constitutional right for privacy as legal grounds to oppose a government demand. Concerning legal advice, the company can claim privilege depending on the subject and the involvement of counsel.
May the government compel testimony of employees of the target business? What rights against incrimination, if any, do employees have? If testimony cannot be compelled, what other means does the government typically use to obtain information from corporate employees?
Yes, the government may compel the testimony of employees of the target business. During the testimony, however, the employee has the right to remain silent, or even lie, whenever the clarifications provided to the authorities may imply his or her criminal responsibility. In addition to the testimony, the government may request information from the company (see question 15) and request the court to allow precautionary measures such as wiretapping (see question 12).
Under what circumstances should employees obtain their own legal counsel? Under what circumstances can they be represented by counsel for the target business?
If employees are in any way liable, it is recommended that they seek counsel (or the company seek counsel for them), especially when a risk of conflict between the company’s defence strategy and their own may arise.
Where the government is investigating multiple target businesses, may the targets share information to assist in their defence? Can shared materials remain privileged? What are the potential negative consequences of sharing information?
Target businesses are not forbidden to share data on the investigation, but there are no clear grounds about the lawfulness of businesses discussing and aligning their statements about the facts. The sharing of information is not considered a waiver of privilege. The potential negative consequences may vary, as it can be either a disadvantage in proceedings according to game theory or considered a form of disloyalty from the authorities’ perspective.
At what stage must the target notify investors about the investigation? What should be considered in developing the content of those disclosures?
The company’s administration may evaluate this in light of their fiduciary duty to protect investors. It is recommended that the target provides full access to, and clear acknowledgment of, the investigation and produces evidence in such a way that investors can make an assessment of the real risks for the business that will normally exist when there are clear grounds for an indictment.
Notification before investigation
Is there a mechanism by which a target business can cooperate with the investigation? Can a target notify the government of potential wrongdoing before a government investigation has started?
There are legal mechanisms by which a target business can be rewarded for cooperating with the authorities, but they are very recent and there are few clear grounds on this topic. If the target anticipates an investigation and decides to submit evidence of wrongdoing to the agencies, it should do so with caution and in line with counsel in other jurisdictions. Considering the lack of coordination among Brazilian enforcement agencies, there is a risk of having to approach different authorities, with different views but overlapping attributions, to avoid being sued or prosecuted after a settlement. For instance, if the company enters into an agreement with the judicial authority in the criminal sphere, this does not mean that the terms of the agreement will be obeyed in the administrative sphere, so the company must think about all the authorities that might be interested in the subject.
Voluntary disclosure programmes
Do the principal government enforcement entities have formal voluntary disclosure programmes that can qualify a business for amnesty or reduced sanctions?
Yes, the Clean Companies Act and the Competition Act provide benefits in disclosure programmes that can qualify a business for amnesty or reduced sanctions. Further, even in cases where there is not an express legal provision, in environmental crimes it is not uncommon for the company to enter into agreements with the authorities to obtain benefits regarding possible sanctions. Another example of such agreement occurs in the case of tax crimes, in which the company may declare irregularities and agree to the payment of eventual tax due, and then be free of criminal sanctions.
Timing of cooperation
Can a target business commence cooperation at any stage of the investigation?
A target business can cooperate with enforcement agencies at any point during the investigation. Generally, the sooner it cooperates, the better.
What is a target business generally required to do to fulfil its obligation to cooperate?
Usually, in order to fulfil its obligation to cooperate, it is necessary for the company to make a full disclosure and admission of the facts. Often, but depending on the case, it also requires admission of guilt.
When a target business is cooperating, what can it require of its employees? Can it pay attorneys’ fees for its employees? Can the government entity consider whether a business is paying employees’ (or former employees’) attorneys’ fees in evaluating a target’s cooperation?
A target business can require from its employees any sort of information that they might be in possession of, including digital data, documents and assets that belong to the company. The business can provide counsel for its employees, as mentioned in question 18. There are no legal grounds for the government to devalue the target’s cooperation because it is paying for its employees’ attorneys. Granting access to a lawyer that may help the company to obtain information from its employees shows that the company cares about conflicts of interest and respects the due process.
What considerations are relevant to an individual employee’s decision whether to cooperate with a government investigation in this context? What legal protections, if any, does an employee have?
Employees have the right to avoid self-incrimination, and the right to be counselled by a lawyer. They also have the obligation to reveal to the company any information concerning their activities inside the business, including providing company data in their possession.
How does cooperation affect the target business’s ability to assert that certain documents and communications are privileged in other contexts, such as related civil litigation?
The target business must take into consideration that enforcement agencies may share information with each other, which may weaken any assertion of privilege.
What mechanisms are available to resolve a government investigation?
The law provides three mechanisms by which a target business can resolve a government investigation:
- through a non-prosecution agreement for consumer and environmental cases, by which the company agrees to refrain from wrongdoing, to pay damages and to restore the environment, without any assumption of guilt;
- a kind of deferred prosecution agreement or leniency for corruption and cartel cases, by which the company acknowledges the wrongdoing, provides new information and agrees to adjust its conduct pursuant to the law, and also to pay fines and damages; and
- something similar to a guilty plea or collaboration agreement, through which individuals recognise their wrongdoing and assist the investigation with new information. They must provide evidence for their allegations to obtain the benefits of such agreement.
Admission of wrongdoing
Is an admission of wrongdoing by the target business required? Can that admission be used against the target in other contexts, such as related civil litigation?
See questions 21 and 28. Considering the use of the admission of wrongdoing against the target in other contexts, it is possible that it will be used by the authorities in procedures in other areas.
What civil penalties can be imposed on businesses?
It is difficult to determine all the civil penalties that can be imposed on businesses, because they can involve many different authorities and jurisdictions, depending on the case. Generally, sanctions such as fines, collective damages and debarment may be imposed.
What criminal penalties can be imposed on businesses?
Corporate criminal liability exists only for environmental crimes (see question 5). Environmental law provides for penalties such as partial or total suspension of activities, fines, community service and prohibition of contracting with the public administration and receiving incentives from it.
What is the applicable sentencing regime for businesses?
Judicial sentences are discretionary. In contrast to other countries, in Brazil, there are no specific statutes or comprehensive guidelines concerning sentencing regimes for businesses.
What does an admission of wrongdoing mean for the business’s future participation in particular ventures or industries?
As mentioned in question 30, there are some sanctions that make the business’s future ventures impossible, such as debarment, heavy fines and suspension of activities. Usually, however, the company faces damage to its reputation and image.