Global Investigations Review - The law and practice of international investigations

The Investigations Review of the Americas 2018

Argentina: current anti-corruption landscape

09 August 2017

Mitrani Caballero & Ruiz Moreno

With a GDP of more than US$550 billion,1 Argentina is one of the largest countries in Latin America. It is the eighth-largest country by landmass in the world and the second-largest in the region. Corruption affects all countries around the world and Argentina is not the exception.

Issues of major concern in bribery offences are the delay in the investigation and prosecution of complex economic crime cases,2 the lack of resources to expedite and pursue the investigations, and the lack of judicial and prosecutorial independence. Evidence of this is that the time from the commencement of judicial investigations of offences through to the final judgment can take several years. Based on the latest OECD Argentina-Phase-3bis-Report, an audit of the federal courts in 2016 found current corruption cases that have been ongoing for over a decade.3 A separate 2016 study of 63 large corruption cases in the last two decades indicated that only 15 per cent reached trial and 11 per cent resulted in convictions. The average duration of a case was 14 years, with some lasting two decades.4 Another study showed that the average time between the reporting of an offence and the start of the trial was more than seven years. Many cases were time-barred.5 Another 2016 report indicated that half of the 2,211 cases of fraud against the public administration handled by the federal courts in the last 20 years were still at a preliminary stage.6

The current administration has publicly stressed that fighting corruption is at the top of the political agenda, in order to re-establish trust in leaders and public institutions. Since taking office in December 2015 the current administration has moved quickly to increase transparency, pushing through the National Congress several bills and proposing amendments to enhance current legislation to combat corruption in response to domestic and international pressures. Notably, at the time of taking office Argentina ranked 107 out of the 175 countries in Transparency International's Corruption Perceptions Index, but rose 12 places to 95 in 2016.

This chapter provides a brief summary of the current legal framework of anti-corruption laws in Argentina, proposed amendments in the pipeline and main highlights to consider when conducting internal investigations.

Overview of international and national sources of anti-bribery laws

With the signing and ratification of several international conventions against corruption, Argentina has formally committed to promote, facilitate and regulate cooperation among other member states in cross-border corruption activities by adopting the mechanisms needed to prevent, detect, punish and eradicate corruption in the performance of public functions. Indeed, in 1997 Argentina ratified the Inter-American Convention against Corruption,7 in 2000 the OECD Convention on Combating Bribery of Foreign Public Officials,8 and in 2006 the United Nations Convention against Corruption.9

At the national level, the Criminal Code10 criminalises domestic and foreign bribery offences involving public officials. Offences only apply to public officials and individuals. There is no current offence for bribing a private person or company. Argentina has not yet adopted legislation to ensure that legal entities can be held liable for domestic and foreign bribery. Notwithstanding the foregoing, as further described below, a Corporate Criminal Liability Bill was introduced to National Congress in October 2016.

It is an offence for individuals to bribe (active bribery) both public domestic officials and foreign public officials, or an official of an international public organisation.11 The terms ‘public official' and ‘civil servant' as used in the Criminal Code refer to any person who temporarily or permanently carries out public functions, whether as a result of a popular election or appointment by competent authority.12

At the domestic level, individuals are punished with imprisonment of between one and six years if money or any other gift is given or offered (either personally or through intermediaries) with the purpose of obtaining the making, issuance, delay or omission of a ruling, order or judgment. The punishment is imprisonment of between two and six years if the behaviour was intended to assert undue influence over a judicial magistrate or prosecutor. If the perpetrator is a public official, special disqualification of between two and six years shall also be imposed in the first case, and between three and ten years in the second case.

Consistent with the commitments adopted under the Inter-American Convention against Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials, the offence of bribing a foreign public official was introduced into the Criminal Code through the passing of the Public Ethics Act.13 Individuals who offer or give a public official from a foreign country or international public organisation, personally or through an intermediary, money or any object of pecuniary value or other benefits such as gifts, favours, promises or benefits, for their own benefit or for the benefit of a third party, for the purpose of having the official perform or not perform an act related to his or her office or to use the influence derived from his or her office in an economic, financial or commercial transaction, can be punished with imprisonment of between one and six years and special disqualification for life in respect of holding public office.

It is also an offence for a public official or any member of the judiciary or public prosecutor to receive a bribe.14 Public officials can be punished with imprisonment of between one and six years and permanent disqualification from holding public office if they, directly or through an intermediary: (i) receive money or any other gift or accept a direct or indirect promise to make, delay or stop doing something within his or her powers; or (ii) request or receive money or any other gift or accept a direct or indirect promise to unduly assert influence on a public servant to act, delay or omit to do something within his or her powers. If this behaviour was intended to assert undue influence over a magistrate of the judiciary or prosecutor in order to obtain the making, issuance, delay or omission of a ruling, order or judgment in matters under their jurisdiction, the maximum term of imprisonment is increased to 12 years.

Other national sources of legislation dealing with anti-corruption are the Criminal Procedural Code,15 the new Criminal Procedural Code,16 the Ethics in Public Service Act,17 the National Public Employment Regulation Act,18 the Code of Ethics in Public Service for Public Officials of the National Executive Branch,19 Decree No. 1162/00 (obligations of public officials or employees of reporting crimes known in the exercise of their duties) and Decree No. 1023/01 (contracting system of the public administration).

In line with the current administration's transparency and compliance efforts, in 2016 several laws and decrees were adopted, including an amendment to the Repentance Act,20 extending the benefits of sentence reductions to defendants who cooperate in the investigation of crimes against the public administration (including corruption and fraud against the public administration); Decree No. 1246/2016, explicitly prohibiting the deductibility of bribes under the Income Tax Law; Decree No. 201/2017,21 regarding conflicts of interest in proceedings involving the federal government; and Decree No. 1030/2016 (which regulates the contracting system of the public administration), setting forth, as disqualifying circumstances, the offers submitted by those individuals or legal entities included in the World Bank or Inter-American Development Bank list of disqualified offerors because of corrupt practices under the terms of the OECD Convention on Combating Bribery of Foreign Public Officials. In addition, the Public Information Law, passed on 14 September 2016, obliges state agencies to make information of public interest available to anyone who requests it.

Several legislative initiatives were recently introduced in the National Congress with the aim of helping Argentina catch up with its neighbouring countries in their fight against corruption and in an effort to implement the commitments assumed when adopting the OECD and United Nations Conventions. A Corporate Criminal Liability Bill22 was introduced in October 2016 to address the criminal liability of legal entities; a Forfeiture Bill, currently being evaluated by the Senate, will empower the state to seize property and goods linked to corruption, drugs trafficking and money laundering. Several other bills are under consideration by the House of Representatives providing that the statute of limitations will not apply to criminal prosecutions against corruption crimes.

Criminal liability of legal entities

Argentina has no law to punish legal entities for bribery offences. As mentioned, a Corporate Criminal Liability Bill was introduced into Congress addressing criminal liability of legal entities23 for crimes including, among others, bribery, influence peddling, negotiations incompatible with public office, illicit enrichment and fraud against the public administration.

According to the bill, legal entities will be liable for crimes against the public administration and transnational bribery if they are committed, directly or indirectly, in its name, interest or on its behalf. The legal entity will be liable if the crime was committed by its owners, partners, shareholders or associates capable of exerting influence on the company's decisions, attorneys-in-fact, representatives, directors, managers or any other employee serving under their supervision or direction, and by any of its representatives in partnership, agency, concession and trust agreements.24

Criminal sanctions include, among other things, fines between 0.5 per cent25 and 20 per cent of the entity's annual gross income for the year immediately preceding that during which the crime was committed; suspension of business operations and/or the use of patents and trademarks for a term of up to 10 years; loss or suspension of government benefits or subsidies; prohibition from participating in public tenders; and the dissolution and liquidation of the legal entity when it was formed to commit the crime or if the commission of the crime is the legal entity's main activity.

Controlling companies will be jointly and severally liable for compensating any damages caused and for the fines imposed on their controlled entities. The bill also provides for successor liability provisions, determining that in the event of a merger, absorption, transformation, spin-off or other corporate restructuring, the legal entity's responsibility will be transferred to the surviving legal entity.

In contrast, the bill provides for a reduction of the maximum fine to one-third up to one-half of the fine when the legal entity has: (i) voluntarily given notice to the authorities of the crime, prior to the commencement of the criminal proceeding; (ii) implemented, prior to the crime, an ‘integrity compliance plan'; and (iii) during the proceeding, voluntarily collaborated through entering into a leniency agreement with the Attorney General's Office providing accurate, complete and verifiable information for the clarification, identification of the individuals and legal entities that would have participated in the crime and/or the reimbursement of the proceeds of the crime.

Having an adequate compliance programme will be a mitigating factor of liability but will not exclude the legal entity's liability. The programme will be considered adequate if it is aligned with the legal entity's activities, based on its size and economic capability, in order to prevent, detect, rectify and report to the authorities the corresponding crimes. The bill provides for the adoption of an compliance programme which includes, among other elements, the adoption of a code of conduct, the implementation of special procedures to prevent violations in connection with contracts entered into with the public sector, training, internal reporting mechanisms, due diligence procedures on business partners (suppliers, agents, intermediaries, etc), appointment of a compliance officer, and a system for internal investigations that protects the rights of the individuals subject to investigation and provides for actual sanctions in case of violations to the code of ethics or conduct.

Governmental authorities responsible for investigating and prosecuting corruption

In Argentina, bribery offences, whether domestic or foreign, are federal crimes. Investigations may be initiated by a complaint made by any person to the police, public prosecutor or judge. Enforcement authorities are legally required to commence the investigation once becoming aware of a bribery allegation.

In addition, two non-judicial agencies, the Anti-Corruption Office26 and the Office for Administrative Investigations27 are empowered to investigate bribery offences. The Anti-Corruption Office - an agency within the Ministry of Justice and Human Rights and headed by the Secretary of Public Ethics, Transparency and the Fight against Corruption - has jurisdiction over corruption offences involving the national public administration, companies and any other state-owned enterprise or private entity which the government participates in or in which the state is the primary source of funding. Aside from its responsibilities for preparing programmes for preventing corruption and proposals to amend laws, the Anti-Corruption Office is also entitled to receive complaints, conduct preliminary investigations and, if appropriate, file complaints with criminal judges. The Anti-Corruption Office may also act as plaintiff when state property is affected. The Office for Administrative Investigations, an agency within the Public Prosecutor Office, has the same essential functions as those described for the Anti-Corruption Office. Although there is an overlap on the scope of responsibilities, differences remain in relation to the appointment and removal of the public agents in charge of both agencies. While the National Prosecutor of Administrative Investigations is appointed by the Executive Branch together with the National Congress after a proposal made by the Attorney General arising from a public examination process, the Secretary of Public Ethics, Transparency and the Fight against Corruption is appointed and removed by the President of Argentina at any time. The National Prosecutor of Administrative Investigations may be removed after a decision made by the ‘Tribunal de Enjuiciamiento del Ministerio Público Fiscal de la Nación' upon request of the Attorney General.

Public prosecutors can initiate a criminal action as a result of a complaint or ex officio, or pursuant to instructions from an investigating judge. Criminal proceedings may also be initiated by the police ex officio or a result of a complaint filed by any person or following instructions from a judge. Public officials who become aware of the commission of a crime while performing their duties must report it to the authorities.

Once an enforcement authority becomes aware of a bribery allegation, the commencement of an investigation is mandatory. The investigation is conducted by the investigating judge or can be delegated to a public prosecutor. The federal procedural system grants the judge the authority to direct the proceedings, and it is this judge who may take any measures appropriate for the discovery of the truth (seizures, requests for information, raids, phone tapping, etc). Once the investigation is completed, the judge may decide whether the matter should move to the oral trial stage, in which case a separate judge or judicial panel conducts the trial until its completion.

Argentine courts have no jurisdiction to prosecute Argentine nationals who commit foreign bribery overseas. Although transnational bribery had already been introduced into the Criminal Code (section 258-bis) as a result of the adoption by Argentina of the OECD Convention, in order for it to be effectively applied it is necessary for Argentine courts to have jurisdiction to investigate Argentine nationals for bribery of foreign public officials perpetrated overseas. The Corporate Criminal Liability Bill contains a proposed amendment to the Criminal Code, which introduces an extended jurisdiction in favour of local courts in connection with crimes committed abroad by Argentine citizens or legal entities domiciled in the Argentine Republic, or by establishments or branches that a legal entity may have in the country.

Internal corporate investigations

There are no specific laws or regulations governing internal corporate investigations in Argentina.28 There are no restrictions under local laws for a legal entity to initiate and conduct an internal investigation, and, indeed, corporate policies adopted by the legal entity may require it, or such an action can be the result of a decision made by the board or similar corporate body as part of its duties and responsibilities. It must be noted that internal investigations performed by external audit or law firms in Argentina do not have the major consideration that they have in the US - where the SEC and the DOJ trust on private investigations, and a board may decide to initiate an internal investigation to comply with its legal duties more than for other purposes.

Investigations may be triggered as a result of an alleged breach of the law, employment contract, or code of conduct and anti-corruption policies, when the facts detected or suspected may involve and affect the legal entity or the employee in his or her employment relationship with the same.

Under local labour laws, employees have the duty to cooperate and participate in internal investigations providing the information and explanations required, subject to their constitutional rights to due process and legal defence. Therefore, an employee may reject or deny participation or cooperation in any internal investigation if those rights are infringed, not responding to all or some of the questions during interviews. The employee has also the right to be assisted by counsel during any interview. Employees must be interrogated in the official language of the place where interviews take place, with the participation of a public translator, if appropriate.

On the other hand, during the investigation, the legal entity is entitled to suspend a suspected employee to protect the integrity of evidence or for the proper discharge of the tasks assigned to the person. There is some debate as to the permitted length of the suspension. While for some scholars it may last for the entire investigation, others consider that only a maximum term of 30 days is reasonable without the consent of the employee. This limitation does not apply when a criminal complaint is filed, as will be discussed below. Most scholars and case law consider that an employee retains the right to receive his or her monthly salary during the suspension period. Payment of this should not preclude the legal entity's right to impose any disciplinary measure, such as economic sanctions or dismissal, once the investigation is completed. If the legal entity has a reasonable basis to suspect that a crime has been committed and decides to file a criminal complaint, it may preventively suspend the employee until the criminal proceeding is finished or a final judgment is issued. It is recommended to analyse on a case-by-case basis whether the suspension should be for the entire period of the criminal proceeding (which may take several years) or only part of it, taking into consideration that the proceeding may not necessarily end with the employee being found guilty. In this scenario the company would be required to rehire the employee and pay him or her all salaries accrued during the suspension period. Additionally, the employee could consider him or herself morally injured due to the complaint initiated and could claim compensation for damages. Labour laws do not provide guidance as to which illegal conduct may justify an employee's suspension or dismissal. As a general rule, dismissal would appear suitable in case of any act or omission that results in actual or potential damage to the legal entity's interests. It will depend on a case-by-case evaluation based on the seriousness of the facts and the potential damages to the company's reputation, including the employee's labour history.

There is no legal obligation for the legal entity or its management to disclose the results of an internal investigation.29 Based on the resulting evidence found upon completion of the investigation, the legal entity may file a criminal complaint with the police, public prosecutor or judge, as discussed in the previous point.

The current legal framework does not contemplate the implementation of leniency agreements or collaboration agreements for legal entities that decide to report a crime. Plea bargains or collaborative agreements are contemplated for the benefit of the individual offenders of certain crimes (drug trafficking, kidnapping, human trafficking, money laundering, corruption, etc, other than crimes against human rights) under the terms of the Repentance Act, providing for the reduction of sanctions if they provide accurate and verifiable information to avoid or impede the perpetration of the crimes, clarify the purpose of the investigation, reveal the identity of other offenders and disclose significant information that contributes to expedite the investigation or the location of victims of the crimes, among other things. Public officials who have held or currently hold positions subject to impeachment cannot enter into collaborative or plea agreements.

Privacy issues in the context of internal corporate investigations

Upon commencement of any investigation, it is advisable to provide all persons who will have access to the relevant data with a written protocol describing the applicable rules on protection of personal data and communications and setting forth the ground rules for data-collection activities. Having such a protocol or other written record of data protection compliance measures in place may be useful in responding to or defending against potential employee objections to the investigation on privacy grounds. Failure to appropriately do this may frustrate the evidence collection procedure and its use or contribution as evidence in any legal proceedings brought as a result of the potential crime.

The Labour Contract Act30 and case law generally recognise the right of employers to take reasonable actions to determine whether employees discharge their obligations properly. However, in exercising such authority, companies are expected to respect employees' fundamental privacy rights. The National Constitution, the Civil Code, the Criminal Code, the National Intelligence Act, the Privacy Act31 and the Computer Access Act32 collectively afford strong protection to personal correspondence and personal data. As a result of this legal framework, companies looking to investigate allegations of employee misconduct must at all times during an investigation seek to achieve an adequate balance between the two interests involved.

Controlling and monitoring activities are valid provided that they are reasonable and adequate to the event or circumstance prompting the exercise of control. They should be carried out protecting the employee's privacy and having first notified the employee about the control powers to which the employer is entitled and the conditions under which they can be exercised. The legal entity must act in good faith in exercising its investigative powers, without incurring in an abusive exercise of any of its rights.

In spite of the foregoing, in a recent judgment of the National Court on Criminal and Correctional Matters the employer's power to review emails sent and received from an electronic address given to the employee for the performance of his duties became uncertain, when the court ruled that the access to the employees' emails, even if there is a policy providing for the employer's right to monitor the use of such technological tools, would entail a violation of the privacy right if made without the control of the courts.33 Given that this decision departs from prior precedents of labour courts as well as international best practices, it remains to be seen if it will consolidate in the future or rather limit its application to cases where no clear rules governing the use of computing and technological tools were made available to the employees.

Additionally, based on the fact that Argentina has adopted a stringent law on data privacy, the transfer of personal data that is collected during an internal investigation to a country without an adequate level of protection (for example from an affiliate company located in Argentina to its parent company in the US) may imply an additional obstacle to internal investigations due to the general impediment to transfer personal data outside of Argentina in certain situations (eg, while European countries are deemed to provide adequate protection, it is not the case in the US).

 

Legal privilege in internal investigations

Client-attorney communications and the work product derived from the advice provided are protected by several regulations, including the National Constitution, the National Civil and Commercial Code, the National Procedural Code and local procedural codes, specific laws and professional codes of ethics regulating the practice of law in several provinces. Secrecy obligations only cease when a client consents to the disclosure or if disclosure is necessary for the attorney's self-defence. Attorneys cannot disclose to government authorities client-attorney communications without waiving the privilege, even in event they gain access to information related to the perpetration of a crime. If actions that are contrary to his or her personal ethical principles occur, an attorney is entitled to cease representing a client. After terminating the engagement, however, the professional secrecy obligations remain.

In Argentina there is no general obligation to disclose documents. A legal entity may discretionally disclose to the courts documents produced by legal counsel during an internal investigation. Attorneys are not compelled by any current law or regulation to disclose facts arising from an internal investigation.

Notwithstanding the foregoing, there are precedents in the criminal sphere where courts, through the use of search warrants, have seized - in companies and law firms - computers, or have copied all of their files. The latter would be covered by case law to the extent that the scope of the documents and goods to be seized are duly specified in the order of the appropriate court and have a direct relationship with the facts of the case in which it was ordered. Therefore, in the face of a judicial order, the privilege in question would not be an impediment to the purposes of carrying out the measure, and obtaining the evidence resulting from that measure.

Notes

  1. See www.worldbank.org/en/country/argentina/overview.
  2. It is expected that the new Criminal Procedural Code, enacted in December 2014, will address the above-mentioned causes of delay by giving prosecutors sole responsibility for conducting investigations and prosecutions. It imposes time limits on prosecutors for completing the various stages of the criminal process from opening a case to trial.
  3. ‘Auditoría a la Justicia: hay 2000 causas abiertas por corrupción y jueces sobrecargados', Clarin, 22 December 2016.
  4. ‘Solo siete de 63 grandes causas de corrupción terminaron con condenas', Télam, 17 July 2016; ‘Las causas judiciales por corrupción duran en Argentina un promedio de 14 años', Infobae, 19 July 2016.
  5. ‘Oportuna auditoría de las causas de corrupción', La Nación, 3 May 2016.
  6. 'La mitad de las denuncias de corrupción nunca avanzaron', Perfil, 3 July 2016.
  7. Inter-American Convention against Corruption, adopted on 29 March 1996 (Caracas, Venezuela), ratified by Argentina and approved by Act No. 24,759 in 4 December 1997, Official Gazette, 17 January 1997.
  8. OECD Convention on Combating Bribery of Foreign Public Officials, adopted on 21 November 1997, ratified by Argentina and approved by Act No. 25,319 in 7 September 2000, Official Gazette, 18 October 2000.
  9. United Nations Convention against Corruption, adopted on 31 October 2003 (by the General Assembly of the United Nations), ratified by Argentina on 28 August 2006, and effective by means of Act No. 26,097, Official Gazette, 12 September 2006.
  10. Act No. 11,179 (Restated Text 1984), section VI ‘Bribery and Improper Lobbying' (Amended by Ethics Act No. 25,188 published in the Official Gazette on 11 January 1999 and Act No. 25,825 published in the Official Gazette on 11 December 2003).
  11. Criminal Code, Act No. 11,179, 3 November 1921 [8300] Official Gazette (text consolidated in 1984, as amended), section 258 and 258-bis.
  12. OECD, Phase 3bis report on Argentina by the OECD Working Group on Bribery, paragraph 42. The OECD Working Group has particularly addressed the need for amendments to Section 258-bis of the Criminal Code, recommending that Argentina (i) introduce an autonomous definition of foreign public officials; (ii) ensure that the definition of foreign public officials covers, in a manner consistent with the Convention, officials of foreign public enterprises and public officials of organised foreign areas or entities that do not qualify or are not recognised as states; and (iii) eliminate the vagueness in the offence resulting from the absence of a requirement that the advantage provided to an official be ‘undue', or that the advantage obtained by the briber be ‘improper'.
  13. Ethics in the Exercise of Public Administration, Act No. 25,188, 29 September 1999.
  14. Criminal Code, supra note 12, sections 256 and 257.
  15. Criminal Procedure Code, Act No. 23,984, 21 August 1991.
  16. New Criminal Procedure Code, Act No. 27,063, 4 December 2014, not yet implemented.
  17. Ethics in the Exercise of Public Administration, supra note 13.
  18. Legal and Regulatory Framework of Public Administration, Act No. 25,164, 15 September 1999.
  19. Ethics Code for the Public Service, Decree No. 41/99, 27 January 1999.
  20. Act No. 27,304 on Repentance that provides for sentence reduction to offenders who cooperate in the investigation of several crimes, including without limitation, money laundering, kidnapping, human trafficking, illicit association, illicit enrichment, etc.
  21. Implementing Resolution No. 13-E/2017 enacted by the Attorney General's Office.
  22. House of Representatives, Bill No. 0031-PE-2016.
  23. Including corporations, companies and associations.
  24. The latter would not apply to legal entities incorporated under the terms of the Promotional Act No. 25,300 for Micro, Small and Medium-sized Entities.
  25. To be increased to 10 per cent when the crime was committed with the senior directives' or management's intervention, knowledge or tolerance, among other scenarios.
  26. Act No. 25,233 (December 1999) created the Anti-Corruption Office and Decree No. 102/99 regulates its functions and main responsibilities.
  27. Act No. 27,148 (10 June 2015) created the Office for Administrative Investigations.
  28. The Corporate Criminal Liability Bill requires an integrity programme contemplating internal investigations protecting the rights of the individuals under investigation and imposing effective sanctions for breach of the respective legal entity's code of ethics or conduct.
  29. To the extent that legal entities are subject to the rules of the National Securities Commission they have the obligation to disclose any fact or situation that could substantially affect the placement of securities of the issuer, the course of the securities' trading or the development of its activities. Based on the particular facts of the potential crime, legal entities should analyse on a case-by-case basis whether disclosure of an ongoing internal investigation would qualify as a ‘relevant fact' requiring disclosure to the Commission. The report becomes mandatory when a judicial proceeding is initiated against the legal entity or by the same as a plaintiff with material impact on its business.
  30. Act No. 20,744, Contract Employment, sections 64, 65, 67 and 70.
  31. Seeks to protect personal data contained in databases.
  32. Its primary goal is to combat hacking, amend several sections of the Federal Criminal Code, and criminalise the undue opening of or access to electronic communications, letters, closed offers, telegraphic and telephone dispatches or any other communications that are not addressed or directed to individuals taking such action.
  33. ‘Gotlib, Rodolfo Saúl y otros' , Criminal y Correccional, Sala I (13 February 2015).

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