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How the City of São Paulo is Fighting Corruption

Author: Carlos Ayres

SaoPauloSão Paulo is the largest city in South America with a massive population of about 12 million (if the metropolitan area is considered – including neighbor cities – the population is of about 19 million). In 2011, the city’s GDP was more than R$ 477 billion (approximately US$ 216 billion). Considering the latest World Bank’s GDP ranking, if São Paulo were a country, it would be the 45th economy in the world, larger than entire nations such as Portugal, Ireland and Peru.

São Paulo was the first Brazilian state capital to issue regulations under Brazil’s new anti-bribery law, which was published on May 14, 2014 (see regulations here). The city has been closing ranks on corruption using different tools. Some of them can serve as examples of possible measures to be taken by other governments in the region and elsewhere. A previous post described how Brazil is fighting corruption. This post describes some of the main measures that São Paulo has taken to fight corruption.

Creation of specialized anti-corruption agency. In May 2013, the city of São Paulo created the Office of the Municipal Comptroller General (CGM), a specialized entity designed to enhance the city’s efforts to prevent and fight corruption at the Municipal level. To carry out the objectives of CGM, the agency has a qualified technical team specialized in anti-corruption matters, many of them coming from the Office of the Federal Comptroller General (CGU). Although CGM has limited resources (its 2013 budget was R$ 3,141,035.99, approximately US$ 1.4 million), the entity has obtained important results in its first year of existence, including the detection of a R$ 500 million (approximately US$ 226 million) fraud / corruption scheme related to ISS (municipal services tax) and issuance of construction permits as well as arrests of 11 public employees involved in corruption issues.

Use of data analytics. CGM has used data analytics on the information available to identify red flags that could lead to corrupt behavior. Data analytics has played a key role for the agency in carrying out its objectives. For example, CGM compared the list of municipal employees (a universe of approximately 160,000 people) against the city’s real estate property tax (IPTU – which is a municipal tax levied annually) database. This simple exercise revealed that more than 800 public employees were living way far beyond what their official salary could afford. In some instances, the public employees would have to work several decades without spending a single penny in order to accumulate the assets they have. The methodology used has already been shared with some states and municipalities in Brazil.

Conducting risk assessments. Assessment of risk is fundamental to developing a strong compliance program. This should be no news for companies. CGM incorporated the concept of risk assessment into public service and has developed its own risk matrix. This exercise has helped it avoid diverting attention and resources away from areas and individuals that pose the most significant risks. Factors considered, for instance, include risks presented by the function of the employee (e.g., employees involved in tax inspections or issuances of licenses and permits versus professors in public high schools); employees that respond to administrative proceedings; and, employees that are shareholders in certain companies.

Transparency. Transparency has also been used as an important tool to preventing and detecting corruption, expanding access to information and acts of the Public Administration.  Since 2004, the federal government has maintained a Transparency Portal where anyone can obtain information, among other things, about direct spending of the government with procurements or contracts. A similar Portal has been created by the city of São Paulo. From January 2014 on, all contracts signed by the city will be fully available on the Portal for download. During the first quarter of 2014, the Portal had an average of 13,950 visits per month.

Exchange of information. CGM has been exchanging information among local authorities. For example, in 2013, CGM carried out five special operations with the Police and worked closely with criminal prosecutors in the case related to ISS and construction permits. As a result, individuals were arrested, and a number of companies were implicated. Local media has reported that information obtained by the CGM has also been shared with the U.S. authorities.

Despite the significant progress made by the city of São Paulo in its fight against corruption, there is still a lot to be done and improvements to be made. The different venues described above, however, seem to indicate that the city is moving in the right direction.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2014 FCPAméricas, LLC

Carlos Henrique da Silva Ayres

Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor

Categories: Brazil, Enforcement, English, FCPA

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