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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Reconsidered: Odebrecht and Braskem are on our FCPA Top Ten list

While the U.S. share of Odebrecht’s “global” criminal penalty for its December 21 FCPA resolution is not yet known, it’s going to be at least $260 million. Its subsidiary, Braskem, agreed to pay the DOJ and SEC $159.8 million for FCPA offenses. If you combine them, their $419.8 million settlement lands fifth on our list of the biggest FCPA cases of all time.

Whether to combine the Odebrecht and Braskem resolutions was always a close call.

We (and most other FCPA watchers) typically combine enforcement actions involving a corporate parent and one or more subsidiaries. Most of the cases on our top ten list involved parent companies and subsidiaries, including Siemens, Alstom, Teva, Och-Ziff, VimpelCom, and Alcoa.

Odebrecht is Brakem’s corporate parent. It controls just over half of the voting shares of Braskem and about a third of its capital stock. The charges against the two companies were interrelated — Braskem used a business unit of Odebrecht to handle its bribery. The DOJ filed the cases at the same time and both companies entered plea agreements on the same day. A single DOJ release covered both companies.

But there were reasons not to combine them. The DOJ treated parent Odebrecht and subsidiary Braskem more like separate enforcement actions than we’ve seen in past FCPA corporate cases.

For example, Odebrecht and Braskem faced separate criminal charges and entered separate guilty pleas. Each company received separate and very different payment arrangements for their criminal penalties, which themselves were separately calculated. And each company agreed to retain its own independent compliance monitor. Usually in FCPA actions, just one monitor is stipulated for the corporate parent.

The way the DOJ handled Odebrecht and Braskem wasn’t typical. That stumped us when it came to whether the actions should be combined or kept separate. At first we decided to keep them separate, based mainly on the unique way the DOJ handled them.

Then we wavered. We started looking back at other parent – subsidiary FCPA actions. Just then one of the FCPA Blog editors came along and nudged us to the other result. As he said, “Since the agencies are breaking new ground with a lot of this stuff, we gotta make up the rules as we go along!”

He’s right.

So we’re combining Odebrecht and Braskem, and combined they land fifth on our list of the ten biggest FCPA cases of all time.

Pushed out of the FCPA top ten is Snamprogetti Netherlands B.V. / ENI S.p.A (a Dutch subsidiary and its Italian parent), which together paid $365 million in 2010.

As of now, four of the ten biggest FCPA cases happened in 2016 — Odebrecht and Braskem, Teva Pharmaceuticals, Och-Ziff, and VimpelCom.

Here are the current top ten FCPA enforcement actions of all time:

1. Siemens (Germany): $800 million in 2008.

2. Alstom (France): $772 million in 2014.

3. KBR / Halliburton (USA): $579 million in 2009.

4. Teva Pharmaceutical (Israel): $519 million in 2016.

5. Odebrecht / Braskem (Brazil): $419.8 million in 2016.

6. Och-Ziff (USA): $412 million in 2016.

7. BAE (UK): $400 million in 2010.

8. Total SA (France) $398 million in 2013.

9. VimpelCom (Holland) $397.6 million in 2016.

10. Alcoa (U.S.) $384 million in 2014.

___

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

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4 Comments

  1. Richard,

    I think you were right combining these two into one. After all, Braskem was allegedly also using Odebrecht's Bribery Department for advice and payments.
    May I ask you one thing though. When you talk about Vimpelcom or any other Dutch BV or NV could you describe the country as the Netherlands and not as Holland? Holland is a province of the Netherlands (in fact there are two provinces North and South Holland). There are 10 more provinces. The nation is called Kingdom of the Netherlands (in short: Netherlands). It's a bit like England and Great Britain.
    There are some historical reasons why it is know as Holland (most of the sea farers who traveled the world came from Holland and rightly introduced themselves as Hollanders). In those days the Netherlands was a Republic and organised on a more federal basis.
    Thank you

    Frank (from Netherlands but not from Holland)

  2. Brazil is the first LatAm country to seriously tackle corruption by setting examples at the top.

    If Castro's Leftist Revolutionary fervor was the equivalent of the Reformation challenging the corrupt established LatAm order, then Moro and other LatAm Prosecutors are the Counter Reformation cleaning up corruption within the established order in order to take fuel away from Leftist fire.

    Bullish Brazil. Brazil is building a solid foundation for its future and setting an example for the rest of LatAm to follow. Mutations of Eliot Spitzer are popping up from Guatemala to Brazil. Everything is going to change over the next 10 years in LatAm.

  3. Richard,

    I just think it is important to add to this scenario (which I agreed on considering the both companies as one) that Petrobras holds 47% of voting capital (36% of total capital) of Braskem.

    It becames more interesting to be discussed when we realize that Petrobras has been considered just victim by the Brazilian prosecutors. Petrobras still expects to receive a relevant portion of the fines, since it would be a victim.

    Regards,

    Rodrigo Carril
    Instituto Compliance Brasil

  4. Since the defendants acted together, you may consider grouping the penalties paid in the Nigerian Bonny Island cases. These were Halliburton/KBR, ENI, Technip, JGC, Marubeni, Jack Stanley, and Jeffrey Tesler. The total comes to about $1.72 billion, dwarfing other matters.


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