“Operation Car Wash” Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown Mexico, S.C., a sociedad civil formed under the laws of the State of Durango, Mexico; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. Navigating the Expanding Investigation and Realizing Emerging Investment Opportunities Houston April 5, 2016
Transcript
“Operation Car Wash”
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA;Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer BrownMexico, S.C., a sociedad civil formed under the laws of the State of Durango, Mexico; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. MayerBrown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in theirrespective jurisdictions.
Navigating the Expanding Investigation and Realizing EmergingInvestment Opportunities
HoustonApril 5, 2016
“Operation Car Wash”:Overview of Petrobras Scheme
Source : Paulo Roberto Galvao, Federal Prosecutor Lava Jato Task Force, Federal Prosecution Service – Brazil
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“Operation Car Wash”:Overview of Petrobras Scheme
Source : Paulo Roberto Galvao, Federal Prosecutor Lava Jato Task Force, Federal Prosecution Service – Brazil
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NAVIGATING THE EXPANDINGINVESTIGATION
Session One
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Navigating the Expanding Investigation
• The latest developments: An overview and impact assessmentof recent events.
• “Car Wash” beyond Petrobras: The full investigative scope andcorresponding enforcement risk (including Eletrobras andEletronuclear).
• “Car Wash” beyond Brazil: Impacts across Latin America andthe status of cooperation and coordination between Brazil andthe global enforcement community (including the DOJ and theSEC).
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Navigating the Expanding Investigation
• The enforcement toolkit: Why compliance with the CleanCompany Act alone is not enough and what to expect next.
• Leniency agreements and plea bargaining in Brazil: What youneed to know.
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Brazilian Integrity Laws
Clean Company ActLaw 12.846, of 2013
Antitrust ActLaw 12.529, of 2011
Court of Auditors ActLaw 8.433, of 1992
Public Improbity ActLaw 8.429 ,de 1992
Conducts Corruption of civil servants andfraud in public tender orcontract.Article 5
Embezzlement or anyirregularity that results indamage to the Treasury.Unlawful or wastefulmanagement.Articles 46 and 58
Corruption or illicitenrichment, damage to theTreasury or violation of publicadministration principles.Articles 9, 10 and 11
Corporateliability
YES YES YES YES
FederalEnforcement
i. Attorney General
ii. Comptroller General
iii. Federal Accountability
i. Antitrust Agency
ii. Federal Prosecutor’sOffice
i. Court of Auditors i. Attorney General
ii. Federal Prosecutor’soffice
EnforcementAgencies iii. Federal Accountability
Court
iv. Federal Prosecutor’sOffice
v. Petrobras
Office
iii. Petrobras
office
iii. Petrobras
Penalties 1. Fines of up to 20% ofannual revenues
2. Debarment
3. Asset forfeiture
4. Suspension orinterdiction of activities;
5. Compulsory dissolution;
6. Ineligibility for subsidies(tax credits, aid,donations or loans)
1. Fines of up to 20% ofannual revenues
2. Debarment
1. Fines
2. Debarment
1. Fines
2. Debarment
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Brazilian Integrity Laws
Clean Company ActLaw 12.846, of 2013
Antitrust ActLaw 12.529, of 2011
Court of Auditors ActLaw 8.433, of 1992
Public Improbity ActLaw 8.429 ,de 1992
Damages andreparation inaddition tofines?
YES YES YES YES
LeniencyAgreements
YES, without criminal amnesty YES, with criminalamnesty andcessation of conduct
YES, through the Clean CompanyAct
YES, through settlement withfederal agencies
LiabilityStandard
Strict, joint, several andextendable to corporate group
Strict, joint, severaland extendable to
Possible by means of courtdecision
Possible
Standard extendable to corporate groupand JV partners
and extendable tocorporate group
decision
SuccessorLiability
Limited to financial penalties andcapped at the value of assetsacquired
Unlimited in case of fraudulentM&A.
Possible Possible Not expressly provided for, butpossible in relation to fines anddamages.
EconomicGroup Liability
Limited to financial penalties Joint and Several Not expressly provided for,corporate liability must beexpressly stated in the court’sdecision
Not expressly provided for
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• Art. 37. The government including all entities of the federation,Federal, State and Municipal levels shall be bound by theprinciples of legality, impartiality, morality, publicity andefficiency, as well as by the following:
– § 5º The law shall establish the statute of limitations for illegalitiesthat cause damage to the treasury, whether caused by public servants
Brazilian Constitution
that cause damage to the treasury, whether caused by public servantsor not; except for what pertains to damage claims.
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• Normative Instruction - TCU nº 74 – requires ratification offederal leniency agreements by the Court of Auditors.
Normative Instruction – Federal Court of Auditors
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• Absence of a common understanding by all enforcementagencies in regards to the Clean Company Act.
• Competition for protagonism between enforcement agencies.
• Difficulties in standardizing damage calculation, disgorgementsand forfeitures.
Challenges
and forfeitures.
• Political stalemate.
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• Who to approach first: Comptroller General and FederalProsecutor’s Office.
• What to offer: Effective collaboration and reparation.
• How address it:
1. By the Company: Leniency agreement with the Comptroller General’s
Facing the Challenges
1. By the Company: Leniency agreement with the Comptroller General’sOffice and Federal Prosecutor’s Office as provided in the CleanCompany Act.
2. By the individual criminally charged: Plea bargain provided by theLaw 12.850, of 2013.
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Commenting Camargo Correa’s leniency agreement:
“A leniency agreement worth R$ 700 million wasconsidered to be extraordinarily high. As a matter of fact,for a leniency agreement, it is very significant. But it isinsignificant in view of the potential damage to the
Ministro Benjamin Zimmler – TCU
insignificant in view of the potential damage to theTreasury that Camargo Correa, for instance, may havecaused only in the Abreu and Lima Refinery. Its coking planthad R$ 700 million in irregularities, which equals theleniency agreement fines. I am not sure if the Prosecutorsor Judge Moro himself have grasped the dimensions of theiceberg. Maybe they have only discovered its tip. That iswhy the Court must act as quickly as possible.”
RemediateEvaluate potential personnel actionsPrepare compliance program recommendations
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REALIZING EMERGINGINVESTMENT OPPORTUNITIES
Session Two
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Realizing Emerging Investment Opportunities
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Realizing Emerging Investment Opportunities
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Realizing Emerging Investment Opportunities
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• Sizing potential liabilities: How are damages, disgorgementsand forfeitures being calculated?
• Approaching the Brazilian government: Who can you talk toand what comfort can you get about your planned investment?
• Not buying a problem: Practical advice on conducting
Realizing Emerging Investment Opportunities
• Not buying a problem: Practical advice on conductingsuccessful due diligence in the current environment.
• Living with your results: Post-acquisition complianceimplementation and integration.
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Enforcement Statistics To Date
• 1016 judicial proceedings
• 396 search warrants
• 99 coercive hearing warrants
• 119 arrest warrants,113 individuals arrested
• 36 formal charges against 179people for the following crimes:corruption, money laundering,organized crime, financial crimes,and drug trafficking
• 5 civil lawsuits against 37individuals and companies
• 232 individuals underinvestigation
• 16 companies involved
• 86 international assistancedemands
• 40 plea/cooperation agreements
individuals and companiesdemanding devolution of $1.1billion
• Crimes charged to date involvebribery of approximately $1.6billion, $717 million of which hasbeen recovered or guaranteed
• $614 million in assets frozen
• 93 convicted defendants
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Factual Developments
• Petrobras is alleged to have paid politicians for contracts, usingmoney skimmed from company profits.
– Kickbacks may total as much as $1.6 million.
• The country’s most senior politicians are implicated, includingrecently re-elected President Dilma Rousseff, who previouslyrecently re-elected President Dilma Rousseff, who previouslyheaded the Petrobras Board of Directors.
– While there is no evidence that Rousseff personally benefited fromthe illegal payments, the majority of alleged events occurred whileshe held this position at Petrobras.
• At the G20 summit in Australia, President Dilma Rousseffstated that the “Operation Carwash” scandal “may change thecountry forever”.
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Timeline of Events
July 2013:
“Operation CarWash” is secretly
launched byfederal police,
focusing onillegal money
brokers.
November 14, 2015:Brazil’s Federal Police
execute 45 dawn raids andarrest several seniorexecutives of majorBrazilian companies,
including Petrobras. Duringthe raids, police seize
thousands of documents tosupport the criminal
investigation.
December 10, 2014:Attorney General
recommends removeof Petrobras’smanagement.
March 2014:
“Operation Car Wash” goespublic. Former Petrobras
director Paulo Roberto Costaand black-market currencydealer Alberto Youssef are
arrested for theirinvolvement. Both giveconfessions implicatingnumerous others in the
scandal.
December 2014:Several indictments
filed, and defendantsinclude high-rankingexecutives of major
Brazilianconstructioncompanies.
December 30, 2014:23 companies
related to“Operation Car
Wash” aretemporarily banned
from contractingwith Petrobras and
cannot participate inPetrobras’s bids.
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January 14, 2015:Brazil arrests theformer Directorof Petrobras’sInternational
Division.
February 5, 2015:Brazil issues 62 warrantsto arrest and questionsuspects, freeze assets,and seize corporate and
personal documents.
February 27, 2015:Two construction
company executivesenter into plea
agreements, becomingthe 14th and 15th
individuals to admitguilt.
Timeline of Events
February 4, 2015:Petrobras CEO
Graca Foster andfive other officers
resign.
February 5, 2015:Party Treasurer
detained forquestioning afterformer Petrobras
executive accuses himof receiving illegal
donations.
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March 2015:New Congressional Investigations
Committee issues over 450subpoenas for documents and
testimony.
April 22, 2015:Former Petrobras Director ofRefining and Supply Costa is
convicted of money launderingand racketing and is sentenced
to one year of house arrest.
Timeline of Events
March 3, 2015:Brazil’s Attorney General files
investigation requests before theSupreme Court against sitting
politicians, which includesindictments of the Presidents ofCongress (Senate) and the House
of Representatives.
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Recent Headlines
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Recent Headlines
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Recent Headlines
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PANELIST BIOS
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Luís Inácio Adams
• Luís Inácio Adams is the former Attorney General of Brazil.
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Alexandre R. Chequer
• Alexandre Chequer is a partner of Mayer Brown and of Tauil & Chequer Advogados inassociation with Mayer Brown. He is the Co-lead of the Energy group at Mayer Brown andglobal lead of the Oil & Gas group. He focuses on mergers and acquisitions, joint ventures,projects and infrastructure development. The oil and gas development projects include LNG,refinery, petrochemical, FPSO and platform-based offshore developments, and integratedfield development, pipeline, and processing projects), mergers and acquisition (includingauction and negotiated sales and property exchanges), and energy-based financings(including project financings, reserve-based loans, and production payments).
• Alexandre has experience with the structuring, documentation, and negotiation of oil andgas transactions that range from host government arrangements, farm-ins, and acquisitionsto shareholder agreements, operating agreements, and unitizations to EPC, productionto shareholder agreements, operating agreements, and unitizations to EPC, productionhandling, transportation, and sales contracts and financing arrangements.
• He has assisted clients with political and regulatory risk analyses, investment managementand the structuring of financing arrangements in the energy industry.
• Reflecting his pre-eminence in project development and business transactions, he has beenselected for "Leaders in their Field" recognition in the areas of corporate/M&A, energy andnatural resources and oil and gas law by Chambers Latin America (2007 through 2015). Healso has received “Leaders in their Field” designations (general business law and overseasspecialists) from Chambers Global (2007 trough 2015). In addition, Alexandre has beenlisted in The International Who's Who of Oil and Gas Lawyers (2007 through 2014) and Legal500 in 2013 and 2014.
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Laurence Urgenson
• Larry Urgenson is a co-leader of the firms' Global Anti-Corruption & FCPA practice. Larry iswidely recognized as one of the preeminent FCPA authorities in the United States. He hasrepresented corporate and individual clients in FCPA and anti-corruption matters worldwidefor nearly four decades. As noted in Chambers, Larry "is highly esteemed for his FCPApractice, which includes advising on statutory compliance and corporate representation ingovernment investigations" (USA 2015), is "known for his experience in high-stakesinvestigations" (USA 2013) and "offers incredible knowledge in the FCPA area . . . he hasgreat judgment" (USA 2012). Clients praise Larry and state that, “There simply isn't a moreclient-sensitive strategist out there.” (Chambers Global 2016)
• Recently, Larry was named Benchmark Litigation Star 2014, 2015. He was also recognizednationally as one of 8 FCPA Masters at the first annual Main Justice Best FCPA Lawyers ClientService Awards in 2013. Additionally, he is a sought-after writer and speaker on white collarService Awards in 2013. Additionally, he is a sought-after writer and speaker on white collarmatters and is currently the Chairman of the Board of Editors of the Business CrimesBulletin.
• Prior to joining private practice, Larry held key leadership positions at the US Department ofJustice (DOJ). As the DOJ’s Acting Deputy Assistant Attorney General, he primarilysupervised the Fraud Section, General Litigation and Legal Advice Section, and Office ofPolicy and Management Analysis. Additionally, he testified before various congressionalcommittees regarding the Department's white collar crime initiatives. He also served as theDOJ's Chief of the Fraud Section for the Criminal Division, where he advised US Attorneys onwhite collar crime issues, supervised the prosecution of bank, securities, and defenseprocurement frauds, and oversaw the FCPA Unit and the Defense Procurement Fraud Unit.Earlier in his career, Larry served as a Chief Assistant US Attorney for the Eastern District ofNew York. Larry received the Attorney General's Award for Distinguished Service and theEdmund J. Randolph award for Outstanding Service.
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Bernardo de Queiroz Weaver
• Bernardo Weaver is a partner in the Anti-Corruption & Compliance group in the Litigation &Dispute Resolution practice of Tauil & Chequer Advogados in the São Paulo office. Bernardohas extensive experience with complex cases of fraud and corruption in over 20 differentjurisdictions from his previous position in Washington D.C. He has advised and representedclients in a broad range of matters related to anti-corruption and compliance, including pre-acquisition due diligence and risk assessment, development and implementation ofcompliance programs as well as the litigation of administrative and criminal matters.
• Alongside DOJ and SEC officials, Bernardo trained the Brazilian Federal Prosecutor’s andComptroller General’s Offices for the enforcement of the Clean Company Act and relatedprosecutions. At Harvard he worked for former US Deputy Attorney General Philip B.Heymann on corruption and law enforcement issues in Latin America. He has lectured onHeymann on corruption and law enforcement issues in Latin America. He has lectured onanti-corruption laws, comparative criminal procedure and related topics at Harvard,American University and Fundação Getúlio Vargas.
