The SEC Wednesday charged Brazil’s Centrais Elétricas Brasileiras S.A. or Eletrobras with violating the books and records and the internal accounting controls provisions of the Foreign Corrupt Practices Act.
The utility agreed to pay a penalty of $2.5 million. It didn’t admit or deny the SEC’s findings. The agency resolved the case through an internal administrative order (pdf) without going to court.
The Brazilian government owns 51 percent of Eletrobras and appoints seven of its eleven board members.
From 2009 until 2015, the SEC said, former officers at Eletrobras’ majority-owned (over 99 percent) nuclear power generation subsidiary Eletrobras Termonuclear S.A rigged bids and arranged for private Brazilian construction companies to pay bribes in a project for construction of a nuclear power plant.
The SEC’s administrative order said the Eletrobras officers “misused their official positions in authorizing unnecessary contractors and inflating the cost of an infrastructure project at Eletronuclear.”
In return the construction companies paid the former Eletronuclear officers $9 million in bribes, the SEC said.
Eletrobras first disclosed the FCPA issues in October 2016, when it said it hired Hogan Lovells for “an independent internal investigation.”
In August this year Eletrobras said the DOJ had declined to prosecute the company “for issues related to the Foreign Corrupt Practices Act.”
Wednesday’s SEC order said “material weaknesses” in Eletrobras’ internal controls “directly contributed to the bribery scheme flourishing undetected for years.”
The order found that Eletronuclear “paid inflated contract costs and sham invoices, recorded these items as legitimate expenses for goods or services, and then consolidated them in Eletrobras’ books and records.”
The SEC said it considered Eletrobras’ cooperation, which included “sharing facts developed during an internal investigation and voluntarily producing and translating documents.”
Eletrobras also disciplined employees, enhanced its internal accounting controls and compliance functions, and adopted new anti-corruption policies and procedures, the SEC said.
The SEC said it had help in the case from the Brazilian Federal Prosecution Service and the Brazilian Federal Police.
Richard L. Cassin is the publisher and editor of the FCPA Blog.