To combat corruption, new legislation in Brazil—the Clean Companies Act—creates for the first time corporate liability for bribery of foreign government officials by Brazilian companies as well as for bribery of local government officials by Brazilian and foreign companies that have offices or agents in Brazil. Strong civil and administrative penalties are part of the new law.
The foreign bribery provision applies to any entity registered in Brazil, regardless of whether or not the company is listed on a public exchange or headquartered in the country.
Harmful acts under the law include:
*Promising, offering, or giving, directly or indirectly, an improper benefit to a public agent or a third person related to him (facilitation payments).
*Using another party to hide or cover up the real interests or the identities of the beneficiaries of the acts performed.
*Defrauding the competitive nature of a public procurement process (including bid rigging).
*Financing, funding, or subsidizing in any way the practice of harmful offenses under the law.
Under the act, both Brazilian and foreign companies are held strictly liable for bribes paid on their behalf by employees either in Brazil or abroad. With strict liability being imposed on companies for their corrupt practices, prosecutors do not have to establish criminal liability on the part of individual directors, officers, employees, or agents of the entity, nor must they show that the company’s directors or management acted with a corrupt intent.
There are no criminal penalties. Civil fines may be as must as 20 percent of the entity’s gross revenue for the fiscal year before the start of the investigation. Alternatively, if that revenue figure cannot be determined, the fine may be as much as R $60 million (about USD $25 million).
Entities may be subject to forfeiture of assets resulting from the illegal acts, to having their activities temporarily suspended, or even be compulsorily dissolved. In addition, infringing companies may be prohibited from receiving state or public incentives, subsidies, and loans for a minimum of one year up to a maximum of five years.
The law includes a leniency provision with incentives for companies to adopt good practices. An entity that reports misconduct before it has come to the attention of prosecutors, cooperates with investigators, and stops the misconduct before being ordered to, may qualify for leniency. To promote this self-regulation, the penalty that would otherwise be imposed may be reduced by as much as two-thirds.
When determining what level of fine to impose, enforcement authorities may consider a corporation’s internal compliance program as a mitigating factor. Enforcement authorities also may settle more favorable terms with infringing companies that collaborate and disclose illegal acts.
President Dilma Rousseff signed the Clean Companies Act, Federal Law No. 12,846, Aug. 1, 2013. It takes effect Jan. 29, 2014.
Susan R. Heylman, J.D., is a freelance legal writer and editor based in the Washington, D.C., area.