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Felipe Rocha dos Santos: New guidance for Brazil anti-corruption settlements

In August 2013, Brazil’s game-changing Clean Companies Act introduced the leniency agreement, a deferred prosecution deal for companies willing to plead guilty and settle corruption charges.

While these agreements were created to encourage cooperation, the Clean Companies Act or CCA (Law No. 12,846/13) and subsequent regulations did not provide sufficient guidance on their implementation. As a result, companies viewed them with skepticism, whereas the authorities struggled to make them effective.

The first settlement under the CCA (signed with SBM) was not reached until July 2016. After months of negotiations, it was ultimately blocked by the Federal Prosecutor’s Office, on the grounds that it was too favorable to the accused and created a moral hazard by pre-allocating fines to certain government entities.

More recently, in May 2017, authorities sparked controversy over the J&F settlement, which certain members of the public and media perceived to be unfair and lacking transparency.

Perhaps in response to the backlash, the Federal Prosecutor’s Office finally took steps to address these shortcomings. On August 29, the agency’s Anti-Corruption Unit released detailed guidelines for negotiating and ratifying leniency agreements. They intend not only to facilitate coordination among Brazil’s many anti-corruption enforcement agencies, but also to promote transparency in the context of corporate settlements.

Under the new rules, companies seeking to settle must negotiate with the prosecuting agency with jurisdiction to enforce the CCA or the Administrative Misconduct Law (Law N. 8,429/92) in their specific case. If their employees or directors wish to negotiate individual plea bargains in connection with the same facts, the company’s discussions must occur simultaneously or subsequently to the individual settlements.

After preliminary discussions on the allegations to be covered and the evidence to be produced, the prosecutors determine whether the company’s cooperation is necessary and useful to the investigations. In this case, the parties sign a non-disclosure agreement and begin negotiating the terms of the settlement.

If the prosecutors believe the involvement of a particular individual in the negotiations to be morally questionable, they must deny his/her participation and require the company to appoint a different representative.

The final settlement must be submitted to the Anti-Corruption Unit for review and ratification, along with any necessary clarifications or additional documentation. The guidance lists numerous requirements for validation, including: (i) the company must be the first offender to disclose the misconduct in question; (ii) the facts covered by the settlement, as well as supporting evidence, must be new to the authorities and relevant to dismantling the illegal scheme; (iii) the parties must establish a protocol for disclosure of facts learned post-closing (such as amendments to the settlement and potential consequences); and (iv) other enforcement authorities and public entities must be authorized to join the settlement. No evidence or information may be shared with authorities that do not join the settlement or undertake to comply with its terms.

Companies are entitled to a reward that is reasonable and proportionate to the significance and effectiveness of their cooperation. This may include, where applicable, completely avoiding civil, criminal, or administrative charges based on the facts revealed as a result of the settlement. On the other hand, by express provision, they may not be granted a full release and discharge of all claims for damages and losses. Any payments determined by the settlement are considered as advances, pending further assessment. 

In exchange for such benefits, companies must agree to a set of core obligations, including: (i) producing relevant evidence within the established timeframe; (ii) discontinuing the misconduct; (iii) implementing a compliance program or hiring an external auditor (where applicable); (iv) acting in good faith and continuing to cooperate with the authorities; (v) compensating all damages (without prejudice to the claims of other entities or individuals not expressly covered by the agreement); (vi) paying all applicable fines; (vii) waiving the privilege against self-incrimination; (viii) declaring that all information provided is truthful and accurate, failing which the settlement shall be terminated.

While in practice these rules may evolve as more experience is gained, the new guidance offers a rare insight into the prosecutors’ enforcement principles. Therefore, understanding its implications is crucial to all companies facing investigations and considering whether — and how — to engage in settlement negotiations.

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Because of space limitations, this is a summary of the new guidance and just some of the requirements for leniency agreements.


Felipe Rocha dos Santos, pictured above, (Harvard LL.M., UFRGS Law School LL.B.) is an international specialist in Hughes Hubbard & Reed‘s anti-corruption and internal investigations practice group in Washington, DC. The firm also prepares an annual publication containing a summary of FCPA settlements Great and criminal matters and an analysis of enforcement trends and lessons.

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