Federal prosecutors in Brazil have asked the US Department of Justice to freeze $124 million in assets belonging to offshore drilling contractor Vantage Drilling International. The Houston-based company revealed the Brazilian mutual legal assistance request in a 14 March securities filing.

The company appears confident that the department will reject the request. On an earnings call the same day as the March filing, Vantage’s chief compliance officer, Douglas Stewart, said he does not believe that the department would assist the Brazilians with freezing Vantage’s US assets “given the history of this case.”

On the compliance executive’s mind would no doubt have been the decision by the DOJ to decline to take enforcement action against the company for the very conduct at issue in the Brazilian case.

Brazilian prosecutors believe that a former Vantage director paid $31 million in bribes in 2008 to officials at Brazil’s state-controlled oil company, Petrobras, to secure a $1.8 billion drilling contract. Upon hearing the allegations in 2015, Petrobras terminated the contract. Meanwhile, authorities in the US and Brazil began investigating.

Ultimately, the DOJ closed in 2017 its investigation into possible violations of the Foreign Corrupt Practices Act by Vantage. The DOJ has not said publicly why it declined to prosecute the case. Stewart said on the earnings call that the company believes “no new facts have risen” since the DOJ’s declination.

Separately, Vantage agreed in November to disgorge $5 million to settle a parallel foreign bribery investigation by the US Securities and Exchange Commission, without admitting or denying the findings. The SEC said it considered Vantage’s financial condition when negotiating the agreement. After Vantage’s $1.8 billion contract with Petrobras was terminated, the company filed for bankruptcy protection in late 2015.

Brazilian prosecutors, meanwhile, have brought a string of related charges as part of their sprawling corruption probe centred on Petrobras known as Operation Car Wash.

They charged the former CEO of Vantage, Paul Bragg, with corruption and money laundering in July. Bragg has not publicly commented on the charges but has previously denied the allegations in a 2015 company press release.

The civil charges against Bragg were filed jointly by Brazilian prosecutors and Petrobras and seek $124 million, which includes damages and a civil fine. Vantage is also a defendant in the case.

The presiding Brazilian judge subsequently ordered the freezing and seizure of Vantage’s assets. But Vantage said it was unaffected by the order because it does not have any Brazilian assets, according to a securities filing.

Now, Brazilian prosecutors are asking the DOJ for help.

The Brazilian Federal Prosecution Service didn’t return a request for comment but it is no doubt aware of a recent arbitration award for Vantage that has upset Petrobras.

Petrobras is seeking to annul a decision by an arbitration panel that compels the state oil company to pay $622 million in damages to Vantage for unfairly terminating the drilling contract. While Vantage was under investigation in the US, the company was engaged in a heated arbitration battle with Petrobras over the terminated drilling contract. Petrobras claimed that it dropped Vantage after the driller was linked to bribery allegations. Vantage claimed that that there is no credible evidence that bribery occurred and that Petrobras dropped the contract in an attempt to cut costs.

In July, the arbitration tribunal sided with Vantage. But Petrobras has since argued in a spin-off lawsuit before a Houston federal court that the arbitration proceedings were unfairly stacked against the Brazilian oil company. That case continues.

A test of the DOJ’s level of cooperation in MLAT requests

Faced with the long legal background of the case, the DOJ must decide if it will comply with Brazilian prosecutors’ request.

When asked if the department will help freeze Vantage’s assets despite previously declining to prosecute the case, a DOJ spokesperson wouldn’t comment. The spokesperson did, however, later clarify that “in general, declining prosecution as to a company does not impact our treaty obligations.”

Looking at the mutual legal assistance treaty between the US and Brazil, there are three conditions under which a country can deny a request, none of which appear to apply in Vantage’s case.

Kate Hamann, a partner with Pierce Atwood, explained that Vantage’s compliance officer might be taking the term “declination” too literally.

“A declination isn’t saying you didn’t commit any offences anywhere in the world,” said Hamann, a former prosecutor in the DOJ’s FCPA unit who also spent 10 years at the State Department. “I have had cases where there is clearly an offence but it was not in the jurisdiction of the US.”

Hamann speculated that there could be a lot of conversation behind the scenes between the DOJ and Brazilian authorities that Vantage does not know about.

“The US might have known all along that the Brazilians were going to get involved,” Hamann said, recalling a case from her time as a prosecutor where the DOJ only agreed not to prosecute the company on the condition that it cooperated with another authority’s investigation into the same allegations.

Ultimately, the DOJ can comply with the request or they may choose to ignore the request altogether. Hamann warned, however, that there could be repercussions for the DOJ if they do not assist the Brazilians.

“If we stop responding to Brazil’s requests, then maybe in the future they won’t help us,” Hamann said. “You aren’t going to get cooperation if you don’t give cooperation.”

Counsel to Vantage, Weil Gotshal & Manges partner Steve Tyrrell, declined a request for comment.

This article was originally published on Global Investigations Review, the leading publication for competition law and regulation insight, intelligence and news. Subscribe now