Global Investigations Review - The law and practice of international investigations

The Practitioner’s Guide to Global Investigations, Third Edition

Brazil

Hogan Lovells (São Paulo)

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.

The highest-profile corporate investigation in Brazil relates to Petrobras, Brazil’s state-run oil company and the largest company in the country. The corruption scheme involving Petrobras started in March 2014 and continues to date. It has linked some of the country’s most powerful and wealthy chief executive officers and politicians, including two former presidents of Brazil – Dilma Rousseff and Luiz Inácio Lula da Silva – and the findings created ramifications involving other public companies. It is expected that this investigation, known as Operation Car Wash, will continue to 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. Furthermore, the Clean Companies Act stipulates that, in the case of mergers or amalgamations, the surviving company is liable for fines and damages arising out of corrupt acts performed before the corporate transaction. The liability of the successor company will be limited to the payment of fines and full compensation for the damage caused. Note that the successor company will not be subject to other sanctions set forth in the law arising out of acts and facts that happened before the date of the merger or amalgamation, except if the transaction was part of evident and proven simulation or created for fraudulent purposes.

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 (CADE). Publicly traded corporations are also regulated by the Securities Commission (CVM), the Stock Exchange (B3, formerly known as BM&FBovespa) and other self-regulated organisations, such as the Brazilian Association of Capital and Financial Markets Entities. Under the Clean Companies Act, the Office of the Comptroller General (CGU) – currently known as the Ministry of Transparency, Oversight and Office of the CGU – is the authority with powers to prosecute companies. However, 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 a suspicion of illegal activity (e.g., through a whistleblower). However, authorities must possess sufficient evidence of wrongdoing to obtain legal orders, such as for wiretapping 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?

The concept of double jeopardy in criminal proceedings does exist in Brazil; however, corporations can only be held criminally liable for violations of environmental law.

6 Does criminal law have general extraterritorial effect in your country? To the extent that extraterritorial effect is limited to specific offences, describe those which have extraterritorial effect, the statutory basis and any conditions that must be met for extraterritoriality to apply.

Brazilian criminal law has extraterritorial effect with respect to certain crimes. In accordance with article 7 of the Brazilian Criminal Code, these are crimes (1) committed against the life or liberty of the Brazilian president, (2) committed against the property or legitimacy (fé pública) of the Brazilian Union, Federal District, or any Brazilian state, territory, municipality, public company, mixed capital company, authority or foundation instituted by public authority, (3) committed against the public administration, by a public servant, (4) of genocide, when the perpetrator is Brazilian or domiciled in Brazil, (5) that Brazil has agreed to combat by a treaty or convention, (6) committed by Brazilians, and (7) committed in Brazilian aircraft or vessels, either commercial or private, when in foreign territory and that are not being prosecuted in that location.

For the crimes listed in points (1) to (4) above, the perpetrator shall be punished in accordance with Brazilian law even if convicted or acquitted abroad. For the crimes listed in points (5) to (7), the application of Brazilian law will depend on whether:

  • the perpetrator has entered Brazilian territory;
  • the conduct is also punishable in the country where it was committed;
  • the perpetrator has not been acquitted or served time abroad; and
  • the perpetrator has not been pardoned abroad or criminal liability has not been extinguished.

In addition, the crime must be extraditable under Brazilian law.

Furthermore, Brazilian law also applies to crimes committed by foreigners against Brazilians outside Brazil, provided the conditions set forth above are met and extradition has not been requested or denied, and there has been a request from the Justice Minister.

7 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. Brazilian companies and public authorities also lack experience regarding anti-bribery cases involving local and foreign prosecutors as the Clean Companies Act only came into force in 2014.

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 the backup of information as most companies have not invested in data storage capacity), 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).

Another concern is the fact that many Brazilian agencies – the CGU, CADE, the Federal Police, the Federal Prosecutor’s Office (MPF) and the Audit Court (TCU) – have jurisdiction over corruption cases, which represents a challenge in reaching resolutions quickly.

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

Brazilian authorities should generally conduct their own investigations to gather the necessary evidence to ensure a conviction, regardless of investigations conducted by foreign authorities. However, it is increasingly common for Brazilian authorities to rely on co-operation agreements with foreign authorities investigating the same or similar matters to provide assistance and increase efficiency. For example, in a big corruption investigation involving Brazilian aircraft manufacturer Embraer, Brazilian, US, Dominican Republic and South African authorities worked together to identify misconduct committed by the company, resulting in a landmark settlement with Brazilian and US authorities and the prosecution of several individuals involved. The settlement also included the first-ever dual monitorship agreement signed with the company, the US Securities and Exchange Commission (SEC) and the CVM. With respect to foreign judicial decisions, in accordance with the Criminal Code, when the application of Brazilian law would produce the same consequences, damages orders, restitution or other civil remedies, or other security measures, can be recognised and enforced in Brazil provided certain requirements are met.

9 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 this Decree, an effective compliance programme shall fulfil 16 requirements, including commitment of senior 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, the creation of an anonymous hotline for any tips, and internal controls and precise books and records. In addition, CADE and the CGU have issued new compliance guidelines, whereby companies with an effective compliance programme who are found guilty of anticompetitive conduct could have their fines reduced. Recently, the State of Rio de Janeiro and the Federal District enacted laws requesting that companies dealing with public administration must implement a compliance programme. We expect other states in Brazil to follow this trend. In addition, there is a Bill under the Senate that creates the necessity of a certification process to evaluate companies’ compliance programmes.

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

Corruption is the object of the widely reported Operation Car Wash, involving Petrobras, which is the largest corruption investigation in the history of Brazil. More recent investigations include:

  • Operation Weak Flesh, involving JBS Group, one of the largest meat producers in the world;
  • Operation Old Jail, a spillover from Operation Car Wash, investigating undercover bribes paid by transportation barons to state congressmen in exchange for approval of laws that favour their business operations, such as tax breaks and fare increases;
  • Operation Unfair Play, a joint investigation opened by the Brazilian and French police to probe bribery in the bid for the 2016 Olympics in Rio de Janeiro; and
  • Operation Resonance, a healthcare cartel investigation that has been carried out by the MPF, CADE, the TCU, the CGU, the Federal Revenue Office of Brazil and the Federal Police. The alleged scheme was formed by a group of companies participating in a cartel, on the one hand, and individuals in a strategic position within the public sector or with connections with the public sector who designed the tender and controlled the tender’s process to support the scheme.

The largest tax evasion investigation in the country’s history is Operation Zealots, which also involved the bribery of politicians and tax authorities.

11 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

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

Most allegations come through whistleblowers (internal or external), internal audits (with the support of external auditors) or investigations by government authorities (e.g., Operation Car Wash).

13 Does your country have a data protection regime?

On 10 July 2018, the Brazilian Senate approved the Data Protection Bill of Law (PLC 53/2018 – also known as Projeto de Lei Geral de Proteção de Dados (LGPD)), which establishes new rules for the use of personal data by individuals, private entities and the public sector in Brazil. The LGPD has significantly transformed the data protection system in Brazil and is in accordance with the most recent European legislation – the General Data Protection Regulation (GDPR), which entered into force in May 2018. The LGPD very much follows the GDPR and includes detailed rules with respect to collection, use, processing and storage of personal data. To access the data, it is necessary to obtain prior, clear and unequivocal consent by data subjects, and a clarification by companies regarding the reasons for the collection of data.

The LGPD will probably affect all economic sectors, including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected. The final draft of the LGPD (Law 13.709/2018) was sanctioned by the President of Brazil on 14 August 2018. The LGPD was subjected to certain vetoes by the presidency, owing to public interest and the possible unconstitutionality of some articles. The main veto related to the creation of a national data protection authority (the ANPD), an autarchy subject to the Ministry of Justice, responsible for regulating, supervising and applying sanctions arising from the new legislation, and the National Council for the Protection of Personal Data and Privacy, since the President decided that such agencies should be created by the initiative of the Executive Power. Companies will need to be compliant by February 2020, as provided for by the LGPD.

14 How is the data protection regime enforced?

The obligations established by the LGPD will become effective within 18 months of publication in the Official Gazette, which occurred on 15 August 2018, after which period companies will need to be compliant regarding policies, procedures and data processing activities. The LGPD requires companies to appoint a data protection officer, who will respond to any matters concerning the processing of personal data, including the yet to be created national authority.

15 Are there any data protection issues that cause particular concern in internal investigations in your country?

Yes. In relation to the collection of data in internal investigations in Brazil, it is advisable that a company obtains from its employees prior, clear and unequivocal consent by data subjects regarding the collection of corporate devices provided by the company. By doing so, a company that undertakes an internal investigation is protected from employees claiming violation of their privacy. Taking into consideration that most exchanges of information are carried out with personal devices, it is important that companies have employment contracts clearly stating that all devices provided by the company belong to the company, even if individuals use them for personal purposes. In that respect, it is highly recommended that companies prohibit their employees from using personal devices to deal with corporate emails, since personal devices cannot be accessed by internal investigators unless authorised by the users.

As mentioned before, the LGPD establishes new rules for the use of personal data by individuals, private entities and the public sector in Brazil. However, the LGPD is very recent and since companies will need to implement policies, procedures and data processing activities by February 2020, it is uncertain how application of the new law will be interpreted by public authorities and the court in Brazil.

16 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 in court before entering the company’s premises and must abide by the limitations set forth in the warrant.

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

While attorneys can claim privilege over certain materials, 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 Car Wash, for example, the presiding judge requested certain documents seized to be delivered to Odebrecht’s lawyers (a construction company indicted for bribery allegations) 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. In Brazil, there is no legal distinction between in-house and external counsel protection. In-house counsel have the same legal professional privilege as those in private practice.

18 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 the Federal Constitution, 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. In addition, those with professional secrecy obligations (such as lawyers and doctors) should also be excused from testifying, unless they participated in the misconduct.

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

Brazil does not have a specific whistleblower protection law. On 22 February 2015, the CGU issued guidelines on compliance programmes (Compliance Programmes – Guidelines for Private Companies) outlining the elements of an effective compliance programme, as set forth in the Clean Companies Act and further regulated by Decree No. 8.420/2015, which include a requirement for companies to have a whistleblower channel for their compliance programmes to be considered effective. Although Brazil lacks a specific whistleblower protection law, 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.

On 11 January 2018, Federal Law No. 13.608 was enacted to authorise states to create hotlines. The Act also foresees that the Federal Union, the states, the Federal District and municipalities may establish ways to reward whistleblowers who disclose useful information to prevent, repress or to investigate crimes and administrative offences. The hotlines should preferably be free of charge and operated by a non-profit private entity, through a partnership agreement with the appropriate government entity. In addition, if an informant chooses to be identified, the confidentiality of his or her personal data must be ensured by the entity that receives the report. As a result, the new law constitutes a notable progression towards protection for whistleblowers in Brazil.

20 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?

Brazil has a very established legal framework to deal with employment rights and specialised courts. Brazilian labour laws are complex and tend to favour the employee. In simple terms, employees of Brazilian companies can be subject to sanctions such as a warning, suspension or dismissal. The same is applicable to directors and officers. However, the extent of these penalties would depend on the particular case.

21 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 (with few exceptions, such as for companies in the financial services industry – see question 40). Best investigation practice recommends suspension (as provided by Brazilian labour laws) of an employee who is a suspect so that an independent investigation can be carried out. This practice has been applied in most large cross-border investigations in Brazil. Employees are expected to co-operate in an internal investigation but should not be forced into an interview, for instance, and they should not be penalised for acting in this manner. 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 tend to be pro-employee).

Commencing an internal investigation

22 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 the complexity of the investigation, but law firms usually prepare an investigation plan (the level of detail varying depending on the size and scope of the investigation).

23 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 retention notice to all employees advising that no documents or data should be deleted until further notice.

24 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 whether the company has shares that are publicly traded. The moment and quality of the disclosure should be analysed case by case.

25 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 immediately upon any suspicions of wrongdoing so that an internal investigation can begin. Contact with law enforcement officials should be made as soon as the company has evidence. Generally board meetings are held on predetermined 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.

26 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 tampering – is a felony under the Clean Companies Act and the Criminal Code). Furthermore, companies should retain specialised counsel as soon as they receive the subpoena and not engage with the authorities without legal representation.

27 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

28 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 that products of the investigation (such as investigation reports and memoranda 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.

Marking materials as ‘privileged and confidential’ and informing witnesses of the legal purpose of the investigation are also recommended steps to ensure privilege protection. Marking a document in this way may help identify it accordingly and avoid an inadvertent production if it is in fact privileged or work-product material. Only attorney–client communication and attorney–work-product should be marked as confidential. Communications – even between an attorney and client – that do not convey or contribute to the provision of legal advice are unlikely to be deemed privileged.

29 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?

Privilege covers all information disclosed to an attorney or that the attorney is provided in his or her capacity as legal counsel. Any communications between attorneys and their clients during an internal investigation are also deemed confidential. Attorneys cannot disclose any non-public information received from their clients or otherwise obtained in the context of the attorney–client relationship, regardless of the nature of the information or the manner in which it is disclosed or obtained. 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.

30 Does the attorney–client privilege apply equally to in-house and external counsel in your country?

Yes, attorney–client privilege applies to both in-house and external lawyers – there is no legal distinction between the two in Brazil. In-house lawyers have the same legal professional privilege as those in private practice, provided they have been granted the necessary powers to represent the company. As long as the communication involves legal issues and the counsel (in-house or external) is licensed or registered at the competent Brazilian Bar Association, the privilege extends to communications between employees (clients) and counsel.

31 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 in which 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.

32 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 a request. In addition, Brazil is a signatory to a number of international treaties providing for the exchange of information between public authorities.

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

See question 32.

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

See question 32.

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

The Brazilian Attorney Ethics Code does not clearly afford this protection to third parties; therefore it is not clear whether attorney–client privilege would cover information prepared by or in the possession of third parties.

Witness interviews

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

Yes.

37 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 and reported to an attorney, witness interviews or attorney reports about it 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 to avoid the content of interviews being made public.

38 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?

Brazilian labour laws and companies’ ethical rules must be complied with. In addition, as cross-border investigations usually have some connection with the United States, it is advisable 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). These requirements are in line with Brazilian law.

39 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. There are no specific laws or procedures in Brazil providing guidance on how to conduct employee interviews. As a result, 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. In addition, given that Brazilian employment courts tend to be pro-employee, it is very important that companies ensure that employees suffer no embarrassment or moral harassment during interviews.

Reporting to the authorities

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

Generally speaking, private citizens and corporations are not required to report misconduct, but there are some exceptions. For example, public officials may be required to report certain crimes, and individuals and companies involved in financial services must report financial crimes to the Council for Financial Activities Control, according to the Brazilian Money Laundering Act (Law No. 9.613/98). Upon being given notice by the management of wrongdoing, a board of directors may consider, in addition to commencing an internal investigation, when it will be appropriate to contact law enforcement authorities in view of fiduciary duties imposed by corporate law. It is recommended that any private individual or company reports to the public authorities if they uncover evidence of wrongdoing.

41 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 interests (e.g., to enter into a leniency agreement or as part of its defence strategy as a victim of the crime rather than the perpetrator). If a Brazilian company also has legal obligations to report under foreign laws, say because it has American Depositary Shares (ADSs) listed on the New York Stock Exchange, or has a subsidiary in the United Kingdom that is potentially involved in the wrongdoing, then it should consider self-reporting to the public authorities of foreign countries as well.

42 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. Activities that constitute corruption involve multi-jurisdictional prosecutions (the CGU, CADE, the Federal Police, the MPF, the TCU and the CVM); therefore, companies should retain specialised counsel prior to self-reporting to ensure they get the best deal possible.

Responding to the authorities

43 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 responsible for all contact and negotiations with the authorities. While it is theoretically possible to have a dialogue with the authorities, in practice this will depend on the factual circumstances, and the strategy set out by the team running the investigation. It is not uncommon for authorities to avoid or deny informal contact with suspects or their attorneys.

44 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.

45 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 equally. Practical steps would depend on the case but it is best to treat all public authorities similarly.

46 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. One must, of course, check local laws regarding data access and cross-border data transfer.

47 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 (see question 8). 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. Brazil has also allowed certain foreign authorities to set up offices in the country – the Federal Bureau of Investigation has an office in Rio de Janeiro and works alongside Brazilian authorities in cross-border investigations.

48 Do law enforcement authorities in your country have any confidentiality obligations in relation to information received during an investigation or onward disclosure and use of that information by third parties?

Brazilian authorities routinely share information with each other. Information gathered during the investigative phase (inquérito) should be kept confidential by the authorities; however, authorities may use this information to commence a legal proceeding and, if the proceeding is not deemed confidential, this information shall be available to the public. It is also possible for companies to ask for confidential treatment of certain information (e.g., trade secrets). In the case of plea bargains and leniency agreements, for example, where confidential information is usually disclosed to the authorities, interested parties can request that this information be kept classified.

49 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 their concerns to the requesting authority.

50 Does your country have 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. Attorney–client privileged information can be kept confidential by challenging subpoenas in court.

51 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

52 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.

53 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. The liability of a successor company will be limited to the payment of fines and full compensation for the damage caused. Note that a successor company will not be subject to other sanctions set forth in the law arising out of acts and facts that happened before the date of the merger or amalgamation, except if the transaction was part of evident and proven simulation or created for fraudulent purposes. Individuals may face fines and imprison­ment for up to 12 years.

54 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. Courts and other public authorities will also look into a company’s compliance programme to assess how effective it is and if it complies with local regulation.

55 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.

56 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 Act and Law No. 8.666/1993 on public tender and administrative contracts, companies that are found guilty of conducting certain crimes (including 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.

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

The Clean Companies Act, which was enacted in early 2014, provides no clear guidance on the possibility of, or requirements for, global settlements. However, Embraer, a Brazilian aircraft manufacturer, entered into a landmark settlement with Brazilian and US authorities in late 2016. According to a US Department of Justice (DOJ) release of 24 October 2016, Embraer entered into a three-year deferred prosecution agreement (DPA) to resolve the case. In accordance with the DPA, among other measures, Embraer will retain an independent corporate compliance monitor for three years, to report to both US and Brazilian public authorities, which is the first time a dual monitorship has been applied to a Brazilian company. Additionally, Embraer agreed to pay a criminal penalty of US$107,285,090, since the company admitted its involvement in a conspiracy to violate the anti-bribery, books and records provisions of the US Foreign Corrupt Practices Act and its wilful failure to implement an adequate system of internal accounting controls. The Odebrecht group, Brazil’s largest construction company, has also entered into a global settlement with the DOJ, the SEC, the CVM, Brazilian public prosecutors and the Swiss authorities regarding bribery allegations in connection with the Operation Car Wash investigation, in which they agreed to pay a US$3.9 billion penalty. Finally, in September 2018, the Brazilian oil company Petrobras agreed to a US$853.2 million settlement with US and Brazilian authorities to end the investigations linked to corruption and cartel charges.

As Brazil has global companies and there is an increased trend towards global co-operation between international public authorities, it is expected that more global settlements will take place. Therefore, we recommend considering which jurisdictions are involved when planning an internal investigation, so that all agencies and countries come to the table to discuss any settlement early on in the process.

58 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

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

The investigatory stage should be kept confidential by the authorities; however, authorities may use information gathered during this stage to commence the criminal case. Most criminal cases are public in Brazil, unless the presiding judge rules that it should be classified (e.g., 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).

60 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. Given the extent of media attention on corruption cases in Brazil, we recommend that companies obtain advice regarding investor relations (in the case of a listed company) and public relations to help manage a corporate crisis, and establish internal protocols or guidelines to deal with these situations.

61 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

62 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 whether the company has shares that are publicly traded and whether the settlement will have a material effect on the company’s business or finances.


Footnotes

Isabel Costa Carvalho is a partner at Hogan Lovells. Mariana Vasques Matos and Cíntia Rosa are associates at HL Consultoria em Negócios.

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