Presenting a live 90-minute webinar with interactive Q&A Brazil’s Anti -Corruption Law in 2015: Complying with the New Implementing Regulations Navigating Key Provisions, Minimizing Corruption Risks, and Ensuring Compliance TUESDAY, AUGUST 11, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Roberto di Cillo, Partner, Di Cillo Advogados , São Paulo, Brazil Thaddeus R. McBride, Partner, Bass Berry & Sims , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Brazil’s Anti -Corruption Law in 2015: Complying with the New Implementing Regulations Strafford Publications Webinar 11 August 2015 Roberto di Cillo Thaddeus McBride
Effective Compliance Programs Required for all types of businesses, whether large, medium or small. 6
Why? • BAA (Brazilian Anticorruption Act of 2013, effective January 2014) • Criminal proceedings against individuals 7
Company size matters a) number of employees and contractors; b) eligibility as a Small Company (which is tax- driven). 8
Company size matters 2 Small Company means... Gross revenue equal or below c. $1Million USD per year for domestic sales or services (and an additional c. $1Million for exported sales or services). 9
Company size matters 3 If not Small Company, then Company is not eligible for streamlined approach. But what does size mean for Multinational Companies? 10
Effective means... 1. – commitment from senior management; 2. – conduct and ethical standards, integrity policies and procedures apply to all (employees and managers), regardless of seniority or position; 11
More... 3.- conduct and ethical standards, integrity policies and procedures apply to vendors and co- venturers whenever necessary ; 4. – periodic training on the integrity program is provided; 12
And more... 5. – accounting records which reflect entirely and precisely all transactions; 6. – internal controls which assure ready making and reliability of reports and financial statements; 13
Also... 7. – specific procedures to prevent fraud and wrongdoing in (public) tenders, government contracts or in any interaction with the public sector (whether directly or through third parties), including tax payment, audits, obtaining of licenses and permits and good standing certification; 14
Still... 8. – (existence and consistent enforcement of) disciplinary measures in case of violation of the integrity program; 9. – procedures which assure prompt interruption of wrongdoing or infringements and timely remediation of the damages so caused; 15
And 10. – transparency of the company with respect to donations to candidates to political office and political parties. 16
Small businesses optional A. – continuous monitoring of the integrity program to enhance it in prevention of, detection of and fight against corruption and similar activities; B. – appropriate investigation prior to hiring of third parties and, depending on the case , oversight measures with respect to vendors and co-venturers; 17
Further... C. – due diligence review in mergers and acquisitions and re-organisation to (try to) detect wrongdoings or vulnerability of the target companies; D. - periodic risk review to make necessary adjustments to the integrity program; 18
More... E. – independence, structure and authority of the internal department in charge of application of integrity program and oversight of the program’s enforcement; F. – hotlines open to all and broadly advertised to employees and third parties and existence of mechanisms to protect good-faith reporting; 19
What if a Company does not implement anything? Fines? What else? 20
Fines under the BAA regul. • Revenue based (for the year prior to investigation start) if revenue can be used ; • Percentages vary depending on materiality (contract values included); • Possible subjectiveness in the determination of whether revenue can be used and materiality; • Caps to apply. 21
Fines if revenue cannot be used High range between R$6,000.00 and R$60Million (or roughly $1,800 USD and $18Million USD) 22
What else? Going back to the basics... The BAA is a civil (as opposed to criminal) statute BUT ... it is expressly not intended to mess with criminal statutes. 23
Lessons learned from Car Wash Car Wash, now in its phase 17... But before phase 17? 24
Car Wash Phase 14 Raids authorized; Search and arrest warrants issued; Bank accounts frozen. 25
Pro forma actions? • Car Wash Phase 14: “ As the investigation became more widely known through press reports on the potential involvement of (...) and (...) and through police investigations there is no record of both builders ’ managers, CEOs included, taking any action to audit internally towards fact-finding and taking disciplinary action against reports who, without knowledge of the CEO, might have done something illegal. Lack of any such action is a showing of senior management involvement and further that crimes did not result from individual action, but rather as part of the companies ’ policy . ” (Judge Moro’s Opinion of June 15, 2015, p. 34) 26
July 2015 Sentence Recommendation • Car Wash sentence : “ While this sentence is not with respect to [the Company], I take the liberty of making a few remarks which I deem material. All evidence of the company’s involvement in criminal activity considered, including confession by they former CEO, I recommend that the company seeks a settlement agreement with prosecutors, the Antitrust Agency, Petrobras and the CGU. (...) In the interest of the company, society and the victim, settlement should involve in combined effort the referred public agentes which have authority to act in furtherance of the common good, prosecutors specifically to be part of the settlement, as prosecutors, along with the police, are responsible for evidence, and settlement should be inclusive of (....) ”. 27
Sentence Recomm. Checklist • Criminally involved managers to be put on leave (and not only those who were convicted); • Unrestricted disclosure of all crimes and of all indivuals who were involved and tender of all available evidence (and not only evidence which has been discovered); • adoption of stricter compliance measures; and • payment of full compensation for damages sustained by the State (and not limited to those which were outlined in the case). (Judge Moro’s Sentence of July 20, 2015, p. 149- 150) 28
Jail: not sole remedy Individual defendants who did not sign settlement agreements or who were acquited were held liable for R$50Million (or c. $15Million USD), the amount which was determined as paid as bribes. (Judge Moro’s Sentence of July 20, 2015, p. 149) 29
Roberto di Cillo Thad McBride Phones: +55 9 11 8111 9753 O: + 202 827-2959 +55 11 3045-4200 C: + 202 253-2518 rdicillo@dicillo.com.br tmcbride@bassberry.com www.dicillo.com.br www.bassberry.com
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