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Former Braskem CEO charged with FCPA and money laundering conspiracies

The DOJ unsealed an indictment Wednesday charging the former chief executive officer of Braskem S.A. with helping his company and Odebrecht S.A. amass a giant slush fund and use it to bribe officials and political parties in Brazil.

Jose Carlos Grubisich, 62, a Brazil citizen, was charged in federal court in Brooklyn, New York. He faces one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, one count of conspiracy to violate the FCPA’s books and records provisions and falsely certifying financial reports, and one count of conspiracy to commit international money laundering.

Grubisich was CEO of Braskem from 2002 to 2008. He served on the petrochemical giant’s board of directors from 2010 to 2012, and as a consultant to Odebrecht from 2012 until 2015.

Braskem’s controlling shareholder is Odebrecht, a Brazilian construction firm, with nearly 40 percent ownership and just over 50 percent of the voting shares. Brazil’s state energy company, Petroleo Brasileiro S.A. (Petrobras), owns about a third of Braskem.

Grubisich was arrested Wednesday morning, the DOJ said.

The indictment was handed down in February 2019 but had been sealed until the arrest.

In December 2016, Odebrecht and Braskem pleaded guilty to bribing officials 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 paid a criminal penalty to the DOJ of $94.8 million and disgorged $65 million to the SEC.

In June this year, Odebrecht went into bankruptcy. It cited large business losses since the FCPA resolution. The company, once Latin America’s biggest construction firm, is aiming to restructure about $13 billion in debt.

The DOJ alleged that from 2002 to 2014, Grubish and other former Braskem and Odebrecht employees diverted about $250 million from their companies for a secret slush fund. They used some of the money to bribe politicians and political parties.

“The slush fund was allegedly generated by payments from Braskem’s bank accounts in Brazil, New York, and Florida,” the DOJ said. The money came from “fraudulent contracts with offshore shell companies that were secretly controlled by Braskem.”

Grubisich helped negotiate and approve bribes to government officials and poltical parties using money from the slush fund, the DOJ said. Some of the bribes were allegedly to help Braskem obtain favorable pricing during negotiations with Petrobras  for supply contracts.

As Braskem’s CEO, Grubisich helped falsify its books and records, the DOJ said. He allegedly certified that some of the payments to the offshore shell companies were “commissions.”

He also submitted false certifications to the SEC that Braskem’s officers had “disclosed all fraudulent conduct by Braskem’s management and other employees with control over Braskem’s financial reporting,” according to the indictment.

Some bribes described in the indictment were allegedly paid after Grubisich left his position as CEO of Braskem in 2008 but while he still worked in other capacities for Braskem and Odebrecht, the DOJ said.

The FCPA-related counts in the indictment are punishable by up to five years in prison. The money laundering conspiracy count is punishable by up to 20 years in prison.

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