[1]This guest post is from Eloy Rizzo, a senior attorney with the law firm KLA – Koury Lopes Advogados in São Paulo, Brazil. Mr. Rizzo focuses on anti-corruption and compliance issues, as well as on complex litigation. Mr. Rizzo currently interns at Miller & Chevalier’s anticorruption team in Washington, DC.
On March 18, 2015, President Rousseff enacted Decree 8.420/15 [2], approving the Federal Guidelines (“the Guidelines”) for the Brazilian Clean Company Act (“BCCA”). Although the BCCA has been in force since early 2014, the recently enacted Guidelines establish important standards for evaluating compliance programs and assessing fines under the law. As previously reported in this blog [3], the Guidelines also stipulate general parameters for the application of administrative sanctions under the BCCA and provide rules for leniency agreements, among other things.
The BCCA sets forth that violations will subject the infringing company to fines ranging between 0.1 to 20% of its gross revenues the year before the commencement of the administrative procedure against the company. The Guidelines establish a number of mitigating and aggravating factors that can determine the fine within this range. Adoption of an effective anti-corruption compliance program is one such mitigating factor. According to the Guidelines, a company that has violated the BCCA but has effectively applied a compliance program may have its fine reduced between 1 to 4%.
The parameters Brazilian Authorities use to evaluate the effectiveness of a compliance program are very similar to the ones the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) establish in the A Resource Guide to the U.S. Foreign Corrupt Practices Act [4] (“Resource Guide”), such as: the implementation of codes of ethics and conduct, commitment from senior management, training of employees and third parties, monitoring and periodic audits, creation of a hotline for guidance and reporting, effective procedures ensuring unlawful activity will be detected and investigated, disciplinary measures in cases of wrongdoing, due diligence on third parties, among others.
However, the Guidelines require additional compliance program elements that companies must implement to secure fine reduction for a BCCA violation.
Account records which accurately and fully reflect the transactions of the legal person.
While only “issuers” (i.e., companies registered on U.S. exchanges) are subject to the accounting provisions of the FCPA, the BCCA and the Guidelines do not distinguish between public from private companies. Every company subject to the BCCA, regardless of size or ownership, must take steps to ensure its accounting records accurately and fully reflect transactions.
Specific procedures to prevent fraud and illicit acts within the context of public procurement processes, in the execution of administrative contracts and in any interactions with the public sector.
While the FCPA focuses on bribery of non-U.S. officials, the BCCA is broader. In addition to prohibiting bribing of foreign officials, the BCCA also bars bribery of national public officials and fraud and other anticompetitive practices in public procurements and contracts with the government.
Given these prohibitions, the Guidelines set forth that compliance programs must have specific procedures to prevent BCCA violations in connection with direct or indirect interactions with national officials, public procurement, and contracts with the government. Thus, a company seeking to implement an effective compliance program pursuant to the Guidelines should address risks associated with collusion, bid rigging and other similar anticompetitive practices related to public procurement and contracts with the government in general.
Transparency of the legal person as to donations made to political candidates and parties
Although donations from companies to political candidates and parties are a legal practice in Brazil (provided that they do not exceed 2% the company’s gross revenues the year before the elections), the Guidelines identify donations as a risk area to be covered by an effective compliance program.
Resolution # 23.406/2014 of the Brazilian Superior Electoral Court of Justice already demanded transparency of companies as to their electoral donations. Nonetheless, the Guidelines strengthen such requirements by stating that effective compliance programs must provide guidance regarding donations to ensure transparency and consistency with applicable law.
Although the Guidelines are new and have yet to be applied, now is the time for companies to evaluate their existing compliance programs to ensure they would be considered effective by Brazilian authorities.
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