Global Investigations Review - The law and practice of international investigations

The Practitioner’s Guide to Global Investigations

Brazil

HL Consultoria em Negócios

General context and principles

1          Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects as it relates to your country.

Currently the highest-profile corporate investigation in Brazil relates to Petrobras, Brazil’s state-run oil company and one of the largest companies in the country. The corruption schemes involving Petrobras have been linked to some of the country’s most powerful and wealthy CEOs and politicians, including two former presidents of Brazil, Dilma Rousseff and Luiz Inácio Lula da Silva. It is expected that this investigation, headed by federal judge Sérgio Moro, will help cleanse the country of recent endemic political corruption.


2          Outline the legal framework for corporate liability in your country.

While corporations cannot be held criminally liable (except for environmental crimes), they can incur civil and administrative liability. Under Law No. 12.846/2013 (the Clean Companies Act), Brazilian companies are strictly liable for corruption crimes, and controlling, controlled or affiliated companies are jointly liable for fines and full reparation of damages. Penalties for corporations under this Act include fines of up to 20 per cent of the company’s gross revenue in the preceding year, seizure of assets obtained illegally or an order that the company be shut down.


3          In your country, what law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies relating to the prosecution of corporations?

In addition to several laws (including the Clean Companies Act, the Civil Code and Law No. 6.404/1976 – the Corporations Law), all companies (including limited liability companies and corporations) are subject to the Department of Corporate Registry and Integration and to the Administrative Council for Economic Defence. Publicly traded corporations are also regulated by the Securities Commission (CVM), the Stock Exchange (BM&FBovespa) and other self-regulated organisations such as the Brazilian Association of Capital and Financial Markets Entities (ANBIMA). Prosecution rules vary according to the authority.


4          What grounds must the authorities in your country have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?

There is no minimum requirement for authorities to initiate an investigation; all that is needed is the suspicion of illegal activity (e.g., through a whistleblower). However, authorities must possess sufficient evidence of wrongdoing to obtain legal orders such as for wire-tapping or seizure of documents.


5          Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another country?

While the concept of double jeopardy in criminal proceedings does exist in Brazil, corporations can only be held criminally liable for violations of environmental laws. However, the question of double jeopardy has been brought up in international drug trafficking cases, for example.


6          Describe the principal challenges in your country that arise in cross-border investigations, and explain whether and how such challenges are dependent on other countries involved.

Internal investigations in Brazil are a very recent innovation, and the vast majority of companies are not used to the rules and procedures that govern the process. The main challenges faced in cross-border investigations include cultural clashes (fuelled by the use of foreign investigators with no knowledge of Brazilian laws and etiquette), lack of comprehensive internal controls (including back-up of information), lack of clear compliance guidelines (this is changing after the enactment of Decree No. 8.420/2015, which regulates the Clean Companies Act and sets forth 16 requirements for an effective compliance programme) and lack of commitment of local employees (as often the local subsidiary’s management and employees see the investigation as an imposition from international headquarters instead of something good for them).


7          What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?

It will very much depend on whether the country in which the foreign authority issued a decision is a signatory of a co-operation treaty (or has a reciprocity agreement) with Brazil. There is no such co-operation agreement signed between Brazil and the USA, for instance, and therefore a US criminal conviction would not necessarily result in extradition of a Brazilian citizen.


8          Do your country’s law enforcement authorities have regard to corporate culture in assessing a company’s liability for misconduct?

Yes. According to Decree No. 8.420/2015, which regulates the Clean Companies Act, authorities will take into account how effective a compliance programme is when considering the penalties to impose on a company. According to such decree, an effective compliance programme shall fulfil 16 requirements, including commitment of high-management (demonstrated by the visible and unequivocal support of the programme), existence of clear rules of ethical conduct and compliance guidelines applicable to everyone, periodical compliance training and the creation of an anonymous hotline for any tips.


9          What are the top priorities for your country’s law enforcement authorities?

Corruption (which is the object of the widely reported Operation Carwash, the largest corruption investigation in the history of Brazil); and tax evasion (which is the object of Operation Zealots, the largest tax evasion investigation in the country’s history, also involving the bribery of politicians and tax authorities).


10        How are internal investigations viewed by local enforcement bodies in your country?

Internal investigations are welcomed by local law enforcement bodies and in some cases local authorities ask for the assistance of internal investigators to build up their cases.


Before an internal investigation

11        How do allegations of misconduct most often come to light in companies in your country?

Most allegations come through whistleblowers, either internal or external to the company.


12        Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress the company has if those limits are exceeded.

Yes, search warrants and dawn raids on companies are features of law enforcement in Brazil. Local authorities must secure a search warrant before entering the company’s premises and must abide by the limitations set forth in such document.


13        How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?

In practice, the authority conducting the raid will collect any and all documents it deems relevant, and the subject of the raid could challenge the use of privileged documents or information as evidence before the judge hearing the case. In Operation Carwash, for example, the presiding judge requested certain documents seized to be delivered to Odebrecht’s lawyers to identify any privileged documents, giving them 72 hours to do so. In this case, the lawyers had to clarify the origin and purpose of the documents and the criteria used to classify them as privileged.


14        Are there any privileges in your country that would prevent an individual or company from providing testimony? Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow in your country from such compelled testimony?

Under Brazilian law everyone has a right against self-incrimination. Furthermore, unless there is no other way to retain evidence or prove a set of facts or circumstances, family members (including foster members) of the accused are not required to testify.


15        What legal protections are in place for whistleblowers in your country?

Brazil has a witness protection programme that can be used by whistleblowers who fear for their life or wellbeing because of their participation in a legal proceeding.


16        What rights do employees possess under local employment law that determine how they are treated within a company if their conduct is within the scope of an investigation? What employment rights would attach if they are deemed to have engaged in misconduct? Does it differ for officers and directors of the company?

Brazilian labour laws are complex. In simple terms, employees of Brazilian companies can be subject to sanctions such as a warning, suspension and dismissal. The same is applicable to directors and officers. However, the extent of such penalties would depend on the case.


17        Are there disciplinary or other steps that a company must take in your country when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation? Can an employee be dismissed for refusing to participate in an internal investigation?

Companies should take steps to reduce their exposure to liability, but they are not required to act. An employee can be dismissed without cause under Brazilian law, but companies should be careful of the potential pitfalls of doing so (including litigation – Brazilian labour courts are very pro-employee).


Commencing an internal investigation

18        Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?

It depends on the company and complexity of the investigation, but investigators usually prepare an investigation plan (the level of detail varying depending on the size and scope of the investigation).


19        If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?

Companies should ensure they collect as much evidence as possible of the wrongdoing, as this can be used in the company’s defence (should it face prosecution) or to enter into a leniency agreement (as it requires companies to provide clear evidence of, and to help identify the individuals involved in, the misconduct). It is also advisable to suspend (as provided by Brazilian labour laws) the individuals who may be involved in the wrongdoing. In addition, the Clean Companies Act includes provisions regarding interference with investigations, and therefore the company should issue a notice to all employees advising that no documents or data should be deleted until further notice.


20        At what point must a company in your country publicly disclose the existence of an internal investigation or contact from law enforcement?

The decision to publicly report the existence of an internal investigation or contact from law enforcement depends on several factors, including if the company has shares that are publicly traded. The moment and quality of the disclosure should be analysed case by case.


21        When would management typically brief the board of a company in your country about an internal investigation or contact from law enforcement officials?

Management should notify the board of directors about an investigation or contact from law enforcement officials as soon as possible. Generally board meetings are held on pre-determined dates but Corporations Law and typical company by-law provisions would allow for a meeting to be called at any point in time if there is a relevant issue to be discussed. Board members are also subject to fiduciary duties imposed by the Corporations Law.


22        What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?

Companies should ensure their employees and officers abide by the requirements of the subpoena and refrain from destroying any evidence (obstruction of an investigation – including witness and document tempering – is a felony under the Clean Companies Act). Furthermore, companies should retain specialised counsel as soon as they receive the subpoena and not engage the authorities without legal representation.

23        How can the lawfulness or scope of a notice or subpoena from a law enforcement authority be challenged in your country?

The lawfulness or scope of a notice or subpoena from a law enforcement authority may be challenged in court.


Attorney–client privilege

24        May attorney–client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?

Brazilian law recognises attorney–client privilege over information provided by a client to an attorney in the course of representation, and attorneys may not disclose such information to third parties (with a few exceptions). Therefore, attorneys may claim the products of the investigation (such as investigation reports and memorandums or interviews) are covered by privilege. To protect the confidentiality of an internal investigation companies should require non-attorneys (who are bound by confidentiality obligations regardless of any other formalities) to sign non-disclosure agreements.


25        Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?

Under the Brazilian Attorney Ethics Code, information provided by a client to its attorney in the course of its representation is confidential in nature, and generally can only be disclosed to third parties if authorised by the client. It makes no difference whether the client is a company or an individual.


26        Does the attorney–client privilege apply equally to inside and outside counsel in your country?

Yes, attorney–client privilege applies to both in-house and external lawyers.


27        To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?

There are cases where the waiver of privilege may benefit a company. Within the negotiations of a leniency agreement, for example, it may be necessary to disclose information that is otherwise privileged to secure the benefit. Attorneys may break privilege if they find themselves endangered and with great fear for their life or honour, or when challenged by their client and they must disclose privileged information to defend the claim.


28        Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?

A company can request that information delivered to Brazilian courts be treated confidentially; however, the presiding judge has discretion over such request. In addition, Brazil is a signatory to a number of international treaties providing for the exchange of information between authorities.


29        If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?

See question 28.


30        Do common interest privileges exist as concepts in your country? What are the requirements and scope?

See question 28.


31        Can privilege be claimed over the assistance given by third parties to lawyers?

If a lawsuit is deemed classified by the presiding judge, only the parties directly involved in the litigation should have access to court records (judges, prosecutors, lawyers and members of the court); court records are not available to the general public. Nevertheless, everyone who has access to confidential information should keep it confidential.


Witness interviews

32        Does your country permit the interviewing of witnesses as part of an internal investigation?

Yes.


33        Can the attorney–client privilege be claimed over internal witness interviews or attorney reports in your country?

Assuming all information provided by a client in the course of its representation is confidential, witness interviews or attorney reports should be covered by privilege. However, Brazil does not require two-party consent for the recording of private conversations (including witness interviews by the participants of the interview). Therefore, caution is advised in interviews to avoid its content from going public.


34        When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?

As cross-border investigations usually have some connection with the United States it is advised to follow the same rules and procedures applicable to US investigations (e.g., Upjohn warning, request that the interview is not recorded and ask the employee to keep the discussions confidential).


35        How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?

As an internal investigation is not a legal proceeding, employees are not required to have an attorney with them (although they may choose to have one present) and can refrain from answering any questions. Interviews in Brazil usually follow internationally accepted investigation standards and investigators may produce documents to the witnesses. Interview notes are usually taken by the investigation team and their disclosure to the interviewee should be avoided.


Reporting to the authorities

36        Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?

Not for private citizens or corporations (public officials, however, have different rules and may be required to report certain misconduct).


37        In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?

Companies are advised to self-report when it is in the company’s best interest (for example, to enter into a leniency agreement or as part of its defence strategy as a victim of the crime rather than the perpetrator).


38        What are the practical steps you need to take to self-report to law enforcement in your country?

The practical steps vary according to the authority with jurisdiction over the misconduct. Companies should retain specialised counsel prior to self-reporting to ensure it gets the best deal possible.


Responding to the authorities

39        In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?

Companies usually contact specialised legal counsel as soon as they receive a subpoena; attorneys should be the ones running all contacts and negotiations with the authorities. While it is theoretically possible to have a dialogue with the authorities, in practice this will depend on the actual team running the investigation. (It is not uncommon for authorities to avoid or deny informal contacts with suspects or their attorneys.)


40        Are ongoing authority investigations subject to challenge before the courts?

If investigations violate any rights of whoever or whatever is being investigated, it is possible to seek judicial relief.


41        In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?

While there is no legal provision, it is possible to negotiate the simultaneous delivery of information or to get local authorities to agree that information will be shared on an equal basis. Practical steps would depend on the case.


42        If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for and produce material in other countries to satisfy the request? What are the difficulties in that regard?

Yes, provided the company has control over the information requested by the authority. For example, in cases where a company has a subsidiary overseas and the authority is seeking information related to the subsidiary, then the company must produce that information.


43        Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?

Brazilian authorities do share information with other law enforcement agencies around the world. For example, Brazil is a signatory of a number of international co-operation agreements for the exchange of information, including an intergovernmental agreement with the United States to improve tax compliance and implement the Foreign Account Tax Compliance Act, and a member of Interpol.


44        How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?

While it would depend on the actual case, companies should retain specialised counsel to address its concerns to the requesting authority.


45        Does your country have data protection statutes or blocking statutes? What related issues are implicated by complying with a notice or subpoena?

While Brazil does have laws covering the protection of personal information such as banking and tax data, companies must comply with legal notices or subpoenas regardless of such statutes.


46        What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?

Public authorities appreciate voluntary production of material. Confidentiality will depend on whether a criminal proceeding is confidential or not.


Global settlements

47        Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?

Companies should conduct any negotiations or settlements through their attorneys to secure the best possible outcome.


48        What types of penalties may companies or their directors, officers or employees face for misconduct in your country?

Under the Clean Companies Act, companies are subject to strict liability and may face fines of up to 20 per cent of their gross revenue for the preceding year, disgorgement of assets, rights or profits, suspension of interdiction of its activities, dissolution of the company and prohibition from receiving public incentives and funds from public institutions, as well as from participating in public tenders. Controlling, controlled or affiliated companies are jointly liable for fines and full reparation of damages. Individuals may face fines and imprisonment of up to 12 years.


49        What do the authorities in your country take into account when fixing penalties?

Courts take into account a series of factors when fixing criminal penalties, including the level of guilt of the parties involved, criminal priors, social conduct, personality, motives, circumstances and consequences of the crime.


50        Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?

There are various Brazilian statutes that provide for the entering of leniency agreements with the authorities. While the particular requirements may vary depending on the authority, companies usually must cease the illegal conduct and assist with the investigation, including by presenting clear evidence of the wrongdoing that will allow the authorities to prosecute the actual offenders.



51        Is there a regime for suspension and debarment from government contracts in your country? Where there is a risk of suspension or debarment or other restrictions on continuing business in your country, what are the options available to a corporate wanting to settle in another country?

Under the Clean Companies Law and Law No. 8.666/1993 on public tender and administrative contracts, companies that are found guilty of conducting certain crimes (including of corruption and crimes related to public tenders) may face suspension from participating in public tenders or of entering into public contracts, as well as from continuing business for a certain period and, in more extreme cases, companies may be required to be dissolved.


52        Are ‘global’ settlements common in your country? What are the practical considerations?

The Clean Companies Act is very recent, therefore, there is no clear guidance on the possibility or requirements in case of global settlements.


53        Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?

It is possible for private parties to seek compensation for damages incurred because of illegal actions. However, the possibility of private parties gaining access to authorities’ files would depend on whether the criminal proceeding is confidential or not.


Publicity and reputational issues

54        Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.

Most criminal cases are public in Brazil, unless the presiding judge rules it to be classified (for example, should minors be involved). With respect to information from the investigatory stage, once it is included in the court records it can be accessed by anyone (unless the records are sealed).


55        What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?

Larger companies usually rely on public relations firms to handle external communications and publicly traded companies have dedicated investor relations departments that deal with these matters.


56        How is publicity managed when there are ongoing, related proceedings?

Companies should be aware of the downfalls of disclosing and of not disclosing information related to ongoing investigations. Attorneys should always be involved when defining a course of action to avoid an increased liability to the company or any individuals.


Duty to the market

57        Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?

This will largely depend on the actual circumstances of the case, including if the company has shares that are publicly traded and if the settlement will have a material impact on the company’s business or financials.

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