Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pled guilty and will pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.
Odebrecht was represented by William Burk, Richard Smith and Eric Lyttle of Quinn Emanuel in Washington, D.C.
Braskem was represented by Joan Meyer and John Rowley of Baker & McKenzie and John Darden and Robert Luskin of Paul Hastings in Washington D.C.
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit – a ‘Department of Bribery,’ so to speak – that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Deputy Assistant Attorney General Sung-Hee Suh. “Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that. I hope that today’s action will serve as a model for future efforts.”
Odebrecht pled guilty to a one count criminal information charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
The Justice Department said that Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties.
Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.
Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent.
The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements.
Sentencing has been scheduled for April 17, 2017.
Braskem separately pled guilty to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.
Braskem will pay a total criminal penalty of $632 million.
Sentencing has not yet been scheduled.
Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.
Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits.
Braskem will pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent.
The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company.
The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem.
Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct.
Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years.
With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.
Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001.
During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries.
The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts.
Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties.
By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the “Division of Structured Operations,” which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities.
Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments.
After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions.
To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords.
The Division of Structured Operations managed the “shadow” budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget.
These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem.
The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities.
The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations.
Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme.
For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct. In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States. In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.
Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct.
Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system.
Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil.
In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil. This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.
The Department of Justice said it reached these resolutions with Odebrecht and Braskem based on a number of factors, including – the failure to voluntarily disclose the conduct that triggered the investigation, the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials, the lack of an effective compliance and ethics program at the time of the conduct, and credit for each company’s respective cooperation.
The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.
The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.