Global Investigations Review - The law and practice of international investigations

The Investigations Review of the Americas 2018

Venezuela: criminal liability of company directors and corruption through use of intermediaries

08 August 2017

D'Empaire Reyna Abogados

Criminal liability of members of boards of directors

In this chapter we shall analyse the criminal liability of the members of the board of directors of Venezuelan companies (hereinafter ‘directors') under the Venezuelan Criminal Code and under certain special Venezuelan criminal laws.

General rules

In Venezuelan criminal law, some crimes require perpetrators or accomplices to act with malice, and other crimes only require that they act with negligence. As a rule, crimes require malice unless the law explicitly states that a specific crime only requires negligence.1

Directors may be criminally liable if they vote with malice or negligence in favour of decisions of their boards that constitute a crime under any Venezuelan criminal law. Additionally, directors may be also criminally liable if they participate with malice of negligence in the execution of such decisions even if they (i) vote against those decisions or (ii) do not attend the meetings in which such decisions are approved.2

Decisions from the board of directors can constitute an accomplished crime to which the full penalty established in the criminal law must be applied, or can be just an attempt to perpetrate a crime or a failed crime to which a reduced penalty is applicable.3 However, it is important to stress that in some cases the decisions from a board of directors may be just preparatory acts of a crime that as a rule are not punishable under the Venezuelan criminal law because they do not imply the beginning of the execution of the planned crime.4

Regarding companies in general, criminal scholars have sustained that members of the board are ‘guarantors' of the corporate assets.5

When an individual is a guarantor of a source of danger (ie, a subordinated worker) or a legal interest (ie, corporate assets), such individual may be criminally liable in cases of commission by omission. In those cases, we find the following elements: (i) the description of the crime does not explicitly require an omission, on the contrary, in most cases the description seems to describe only a positive action, (ii) the harmful result contained in the description of the crime has occurred and (iii) the ‘guarantor' had the power to prevent such harmful result.6 Although, the commission by omission is not contained in the Venezuelan Criminal Code but in specific criminal laws, Venezuelan public prosecutors and criminal courts have accepted the commission by omission as a general source of criminal liability.7

What is relevant for our analysis is the possibility for ‘guarantors' to be criminally liable as accomplices by commission by omission for crimes against the corporate assets. Although, this is a controversial matter, we should highlight that very prestigious German criminal scholars and the Spanish case law accept such possibility.8 Therefore, we believe that it is likely that Venezuelan public prosecutors and criminal courts accept the possibility for ‘guarantors' to be criminally liable as accomplices by commission by omission in those cases.

Based on the considerations explained above, we consider that as ‘guarantors' of the corporate assets, directors may have the duty to take all the necessary measures to prevent the perpetration of crimes arising from the execution of decisions from the boards even if those directors do not vote in favour of those decisions or do not attend the meeting on which such decisions are approved.

If directors fail to take those measures, they may be criminally liable as simple accomplices if their omissions are intentional or negligent and the harmful result against the corporate assets occurred.9 If the type of crime is intentional, directors' omissions must be intentional in order for them to be criminally liable; if the type of crime is negligent, a negligent omission from directors would be enough for the existence of the criminal liability. Generally, simple accomplices only receive half of the penalty for the perpetrators.

Determining the right measure to prevent the commission by omission of the crime and to avoid criminal liability for directors should be made on a case-by-case analysis. Filing a criminal report with the Office of the General Prosecutor or a police agency in charge of criminal investigations will always be a right measure, but in some cases, less drastic measures may be sufficient. For instance, filing a report with the statutory auditor (comisario) of the company may dissuade other directors from executing the crime, or requesting a new board of directors meeting where the illegal decision is revoked could be sufficient to avoid negative legal consequences for directors, depending on the circumstances.

Environmental criminal liability

As a rule, the Environmental Organic Law establishes a system of strict liability for crimes perpetrated by legal entities and individuals.10 However, the same law also establishes that owners and administrators (ie, directors) are criminally liable for their intentional or negligent participation in the crimes perpetrated by the legal entities to which they belong.11

Although it is very complex to reconcile both rules, in our opinion, the Environmental Organic Law tries to establish a system of (i) strict liability for legal entities and individuals and (ii) a system of liability in cases of commission by omission based on malice or negligence for owners and administrators who are ‘guarantors' of the performance of their legal entities.

On the other hand, the Criminal Environmental Law establishes a system of strict liability as a rule.12 Additionally, the Criminal Environmental Law also establishes that principals are criminally liable as ‘guarantors' of their subordinated workers.13

However, since the Environmental Organic Law has a higher rank, we believe that the Environmental Organic Law prevails over the Criminal Environmental Law. Therefore, we should make our analysis based on the rules of the Environmental Organic Law together with the article of the Criminal Environmental Law regarding the liability of the principals for crimes of their subordinated workers.

We think that a system of strict criminal liability for individuals infringes the essence of the rule of law, the due process of law and the presumption of innocence14 contained in article 49(2) of the Venezuelan Constitution and several human rights treaties approved by Venezuela.15 Then, we believe that Venezuelan courts and public prosecutors should not apply the system of strict criminal liability on environmental matters. Therefore, individuals must be criminally liable only when they act with malice or negligence, taking into account that, as a rule, crimes requires malice unless the law explicitly states that a specific crime only requires negligence.16

Based on our interpretation explained above, directors may be criminally liable in environmental matters if they (i) vote, with malice or negligence, in favour of decisions of the board of directors that constitute a crime or (ii) participate with malice of negligence in the execution of such decisions even if they vote against those decisions or do not attend the meetings in which such decisions are approved.

Additionally, there are arguments to state that under the Environmental Organic Law and the Criminal Environmental Law, directors are ‘guarantors' of the quality of the environment, and therefore, they may be criminally liable for environmental crimes by commission by omission even if they (i) vote against decisions from the boards of directors that may constitute an environmental crime or (ii) do not attended the meetings in which such decisions were approved; if they with malice or negligence do not take all necessary measures to prevent the execution of that crime. Moreover, as ‘guarantors' of the legal entities and subordinated workers under their direction or supervision,17 directors may be criminally liable if they, with malice or negligence, do not take all necessary measures to prevent the perpetration of a crime by those legal entities and individuals.

In short, and based on our interpretation explained above, directors may be criminally liable in environmental matters if (i) they personally perpetrate a crime with malice or negligence, (ii) they vote, with malice or negligence, in favour of decisions of the boards that implies the beginning of the execution or the execution of a crime, (iii) as guarantors of the quality of the environment, they with malice or negligence do not take all necessary measures to prevent the perpetration of a crime that is consequence of a decision taken by the board even if directors vote against such decision or do not attend the meeting in which the decision is approved, or (iv) as ‘guarantors' of the legal entities and subordinated workers under their direction or supervision, they, with malice or negligence, do not take all necessary measures to prevent the perpetration of a crime by those legal entities and individuals.

In addition, in this case, the analysis of the right measure to prevent the commission of the crime and to avoid criminal liability for directors should be made on a case-by-case basis. Filing a criminal report with the Office of the General Prosecutor or a police agency in charge of criminal investigations will always be a right measure, but in some cases, less drastic measures may be sufficient.

Criminal liability for work accidents

Under articles 119, 120 and 131 of the Venezuelan Organic Law on Prevention, Condition and Work Environment,18 the representatives of the legal entity acting as employer (ie, the members of the board of directors) may be considered ‘guarantors' of the physical integrity and health of its workers. Nevertheless, such role of ‘guarantors' is restricted to work accidents causing the death or injury of a worker because of a negligently gross infringement of legal rules and regulations on safety and health working conditions.

Based on those legal rules, directors may be criminally liable by commission by omission for deaths or injuries of the workers of their companies and subject to imprisonment of up to 10 years and fines.

If directors infringe the legal rules and regulations on safety and health working conditions with malice, they may be criminally liable not based on the Venezuelan Organic Law on Prevention, Condition and Work Environment but on the Venezuelan Criminal Law for murder or intentional injuries, in which case the imprisonment term may reach 26 years.19

Criminal liability based on the Venezuelan Organic Law of Fair Prices

Under the Venezuelan Organic Law of Fair Prices, directors are ‘personally and severally criminally liable' for ‘the crimes perpetrated by the companies that they represent'.20

We are facing a blatant infringement of the due process guaranteed by the Venezuelan Constitution,21 under which (i) an individual may be criminally liable only for his or her own actions or omissions and not for other persons' actions or omissions and (ii) several liability is an institution that only applies to contractual liability and tortious liability, never to criminal law.22

As an infringement of the due process, criminal courts must declare such legal rule unconstitutional and refrain from applying it. Additionally, public prosecutors must refrain from considering it when pressing preliminary charges or filing indictments because of criminal investigations.

Certainly, criminal courts may interpret such legal rule as a case of commission by omission, in which directors may be criminally liable for their own omissions when they have the power to prevent the perpetration of a crime. However, the draft is so poor that it is preferable to challenge the constitutionality of that legal rule and to discard it completely.

Regrettably, the inclusion of that legal rule together with the system of strict liability for environmental crimes represent a very worrisome sign of the evolution of the Venezuelan criminal law. Gradually, the Venezuelan legislation is abandoning the most basic principles of modern continental criminal law and creating an environment of legal uncertainty for directors and companies.

The use of intermediaries to obtain licences, authorisations from the government and the Venezuelan law against corruption

Crimes perpetrated

It has become very common for multinational and Venezuelan companies to hire ‘service providers' who have or pretend to have influence on public officials to obtain authorisations, licences or permits to which the corporations are entitled from the Venezuelan government. In such cases, the corporations may sign ‘service agreements' to support payments whose only justification is the influence that the ‘service providers' can exert on public officials.

If the funds paid to the ‘service providers' were totally or partly used to bribe public officials, we are facing a crime called improper corruption, whose punishment for the ‘service providers' and the public official receiving the funds may be from one to four years' imprisonment and a fine of up to 50 per cent of the bribe.23 In that case, directors or employees of the companies who hired and paid the ‘service providers' may be punished with the same sanctions as necessary accomplices.24

If the funds paid to the ‘service providers' were not used to bribe public officials, but just paid by those directors or employees to the ‘service providers' to exert undue influence on public officials, such directors or employees may be punished with imprisonment from six months to up to two years. In this case, if the directors and employees report the facts with the Office of the General Prosecutor or a police agency in charge of criminal investigations before the criminal investigation begins, they may be released from this specific criminal charge. However, this release for the directors and employees would not be automatic since a criminal investigation must be opened by the Office of the General Prosecutor to determine which crimes were really committed. If there are elements to believe that the funds were totally or partly used to bribe public officials, the Office of the General Prosecutor would probably file criminal charges for improper corruption.25

In order to determine which crime was really committed by the directors and employees of the company, the analysis of malice is the key element. If there was a bribe and those directors and employees knew that the funds were going to be totally or partly used to make illegal payments to public officials, they should be charged for improper corruption.

If the directors and employees of the companies were not aware that the funds were going to be totally or partly used to bribe public officials, even if the bribe took place, they should be charged only for making payments to persons to exert undue influence on public officials.

Additionally, even if the funds were not used to bribe public officials, the ‘service providers' should also be charged for pretending to have undue influence on public officials, which is punished with imprisonment of between two and seven years.26

Confiscation of cash holdings of the corporations paid to the ‘service providers' or the assets bought with those funds can also be applied because of final conviction judgment for improper corruption.27

‘Social acceptance' as a justification for improper corruption

There is no specific legal rule on this matter in Venezuela. Modern Venezuelan scholars under the influence of German and Spanish scholars have argued about this exception based on the theory of objective imputation. However, this argument is not well understood by the Venezuelan prosecutors and criminal courts.

We believe that even in the difficult Venezuelan business environment, it would be very complicated to argue that bribing public officials or paying to exert undue influence on public officials is ‘socially acceptable' before a prosecutor or a criminal court.

Additional charges for organised crime

Since the crimes described may have been perpetrated by three or more persons temporarily associated for that purpose, including the directors and employees of the corporations, it is possible that there would be charges for criminal association, which can be punished with imprisonment from six to 10 years.28

If the company obtains public funds as a consequence of the authorisations, licences or permits granted by the Venezuelan government, we cannot discard criminal charges of money laundering for the directors and employees of the corporations since they may have received and managed funds that are the result of illegal activities in Venezuela knowing the source of those funds, which may lead to sanctions of imprisonment from 10 to 15 years and a fine equivalent to the increase of wealth of the beneficiaries.29

If there are charges for organised crime, the companies may be criminally liable for criminal association or money laundering, or both, and face the following sanctions:

  • definitive closure;
  • prohibition from carrying out commercial, industrial, technical or scientific activities;
  • confiscation of assets;
  • publication of the ruling in a high-circulation newspaper;
  • fines; and
  • withdrawal of governmental concessions, permits and administrative authorisations.30

Nevertheless, we should point out that the classification of infractions as organised crime is at the discretion of the public prosecutors.

No obligation to report

Neither the company hiring the ‘service providers' nor its directors or employees have a duty to report these crimes under Venezuelan law.31

However, although there is no duty to report those crimes, the company, its directors and employees should take care that they do not obtain profits or gains from such crimes, as this may entail the commission of crimes such as money laundering32 or benefiting from assets obtained through crime.33

In addition, it is important to stress that those who destroy, alter or conceal evidence or information related to these crimes would be criminally liable for (i) obstruction of justice and punished with imprisonment of up to 12 years if it is for the benefit of an organised crime group34 or (ii) concealment if such actions are not related to organised crime, in which case the applicable penalty is up to five years' imprisonment.35

Notes

  1. Arteaga Sánchez, Alberto, Derecho Penal Venezolano, UCV, Caracas 1995, 7th edition, pp. 215-219.
  2. We use (i) the expression malice to describe what in Spanish is called ‘dolo', which implies an intentional action or omission in the perpetration of a crime and (ii) the expression negligence for what in Spanish is called ‘culpa' or ‘imprudencia', which implies that the perpetrator of the crime does not want to commit the crime but he does it by infringing a legal duty.
  3. In the case of an attempt to perpetrate a crime, the penalty is reduced from half to two-thirds; for failed crimes the penalty is reduced by one-third. Article 82 of the Criminal Code.
  4. Cf. Arteaga Sánchez, ob. cit. p. 326.
  5. Cf. García Cavero, Percy, La Responsabilidad Penal por Decisiones Colegiadas en el Ámbito de la Empresa, in Revista Derecho y Sociedad No. 39, Derecho y Sociedad Asociación Civil, Lima 2012, p. 76.
  6. Mir Puig, Santiago, Derecho Penal, Parte General, IBDF, Montevideo-Buenos Aires, 7th edition, pp. 317-318.
  7. Cf. Constitutional Chamber of the Venezuelan Supreme Tribunal, Judgment No. 366 dated 1 March 2007, retrieved on 2 June 2016 from http://historico.tsj.gob.ve/decisiones/scon/Marzo/366-010307-04-1607.htm.
  8. Cf. Hans Jescheck, Hans Welzel and Heinz Maurach, referred by Castillo Alva, José Luis, La complicidad como forma de participación criminal, in Revista Peruana de Ciencias Penales No. 9, pp. 679-712, retrieved on 2 June 2016 from www.unifr.ch/ddp1/derechopenal/articulos/a_20080521_47.pdf.
  9. Cf. Rodríguez, María, Los delitos de omisión impropia como delitos especiales y de dominio positivo del hecho. Repercusiones en materia de autoría y participación, p. 112, retrieved on 2 June from www.unirioja.es/dptos/dd/redur/numero11/rodriguez.pdf.
  10. Articles 131 and 132 of the Environmental Organic Law.
  11. Article 130 of the Environmental Organic Law.
  12. Article 3 of the Criminal Environmental Law.
  13. Articles 3 and 17 of the Criminal Environmental Law.
  14. Cf. De Palma del Teso, Ángeles, El principio de culpabilidad en el derecho administrativo sancionador, Tecnos, Madrid 1996, pp. 61-64.
  15. Article 14(2) of the International Covenant on Civil and Political Rights. Article 18(2) of the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families.
  16. Arteaga Sánchez, Alberto, ob. cit., pp. 215-219.
  17. Article 17 of the Criminal Enviromental Law.
  18. Articles 119, 120 and 131 of the Venezuelan Organic Law on Prevention, Condition and Work Environment.
  19. Articles 406 and 413-419 of the Venezuelan Criminal Code.
  20. Article 44 of the Venezuelan Organic Law of Fair Prices.
  21. Articles 49(2) and 44(3) of the Venezuelan Constitution.
  22. Mir Puig, ob. cit. pp. 132-136.
  23. Article 63 of the Venezuelan Law against Corruption. ‘Improper corruption' implies using bribery to obtain something to which somebody is entitled.
  24. Article 84 of the Venezuelan Criminal Code.
  25. Article 81 of the Venezuelan Law against Corruption.
  26. Article 81 of the Venezuelan Law against Corruption.
  27. Article 98 of the Venezuelan Law against Corruption.
  28. Articles 4(9) and 37 of the Venezuelan Organic Law against Organised Crime and Terrorism Financing.
  29. Articles 3 and 35 of the Venezuelan Organic Law against Organised Crime and Terrorism Financing.
  30. Article 32 of the Organic Law Against Organised Crime and the Financing of Terrorism.
  31. Article 269 of the Venezuelan Criminal Procedural Code.
  32. Article 35 of the Organic Law Against Organised Crime and the Financing of Terrorism, which establishes imprisonment of 10 to 15 years.
  33. Article 470 of the Criminal Code¸ which establishes imprisonment of three to eight years.
  34. Article 45 of the Venezuelan Organic Law against Organised Crime and Terrorism Financing.
  35. Article 254 of the Venezuelan Criminal Code.

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