FCPAméricas Blog
The Lack of Legal Certainty in BCCA Leniency Agreements
11.28.2015
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.
The Brazilian Clean Company Act (“BCCA”) came into effect on January 29, 2014 establishing the civil and administrative strict liability for legal entities for acts against the public administration, either foreign or Brazilian. Among the applicable penalties are monetary fines ranging from 0,1 to 20% of the legal entity’s gross revenues of the last fiscal year, the publication of the sentence and the prohibition to receive public incentives, subsidies, donations or loans for 1 to 5 years. The BCCA is also innovative in that it establishes that a legal entity that breaches its provisions may enter into a leniency agreement with the authority competent to initiate administrative liability proceedings related to the act. Companies are now finding, however, that leniency agreements are not as attractive as one might think.
Leniency Agreement Overview
Among the possible benefits to the legal entity that enters into a leniency agreement, the following are worth highlighting:
- Reduction of the monetary fine up to 2/3
- Exemption of debarment or suspension in contracting with the government
- Exemption of prohibition from receiving government incentives, subsidies, loans, etc.
- Exemption of the publication of the conviction decision in the newspapers
To qualify for a leniency agreement, a legal entity must meet certain requirements, including:
- Be the first to initiate cooperation with the investigation where relevant
- Fully cease the illegal activity when the leniency agreement is proposed
- Admit the participation in the violation and identify all others involved
- Cooperate fully and permanently with the investigation and administrative proceedings
- Provide information, documents and other elements that corroborate the violation
- Adopt and implement or improve a Compliance Program
Lack of Legal Certainty
Recently, the Brazilian press has reported (see here and here) that some legal entities associated with the Car Wash Probe are negotiating leniency agreements with the General Comptroller’s Office (“CGU”), the body in the executive branch with powers to sign such agreements on the Federal level. However, despite the clear interest of these legal entities in reaching a deal to resolve the Car Wash Probe, there have not been any leniency agreements concluded in the probe so far. In fact, there have not been any leniency agreements executed with the CGU at all since the adoption of the BCCA.
One explanation for the absence of any BCCA leniency agreement so far is the lack of legal certainty in such agreements. Specifically, the execution of a leniency agreement with the CGU does not prevent prosecutors from gaining access to the content of the settlement and then using it for criminal proceedings against the individuals involved in the practice, or even for civil proceedings against the company. This appears to have become a real problem for companies interested in self-disclosure and cooperation.
Mr. Deltan Dallagnol, one of the leading prosecutors in Brazil’s Petrobras investigation, confirmed the existence of this challenge during a recent interview with Global Investigation Review, in which he stated the following: “Besides that, even if they are lucky and reach a good agreement, all the evidence they give to the CGU – internal information, emails, papers regarding the crime – we can get that information, that evidence and we can use it for criminal purposes against executives and for civil purposes against the company. So they will have no guarantee that they will be protected in both these areas.”
Is there a solution for companies seeking leniency agreements under the BCCA? The only certain path might be to involve the CGU and prosecutors in the negotiations from the beginning and to only sign agreements after ensuring a settlement has been reached with both authorities. What might prevent this from happening? It appears that the standards that prosecutors are applying for offering leniency agreements are higher than those of the CGU. For example, information that the CGU might consider to be new and deserving of leniency might not be considered as such by a prosecutor. Mr. Dallagnol said: “Our requirements for company settlements are stronger than the CGU’s, so it is likely that if you settle with us you’ll also settle with the CGU too, but not the other way round.” In this way, the approach of prosecutors to leniency appears to be much more aggressive than that of CGU, greatly complicating the settlement equation for companies who wish to cooperate.
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.
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