Carina Quito and Alice Christina Matsuo analyse corruption; crimes against the Public Administration, money laundering and extraterritorial enforcement in Brazil
1. What trends, in terms of activity or focus, have you seen in the prosecution of business crimes in your jurisdiction in the last 12 months?
For the last 12 months, the prosecution of business crimes has significantly focused on corruption cases, frauds in competitive biddings, crimes against the Public Administration and other criminal infractions regarding the relationship between corporations and the Public Administration of Brazil, as well as on money laundering resulting from such illicit conducts.
Since 2014, law enforcement has been conducting the so-called Operation Car Wash, which is the work product of a taskforce involving the Federal Police, the Federal Prosecution´s Office and the 13th Federal Criminal Court of Curitiba, Paraná State.
It is the biggest case ever carried out in the country to investigate corruption crimes committed by criminal organisations integrated by several private corporations and public agents. The case started in 2014 and initially focused on allegations of money laundering perpetrated by private companies. As the investigation developed, its scope was expanded to investigate suspicions of corruption at the state-controlled oil company Petrobras, whose executives accepted bribes in return for awarding contracts to construction firms at inflated prices.
Even though the investigations are still going on, Operation Car Wash has already led to the filing of dozens of criminal lawsuits against public agents and politicians who supposedly benefited from the illegal scheme, as well as against legal representatives and executives of several corporations which contracted with the Public Administration.
It is worth mentioning that Operation Car Wash also motivated a campaign launched by the Brazilian Federal Prosecution’s Office in March 2015 comprising 10 suggested measures to fight corruption, such as the creation of new criminal infractions, the increase of imprisonment penalties, the reduction of appealing possibilities and the confiscation of illicit assets prior to criminal conviction.
2. Are enforcement agencies particularly focused on any specific industries or crimes?
Enforcement agencies are particularly focused on criminal infractions regarding the relationship between private and public sectors. For said reason, construction industries and large corporations that celebrate large-value contracts with public agencies are frequently targeted by law enforcement nowadays.
3. Are enforcement agencies more or less focused on pursuing cases against corporations or individuals?
Considering that corporations contract with public agencies, they have a higher potential for getting involved in investigations of crimes against the Public Administration. Moreover, since the media attention has been focused on cases involving large corporations as a consequence of Operation Car Wash, enforcement agencies are likely to remain focused on pursuing crimes which involve them.
It is important to clarify however, that in Brazil, except for environmental crimes (article 225, paragraph 3rd, of the Brazilian Constitution), entities cannot be held liable for the commitment of criminal infractions. As a rule, criminal liability lies on the individuals who integrate corporations, to the extent of their culpability. Thus, to enable the prosecution of business crimes committed in the context of companies or legal entities, enforcement agencies must investigate the individuals in those entities who personally got involved with the perpetration of the criminal offences.
4. Does the legal framework concerning the prosecution of business crimes allow for extraterritorial enforcement? Are such matters being pursued?
According to article 5 and 6 of the Criminal Code, the Brazilian Law is applicable to the crimes committed inside the Brazilian territory and also to crimes committed abroad that produced effects inside the Brazilian territory.
Article 7 of the Criminal Code, on the other hand, sets forth the following, that, even if committed abroad, are subject to the Brazilian Criminal Law: (i) crimes against the life of freedom of the President of Brazil; (ii) crimes against the property or the public faith of public entities; (iii) crimes against public administration, by whom is at service; (iv) genocide, when the agent is Brazilian or has domicile in Brazil; and if met a few legal conditions; also (v) crimes that by means of treaty or convention Brazil is obliged to prosecute; (vi) crimes committed by Brazilian citizens; and (vii) crimes committed inside Brazilian aircrafts or vessels, when in foreign territory and not subject to foreign jurisdiction.
Due to the countries’ sovereignty and to the territoriality principle, judicial decisions delivered in Brazil do not have effectiveness outside its territory, unless when submitted to the proper enforcement proceedings.
Although the Brazilian Justice has jurisdiction to prosecute crimes to authorise the collection of the responsive evidence about facts that occurred overseas, the enforcement of the decisions issued by the Brazilian Justice for that purpose will be ruled by the Law of the country where the facts occurred, as set forth by article 13 of Brazilian Law-Decree 4.657/1942.
The proceedings to the extraterritorial enforcement of Brazilian judicial decisions are the letter rogatory or, when possible, legal cooperation. Brazil has celebrated legal cooperation treaties with Mercosul and several other countries, such as the United States of America, Switzerland, Spain, Italy and France. Most of the extraterritorial enforcement requests, however, are based on the reciprocity principle.
Pursuant to the reports of the Brazilian Ministry of Justice (available at: http://www.justica.gov.br/sua-protecao/cooperacao-internacional/estatisticas), in the past 12 months, 1,488 letters rogatory and legal cooperation requests were issued by or received in Brazil in connection with criminal matters, extraditions, recovery of assets requests and transference of prisoners.
5. What judicial or legislative developments have impacted the prosecution of business crimes in your jurisdiction in the last 12 months? Are there any significant proposals for reform of the legal framework that governs business crimes in your jurisdiction?
The use of the institute named “Colaboração Premiada” (plea bargaining - Although commonly translated as plea bargaining, the “colaboração premiada” differs in its essence from the plea barganing, which is why we prefer to adopt here the Portuguese name of the institute, as the use of plea bargaining could be misleading) has significantly increased in the past 12 months. Although it is not a new institute (it was initially provided for by section 8 of Federal Law 8,072/90, being also treated by Federal Laws 9,080/95; 9.034/95; 9,269/96; 9,613/98; 9,807/99; 11,343/2006, 12,529/2011 and 12,683/2012), it was only disciplined thoroughly by Federal Law 12,850/2013.
Its use has become more frequent with the development of Operation Car Wash, as many of the individuals being accused entered into agreements with the Federal Police and the Federal Prosecution´s Office to cooperate with the investigations by whistleblowing in return for reward in what concerns the prosecution of the crimes they would be charged with, or the application of the penalties for those crimes.
“Colaboração Premiada” corresponds to an agreement between the individual under investigation, on one hand, and the police authorities or public prosecutors, on the other hand, aiming at the cooperation of the first in regards to: (i) the gathering of evidence of the participation of other individuals in the crime or in the criminal organisation, as well as of the hierarchical structure and task division of the criminal organisation; (ii) the prevention of future criminal infractions resulting from the activity of the criminal organisation; (iii) the recovery (total or partial) of the product or profit of the crimes committed by means of the criminal organisation; and (iv) the location of the victim, preserved his/her physical integrity.
To reward the collaboration, depending on its relevance to the outcome of the case, the police authorities or the public prosecutors may require court (i) to grant judicial forgiveness to the collaborator (exemption of penalty), (ii) to reduce up to 2/3 the penalty which would be applied to the collaborator in case of criminal conviction, (iii) to substitute the imprisonment penalty by the restriction of the collaborator´s rights or (iv) to authorise the progression of regime in case the penalty has already been applied (when the collaboration occurs following the sentence).
In case the collaborator is not the leader of the criminal organisation and has been the first to volunteer his/her contribution, the public prosecutor may not press charges against him/her and therefore dismiss the case in connection with the collaborator.
In addition to the increased use of the “Colaboração Premiada”, as referred to in the answer to question 1, in 2015, the Federal Prosecution´s Office launched a campaign which encompasses 10 suggested measures to reduce corruption in Brazil.
Such suggested measures have been converted into proposals to change the current framework for the prosecution of corruption crimes and other related criminal offences, in order to increase the effectiveness of the state response to those crimes. The proposed changes include the creation of new criminal infractions, an increase in imprisonment penalties, the reduction of appeal possibilities and the confiscation of illicit assets prior to criminal conviction.
6. How common is it for enforcement agencies in your jurisdiction to exchange information and cooperate internationally with other agencies? What are the consequences of cross-border cooperation on prosecutions of entities and individuals in your jurisdiction?
The exchange of information and the international cooperation of Brazilian agencies with foreign ones are frequent. Pursuant to the answer for question 4, in the past 12 months 1,488 letters rogatory and legal cooperation requests were issued by or received in Brazil.
Cross-border cooperation is more frequently related to the gathering of evidence to instruct ongoing criminal investigations and lawsuits, as well as to the recovery of assets which correspond to the product or profit of the crime.
Although international cooperation does not implicate special consequences to the prosecution of entities or individuals in Brazil from a procedural perspective, it exposes individuals to a higher risk of being criminally sued or convicted, due to the effectiveness of such cooperation as to the production of evidence of both domestic and transnational crimes.
7. What unique challenges do entities or individuals face when enforcement agencies in your jurisdiction initiate an investigation?
Entities and individuals under investigation in Brazil will be challenged by the abusive use of precautionary measures which impose great level of violation to fundamental rights.
According to the system created by the Brazilian Federal Constitution, violations to fundamental rights must be exceptional, depending on prior and duly grounded judicial decisions which recognise the insuperable need of such violations to elucidate crimes.
In spite of the constitutional provisions on this matter, during the past years, the use of measures such as search and seizure of documents, breach of bank and tax secrecy, breach of telephone and electronic communications secrecy and temporary arrest has increased tremendously under the argument that they guarantee the effectiveness of the prosecution.
At times, such measures are granted by the Judiciary Power independently from any prior attempt by law enforcement of using the ordinary means of investigation.
8. Do enforcement agencies in your jurisdiction provide incentives for individuals or entities to self-report a business crime or otherwise provide assistance to the government? If so, what factors should individuals or entities consider when assessing whether to self-report a business crime or cooperate with a government investigation?
Yes. As explained in answer to question 5, non-prosecution or reduction of the penalties which would be imposed in case of conviction represent incentive for individuals being investigated or prosecuted to cooperate with law enforcement authorities by self-reporting and whistleblowing (“Colaboração Premiada”) in the context of crimes committed by criminal organisations.
Likewise, sections 86 and 87 of Federal Law 12,529/11 provide for leniency agreements, which apply to competition crimes, especially to the crime of cartel.
The leniency agreement is entered into with the General-Superintendence of the Administrative Council for Economic Defence (CADE) aimed primarily at preventing the commencement of any administrative proceeding or reducing the administrative penalties which would be imposed to the companies and its executives and employees in case of conviction.
The celebration of the agreement depends on effective cooperation leading to the identification of other entities and individuals involved in the wrongdoings, and the reunion of documents and other evidence capable of proving the infractions.
Pursuant to section 87 of Federal Law 12,529/11, the leniency agreement produces criminal consequences by preventing public prosecutors from pressing charges against the individuals who entered into such agreements, provided that both entities and the individuals have ceased the anticompetitive conducts.
Law 12,683/2012 also provides, in connection with the prosecution of money laundering crimes, that the applicable penalties may be reduced from 1/3 to 2/3, or may not even be imposed, at the judges´ discretion, in case the perpetrator of the crime decides to cooperate with the investigations by self-reporting and whistleblowing or by providing information which enable the localization of the assets that are the product or the profit of the crime.
Individuals and corporations ought to consider that the granting of the abovementioned incentives will depend not only on self-reporting, but also, and more importantly, on the effectiveness of the collaboration with regards to the production of evidence to identify the other perpetrators of the crime.
Having that in mind, entities and its executives and employees should always proceed to a very careful and complete evaluation about the level of evidence that they would be able to provide law enforcement authorities with prior to self-reporting any offence.
9. Do enforcement agencies in your jurisdiction use non-prosecution agreements ("NPA") or deferred prosecution agreements ("DPA")? If so, how do such agreements work in practice and what can entities or individuals do to reach an NPA or a DPA with enforcement agencies? If not, do you believe it is likely that such agreements will become part of the legal framework in the next five years.
Yes, as explained in answer to questions 5 and 8.
In addition to that, non-prosecution and deferred prosecution agreements are normally used during the prosecution of lesser offences. According to the provisions of Federal Law 9,099/95, non-prosecution agreements apply to crimes punished with up to one year of imprisonment. Deferred prosecution agreements, on the other hand, apply to crimes which receive minimum penalty of one year of imprisonment.
Non-prosecution agreements take place upon the conclusion of the corresponding criminal investigations and implicate the extinguishment of the state´s right to prosecute in reward for the acceptance, by the perpetrator of the offence, of an alternative penalty.
Deferred prosecution agreements are celebrated upon the filing of the indictment and before its acceptance by court. It results in the acceptance of the charges and suspension of the criminal lawsuit from two to four years. During such time, the accused will comply with a list of conditions: monthly attendance at court; obligation to obtain authorisation from court to leave his/her domicile; prohibition of going to/being at certain places; and obligation to repair damages.
Upon conclusion of the suspension period, in case all obligations are complied with, the state´s right to prosecute will be also extinguished.
Pursuant to the provisions of Law 9,099/95, non-prosecution and deferred prosecution agreements must be proposed by public prosecutors whenever the criteria provided for by Law is met (inexistence of prior conviction; inexistence of prior agreement in five years; sufficiency of the alternative penalty/suspension period to retribute and prevent new infractions).