US-Brazil Alignment Is Incentivizing Companies to Settle Corruption Cases

Operation Car Wash is transforming the legal landscape in Brazil. The anticorruption probe began as an investigation into allegations that officers of Petroleo Brasileiro SA, the state-controlled oil company more commonly known as Petrobras, accepted bribes in exchange for awarding contracts at inflated prices to a multitude of construction companies and other businesses. Operation Car Wash revealed systemic corruption across the public company sector that resulted in losses of more than $15 billion and, as of press time, has led to more than a thousand warrants, dozens of pretrial detentions, and more than a hundred convictions. Brazilian authorities have recovered more than $3 billion; the investigation is ongoing.

The aggressive response by Brazilian prosecutors to locate evidence of corruption is cascading through Latin America and has prompted numerous investigations into corruption by other countries outside Brazil. Operation Car Wash underscores the importance, and the practical effect, of the Clean Company Act, which Brazil enacted in 2013. The legislation marked the beginning of corporate liability for corruption in that country. Although companies are not subject to criminal liability, the Clean Company Act establishes civil and administrative penalties for companies that engage in corrupt conduct. But, unlike the U.S. Foreign Corrupt Practices Act (FCPA), this legislation does not require proof of corrupt intent. As Brazil adjusts to the new reality of rigorous anticorruption enforcement, a system that incentivizes companies to disclose evidence of corruption and to cooperate with enforcement authorities is taking shape.

In many respects, this incentive structure parallels established law enforcement procedures in the United States. These parallels have important implications for multinational corporations concerning how they should address both known and potential misconduct.

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