On March 5, 2019, the FBI announced the creation of a dedicated “international corruption squad” that will be based in the FBI’s Field Office in Miami, Florida. According to the FBI’s press release, the squad is to be staffed with personnel who have “extensive experience conducting complex white-collar crime and corruption investigations.” The FBI’s announcement signals that organizations doing business in Latin America should be prepared to face increasing scrutiny from federal authorities.
The FBI’s move is consistent with a burst of FCPA activity involving Latin American companies in recent months. The FCPA—Foreign Corrupt Practices Act—criminalizes bribery of foreign officials, either directly or through an intermediary, in order to obtain business or some other benefit. Its anti-bribery provisions apply not only to all US companies and persons, but also to foreign companies that issue securities within the United States or file certain reports with the SEC and to those companies’ officers and employees, among others. The FCPA also criminalizes actions taken in the United States by foreign companies or their agents that are in furtherance of an improper payment or offer. The FCPA’s books and records and internal controls provisions also require companies whose securities are listed in the United States or who file reports with the SEC to keep accounting records that accurately reflect the company’s transactions and to maintain a system of internal accounting controls.
The statute’s broad extra-territorial reach is what has enabled US authorities to ensnare several Latin American companies for corrupt activities in Latin America. In September 2018, Petróleo Brasileiro S.A. (Petrobras), a Brazilian state-owned and state-controlled energy company, entered into a nonprosecution agreement and agreed to pay nearly $1.8 billion to resolve investigations by the DOJ, SEC and Brazilian authorities. The investigations centered around Petrobras’ role in facilitating a massive bidrigging scheme and its receiving and facilitating the payment of hundreds of millions of dollars in bribes to company executives, Brazilian politicians, Brazilian political parties, and other individuals, all of which the company concealed within its books and in its public filings. Similarly, in December 2018, Brazilian power company Centrais Elétricas Brasileiras S.A. (Eletrobras) agreed to the entry of a cease-and-desist order and agreed to pay $2.5 million to resolve the SEC’s allegations that it violated the FCPA’s books and records and internal accounting controls provisions by failing to detect an illicit bid-rigging and bribery scheme related to the construction of a nuclear power plant. In addition, just this past March, the government brought charges against a new defendant in connection with an investigation into a moneylaundering conspiracy involving the proceeds of a scheme to bribe officials of Ecuador’s state-owned oil company, Empresa Publica de Hidrocarburos del Ecuador (Petroecuador), to enter into contracts with GalileoEnergy S.A. in violation of the FCPA.
The FBI’s Miami-based international corruption squad suggests that Latin American-focused FCPA cases will continue to rise. With that in mind, companies doing business in Latin America should consider taking preemptive steps to minimize their exposure in the event of a future governmental investigation into FCPA-related activity. Petrobras’ settlement provides some important reminders regarding some steps companies should consider taking now—before the DOJ or SEC initiates an FCPA investigation—such as the importance of thoroughly investigating FCPA concerns that emerge within a company, taking decisive measures to remediate wrongdoing and deal with complicit employees, strengthening anti-corruption measures and compliance programs and carefully weighing the pros and cons of voluntarily self-disclosing wrongdoing to authorities.
Petrobras’ settlement reflected a 25 percent discount off the low end of the applicable US Sentencing Guidelines fine range. This discount was attributable to the company’s full cooperation with US authorities and the measures it implemented to remediate the wrongdoing. Specifically, Petrobras retained outside counsel to conduct a thorough internal investigation, implemented governance reforms, enhanced its compliance program and internal controls, disciplined employees and ensured it no longer employed or was affiliated with any of the individuals known to have engaged in the wrongdoing at issue. However, Petrobras did not voluntarily and timely disclose the wrongful conduct. Because it did not, the company did not receive voluntary disclosure credit, which likely would have led to a reduced settlement figure.
Of course, each company’s situation is fact-specific. That said, in light of the FBI’s recent announcement, companies doing business in Latin America, particularly those with existing FCPArelated concerns, should consider engaging outside counsel to evaluate the company’s position now so the company can make an informed decision on how to proceed.