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Harry Cassin
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DOJ and SEC take small slice of Odebrecht – Braskem $3.5 billion global settlement

Brazil construction giant Odebrecht S.A. and its petrochemical unit, Braskem S.A., pleaded guilty Wednesday to paying bribes around the world. The companies agreed to pay $3.5 billion for a global settlement with authorities in the United States, Brazil, and Switzerland.

Braskem, whose American Depositary Receipts trade on the New York Stock Exchange, agreed to pay the DOJ and SEC $159.8 million for conspiring to violate the Foreign Corrupt Practices Act. It will pay a criminal penalty to the DOJ of $94.8 million and disgorge $65 million to the SEC.

Odebrecht agreed to pay a criminal penalty to the DOJ that is equivalent to 10 percent of its total criminal fine. It agreed in its plea that the appropriate criminal fine is $4.5 billion. But it said it can only afford to pay $2.6 billion. Final sentencing was set for April 17, 2017 when the fine amount will be decided.

Odebrecht entered into a plea agreement with the DOJ for a conspiracy to violate the anti-bribery provisions of the FCPA.

Under the plea, Odebrecht will also pay 10 percent of its final criminal fine to Switzerland and 80 percent to Brazil.

The DOJ filed a one-count criminal information against Odebrecht Wednesday in the U.S. District Court for the Eastern District of New York.

Odebrecht reached related settlements Wednesday with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.

Braskem separately pleaded guilty Wednesday to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA. 

The SEC charged Braskem with creating false books and records to conceal millions of dollars in bribes. The agency filed a civil complaint Wednesday in the U.S. District Court for the District of Columbia.

Braskem also settled with Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. 

Braskem’s total criminal penalty is $632 million. 

It will pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay Swiss authorities 15 percent. 

The United States will receive $94.8 million — 15 percent of the total criminal fines paid by Braskem.

Braksem’s final U.S. sentencing date hasn’t been set.

Odebrecht and Braskem agreed to retain independent compliance monitors for three years.

The DOJ said the companies failed to voluntarily disclose their bribery and the cover up. 

The conduct “spanned many years, involved the highest levels of the companies, occurred in multiple countries, and involved sophisticated schemes to bribe high-level government officials,” the DOJ said.

Wednesday’s enforcment action is part of a long-running probe by Brazil prosecutors into corruption at the state energy company Petrobras. The investigation in Brazil has implicated scores of big companies and dozens of executives and politicians. The investigation is called Operation Car Wash.

Earlier this year, the CEO of Odebrecht SA — Marcelo Odebrecht — was sentenced to 19 years in prison for money laundering, corruption, and taking part in a criminal association.

Odebrecht S.A. admitted Wednesday to a bribery and bid-rigging scheme that started as early as 2001. During that time, the company paid about $788 million in bribes to government officials and political parties in several countries to win business. 

“The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts,” the DOJ said.

Some of the Odebrecht employees involved in the bribery scheme were working in the United States.

Odebrecht and Braskem used a hidden Odebrecht business unit to fund and pay the bribes. The DOJ’s Sung-Hee Suh called that unit a “Department of Bribery.”

Braskem admitted Wednesday that between 2006 and 2014, it paid about $250 million into Odebrecht’s secret bribe payment system. 

The money went to politicians and political parties in Brazil and to an official at Petrobras.

In exchange, Braskem enjoyed preferential rates from Petrobras for the purchase of raw materials and lower tax bills in Brazil. 

Odebrecht controls just over half of Braskem. Petrobras has a minority stake.

The DOJ said with a combined total of at least $3.5 billion, Wednesday’s U.S., Brazilian, and Swiss settlements with Odebrecht and Braskem are “the largest-ever global foreign bribery resolution.”

Germany-based Siemens AG paid about $1.6 billion to U.S. and German authorities in a 2008 settlement. The U.S. portion of the settlement was $800 million — still the biggest FCPA enforcement action.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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