Preparing for Brazil's New Anti-Corruption Law: What In-House Counsel Should Know

by Pillsbury Winthrop Shaw Pittman LLP
Contact

Earlier this year, the Brazilian government approved a sweeping anti-corruption law known as the Brazilian Clean Companies Act ("BCCA" or "Act"), which is set to take effect on January 29, 2014. The new law provides for a wide range of administrative and legal penalties for violators, and is as broad as—if not broader than— the U.S. Foreign Corrupt Practices Act ("FCPA"). As Brazil’s economy continues to surge, and the Brazilian government continues to promote a vigorous anti-corruption agenda, companies that do business in Brazil must ensure that their policies and procedures are satisfactory. This advisory provides an overview of the anti-corruption enforcement risk in Brazil, summarizes the new law, compares it to the FCPA, and offers practical compliance suggestions for in-house counsel.

Anti-Corruption Enforcement Risk in Brazil
In addition to the corruption risk encountered by companies while transacting business in Brazil, there is now increased regulatory risk created by the enactment of the BCCA.

High Corruption Perception Score. Brazil has historically received a middling-to-poor ranking on Transparency International's Corruption Perceptions Index, which is a primary benchmark used by Western law enforcement and anti-corruption practitioners.

Intense Scrutiny by American Regulators. Brazil has been the focal point of numerous high-profile FCPA investigations by the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”), the two American regulators tasked with enforcing the FCPA. More than a dozen major FCPA cases have focused on business conducted in Brazil, which places the country near the top of the list in terms of the volume of DOJ/SEC investigative activity. Moreover, U.S. regulators have also repeatedly focused on anti-competitive conduct in Brazil, and such investigations can often spur subsequent anti-corruption investigations.

Government-to-Government Cooperation. Unlike the governments of many other high-risk countries, such as that of Russia, the Brazilian government has embraced a very aggressive posture towards corruption. While this obviously culminated in the enactment of the BCCA, the government had begun focusing intently on combatting corruption well before that historic measure was passed. As a new generation of political leadership has assumed the reins in Brazil’s democracy, fighting corruption has emerged as an effective political issue that allows politicians to separate themselves from the "old ways." Indeed, in several recent cases, the Brazilian government played an important role assisting Western prosecutors to investigate and build cases. We anticipate this trend to accelerate in the years ahead, augmented by the new Act.

Local Law Challenges. Brazil operates under a federal system of government similar to that of the United States. As a result of this system, local law challenges can often emerge that present unscrupulous officials with the ability to potentially coerce bribes at several stages of a transaction or project.

Corporate Ownership. As with other nations confronting corruption risk, it can be sometimes challenging to determine (i.e., “know your customer”) the ownership structure and composition of companies in Brazil. While one may be able to determine the corporate ownership of large, publicly held state-owned corporations without a thorough due diligence, it can be difficult to determine the ownership and the influence of the state on the governance of smaller, privately held companies.

M&A Activities. One of the recent economic trends in Brazil is for established U.S. companies to purchase entrenched Brazilian incumbents, many of whom have a dominant market position in their respective space. Given Brazil's corruption history, such purchases may carry significant anti-corruption enforcement risk given the reality that in many countries (such as the United States), the purchaser “buys” any misconduct of the acquired entity. This risk arises not only in the context of acquisitions, but also in strategic combinations such as joint ventures. As a result, purchasers must take every step to ensure that the target's market position has not been the result of graft.

The Brazilian Clean Companies Act
Generally speaking, the BCCA takes a somewhat similar approach to anti-bribery as does the United States under the FCPA. Where there are differences, however, the Act goes beyond the FCPA approach.

Before discussing what’s new, it’s important to note what has not changed: the scope of criminal liability. In Brazil, criminal liability for anti-corruption violations is limited to individuals, and the BCCA does not change this. Nor does the Act change the existing criminal anti-bribery offense under the Brazilian Criminal Code, which requires that the government prove that the defendant offered or promised a benefit to a government official in exchange for the official’s agreement to take an action (or forbear) within the scope of the official’s duties.

That having been said, the BCCA will usher in a host of significant reforms that are relevant to virtually every aspect of anti-corruption compliance in Brazil. These include the following:

Expanded Scope of Coverage and Strict Liability. The BCCA provides for administrative and civil strict liability for foreign and domestic corporations that “promise, offer or give, directly or indirectly, any undue advantage to a public servant or a third person related to him,” or that fund efforts or use a third party to do so. This is one of the main points in which the BCCA differs from the FCPA. Under the FCPA, the government must prove that a defendant willfully violated the FCPA. The fact that a company subject to BCCA may be held liable for violation thereof–-even though it had no knowledge of such violation committed by an employee and had all necessary compliance programs in place—has been a profound concern for general counsels in Brazil.

Corporate Defendants. While corporations still cannot be pursued criminally in Brazil, the BCCA arms Brazilian regulators with powerful tools, such as strict liability, to pursue corporate wrongdoers—both domestic and foreign. With respect to the latter, the Act takes a broad approach to foreign corporations, and considers any entity with a registered office, branch, or other representation in Brazil to be subject to Brazil jurisdiction.

Application to Public Bidding Process. As an example of coverage that is broader than the FCPA, the BCCA penalizes corporations that engage in wrongdoing in the public bidding process. This includes prohibitions against bid rigging and other fraudulent conduct during a public bidding process.

Internal Governance and Incentives for Voluntary Disclosure. Like the FCPA, the BCCA encourages corporations to implement “internal mechanisms and procedures for integrity,” which can subsequently be used to qualify for reduced penalties. However, unlike the FCPA, the Act also includes significant statutory incentives that encourage voluntary disclosure. For example, the BCCA includes leniency provisions that self-disclosing entities can avail themselves of if they detect potential wrongdoing prior to it coming to the attention of the government, cooperate thereafter, and prevent further misconduct. Obtaining leniency would exempt the corporation from some of the Act’s penalties and could reduce the applicable fine by two-thirds.1

Robust Sanctions. Corporations that violate the BCCA will face significant administrative sanctions, including fines of up to 20 percent of their gross revenue in the preceding year. If such a figure cannot be calculated, a fine between R$6,000 and R$60 million (approximately $26 million in U.S. dollars) will be assessed. If a legal action is filed, corporations will be subject to additional penalties, ranging from disgorgement to mandatory dissolution.2 Corporations may also be banned from receiving any subsidies, grants, or loans from public bodies or public financial institutions for up to five years. Finally, corporations that are penalized will be listed in a national registry.

Successor Liability. Under the BCCA, the responsibility of a corporation survives even if it is involved in a merger or acquisition. However, the successor entity will generally only be required to pay fines and full compensation for the damage caused to the limit of the assets transferred; other penalties may apply if the corporation acted fraudulently.

Strategies for In-House Counsel to Consider
In light of the intersection between corruption risk in Brazil and the realities of the aggressive new anti-corruption enforcement matrix set forth in the BCCA, in-house counsel should take prudent steps to ensure their business models are able to manage risk without undermining the company’s core mission. In-house counsel may wish to consider the following:

Audit the Company’s Existing Anti-Corruption Policy and Procedures. Many companies, in Brazil and elsewhere, may not have revised their anti-corruption policies and procedures within the past several years. For any company for which that is the case, in-house counsel should conduct a detailed compliance review of the company’s anti-corruption policies and procedures. The BCCA offers generous benefits to companies that maintain comprehensive and credible anti-corruption programs, and no company doing business in Brazil should risk losing such benefits by virtue of inaction.

Conduct Targeted Anti-Corruption Due Diligence. Under both the BCCA and the approach taken by U.S. regulators under the FCPA, targeted anti-corruption due diligence represents a company’s first line of defense in the acquisition setting. Such due diligence should be conducted by seasoned anti-corruption counsel and should focus on a range of potential risk factors, including the nature of the industry, role played by the government, and revenue stream sourcing, to name three examples. Effectively gauging risk pre-acquisition can have a number of benefits, including avoiding successor liability issues and driving a better deal (lower valuation). We believe it is likely that Brazilian regulators—like their U.S. counterparts—will consider the quality of the due diligence to be a critical factor in charging decisions under the BCCA.

Monitor Media for Potential Red Flags. As the pace of prosecutions continues to grow—both in Brazil and in the United States—so too will media coverage. In-house counsel should stay abreast of all active anti-corruption and antitrust investigations that relate to the company's geography, competitors and lines of industry. Such investigations can often breed investigations of other companies, and thus, in-house counsel should be aware of existing enforcement trends both to protect the company and as a means of highlighting (for the business side of the company) the need for anti-corruption compliance.

Consider Special Policies for the World Cup and the Olympics. With Brazil set to host the World Cup in 2014 and then the Summer Olympics in 2016, every company doing business in Brazil should consider whether it needs a special policy, procedures or training for certain employees regarding potential entertainment at these events. The Beijing Olympic Games in summer 2008 are instructive, as Western prosecutors have investigated—and prosecuted—several significant anti-corruption matters relating to the Games. These have included bribe payments relating to infrastructure projects as well as improper entertainment gratuities. At a minimum, every company doing business in Brazil should have clearly defined policies for entertainment during these events—including rules and approval requirements for things such as tickets, transportation, hotel accommodations, etc.

Conclusion
With the BCCA, Brazil has joined the club of countries that have robust anti-corruption laws offering steep penalties for corporate wrongdoers. We anticipate that Brazilian regulators will aggressively enforce the Act and continue to collaborate closely with their American counterparts. In-house counsel can manage these risks with an appropriate set of precautions, including the measures outlined above.


  1. The law provides that such a leniency agreement “does not relieve the person’s legal obligation to make full reparation for the damages caused."
  2. The law provides for mandatory dissolution when the corporate status has been used to facilitate or promote the commission of unlawful acts, or the entity was formed with the intent to conceal or disguise illicit interests or the identity of the beneficiaries of the acts committed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Pillsbury Winthrop Shaw Pittman LLP | Attorney Advertising

Written by:

Pillsbury Winthrop Shaw Pittman LLP
Contact
more
less

Pillsbury Winthrop Shaw Pittman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.