Brazil’s “Operation Car Wash”— What to Expect Next Kelly Kramer Salim Jorge Saud Neto Partner Partner + 1 202 263 3007 +55 21 2127 4210 kkramer@mayerbrown.com sjsaud@mayerbrown.com Arturo Vecchi Associate +55 21 2127 4254 avecchi@mayerbrown.com March 16, 2016
Speakers Kelly Kramer Kelly Kramer Salim Jorge Saud Neto Salim Jorge Saud Neto Arturo Vecchi Arturo Vecchi Washington, DC Rio de Janeiro - TC Rio de Janeiro - TC + 1 202 263 3007 +55 21 2127 4210 +55 21 2127 4254 kkramer@mayerbrown.com sjsaud@mayerbrown.com avecchi@mayerbrown.com 2
Operation Car Wash - Scheme 3
2014 Elections Winning Ticket Vice-President Temer President Rousseff PMDB PT 4
Operation Car Wash - 2014 March 17 March 20 April 11 June 11 July 1 August 22 October November 14 December 2nd Phase 4th Phase – 6th Phase – 7th Phase – – “Bidone” “Casablanca” “Bidone 3” “Doomsday” Alberto Alberto Costa Alberto Costa Costa arrested arrested Costa plea Costa plea arrested again bargain 1st Phase 3rd Phase 5th Phase Elections Congressional “Dolce Vitta” “Bidone 2” Committee Report Dilma Rousseff re-elected 5
Speaker of the House Eduardo Cunha PMDB 6
TCU Operation Car Wash - 2015 rejects Rousseff’s 20th Senator 16th Petrobras New accounting Phase Delcídio Phase Financial Congressional for 2014 Amaral and 19th Statements Investigation BTG Phase Corruption BRL6.2 Commitee Opinion pactual “Nessum at Nuclear Billion losses (CPI) in favor of Dorma” Banker 22nd Power due to Impeachment Cunha’s André Phase Company corruption by House deposition Esteves Catiline 18th legal at CPI 14th Phase 9th Phase Phase arrested . 11th department Marcelo “My Way” Focus on Pixuleco II Phase Odebrecht Eduardo arrested Cunha Jan Feb Mar Mar Apr May Dec July Aug Sep Sep Oct Nov Nov 14 6 16 15 21 2 03 1 30 15 2 03 24 Sep Oct Oct Nov Dec Feb Feb Mar Apr April Jun Aug Nov Jul 5 12 10 22 19 13 21 7 16 25 15 16 15th Cunha’s Phase 12th Phase Cunha’s Ethics Swiss 17th phase Committee Vaccari Accounts “Pixuleco” 8th Phase Proceeding Investigations (PT unveiled “Nestor at Supreme treasurer) 21st José Dirceu Cervero” Court Updated arrested Phase arrested Impeachment Cunha defeats 13th Request PT candidate Impeachment Phase Impeachment submitted and is Request Request 10th Phase Speaker Filed Admitted by of the “What Kind of Cunha Country is this? House 7
Impeachment Proceeding and Supreme Court Decisions • Impeachment proceedings started at the House of Representatives with the government suffering a loss of 272 v 199 at a procedural vote – For the impeachment vote, government needs 171 Votes to avoid the commencement of the proceedings • Proceeding is suspended by Supreme Court • STF decision has been issued and is pending appeal • Appeal is expected to be voted either today or tomorrow 8
History • Delcidio Amaral under house arrest – Feb 19, 2016 – Rumors that he entered into a plea bargain had not been confirmed at the time • Extracts of his deposition have surfaced in March and implicate President Roussef, Former President Lula and Minister of Justice, Eduardo Cardoso – Official reason for release was that he no longer was a threat to the investigations – Senator Delcidio is currently – Senator Delcidio is currently facing an ethics proceeding at the Senate and can be expelled – Senator Delcidio decided not to return to the Senate and is on medical leave 9
History • Delcidio plea bargain confirmed – Mar 15, 2016 – Several politicians implicated on obstruction of justice: • President Dilma Rousseff • Former President Lula • Minister Mercadante • Former Minister Antonio Palocci – Several politicians implicated on Corruption: • Former presidential candidate and Senator Aecio Neves • Vice President Temer – Links to Mensalão – the political scandal during the Lula administration 10
History • 23 rd phase – “Acarajé” – Feb 22, 2016 – Focused on João Santana, PT’s marketing advisor, and his wife – Zwi Skornicki, an alleged middleman, and Odebrecht were also targets of this phase – the Federal Police investigates the payment of USD 7 million by them to João Santana – 51 judicial warrants enforced in Rio de Janeiro, São Paulo e Bahia: • 38 for search and seizures • 2 for preventive arrest • 6 for temporary arrest • 5 detentions for questioning 11
History • 24 th phase – “Alethea” – Mar 03, 2016 – Focused on the investigation on the relation between the former president Luis Inácio “Lula” da Silva and companies involved in the Petrobras corruption scheme – donations and payments for lectures – 44 judicial warrants enforced: • 33 for search and seizure • 11 for detentions for questioning, including the former president Luiz Inácio • 11 for detentions for questioning, including the former president Luiz Inácio “Lula” da Silva 12
History • Reactions to Alethea – Criticism by attorneys and judges of the detention of former President Lula, as he had not been previously summoned to be deposed • Judges are expected to be more cautious in new detentions – Significant support of the detention by general public opinion – PT President and former President Lula urge supporters to go to the streets streets – President Roussef publicly supports Lula, criticizing the decision of Judge Moro – President Roussef invites Lula to become a minister – this would grant him a privilege of venue and he could only be prosecuted by the Supreme Court 13
History • Reactions to Alethea – Race to arrest Lula • São Paulo public prosecutors request the indictment of President Lula and his family for hiding assets • Preventative arrest of Lula is requested in connection with application for indictment • São Paulo judge declined jurisdiction • São Paulo judge declined jurisdiction – PMDB (party of vice-president) prohibits its members to accept appointments to the Federal Government and start procedures to leave government in 30 days – Support for impeachment grows and President vows not to resign – Markets react favorably to a potential end of Roussef Government – Massive demonstrations against former President Lula and President Roussef last Sunday 14
History • Demonstrations 15
History • Demonstrations 16
History • Demonstrations 17
History • Demonstrations 18
Current Status in Brazil • Investigations and criminal proceedings being conducted at the Supreme Federal Court against sitting members of Congress and Ministers of State • Investigations and criminal proceedings being conducted at the Federal Court in Curitiba against other individuals • Proceedings against companies for cartel violations at CADE – Proceedings against companies for cartel violations at CADE – Brazilian Antitrust Authority • Proceedings against companies for corruption before the CGU – 29 proceedings • Improbity lawsuits against individuals and companies 19
What to Expect Next in Brazil • The Federal Police and the Public Prosecutor’s Office are still questioning several individuals and it is not possible to be certain which executed or not a plea bargain and what was said in the full content of the depositions • Lawsuits have already been filed against high-level executives of EPC companies, politicians and operators, and some have already been convicted convicted • Investigations are now very close to politicians – any new fact may have significant political impact • Impeachment proceeding is likely going to affect investigations • A number of companies involved have been considering and negotiating leniency agreements 20
Operation Car Wash - Current Status in the US • US Department of Justice and Securities and Exchange Commission • Petrobras has publicly disclosed that it is under investigation by the DOJ and the SEC, as have a variety of companies that did business with Petrobras • The DOJ is also providing formal and informal assistance to Brazil, such as tracing the proceeds of suspected bribery Patrick Stokes, the Chief of the DOJ’s FCPA Unit, reportedly personally visited • Brazil to meet with prosecutors Brazil to meet with prosecutors • US Private Securities Claims • Petrobras has been sued in class actions and opt-outs for securities fraud • Judge Rakoff recently certified the class actions and authorized discovery, including discovery in Brazil via Letters Rogatory 21
Operation Car Wash – Status Globally • Global operation: • Reportedly, around $30 million has been frozen in accounts held by Petrobras executives and Petrobras’ counterparties’ executives • US and Swiss authorities playing leading role on asset-tracing efforts • Expanding operation: • Argentina and other Latin American countries have reportedly • Argentina and other Latin American countries have reportedly launched parallel investigations of Odebrecht and Petrobras 22
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