Petrobras Reaches $1.78 Billion FCPA Resolution

Author:Mr Nicholas Berg, David Peet, María González Calvet and Eve L. Shabto
Profession:Ropes & Gray LLP
 
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On September 27, the DOJ and SEC and Petróleo Brasileiro S.A. ("Petrobras"), Brazil's state-owned energy company, reached the largest settlement in the history of U.S. enforcement of the Foreign Corrupt Practices Act ("FCPA"). As part of its groundbreaking settlement, Petrobras entered into a Non-Prosecution Agreement with the Department of Justice and agreed to pay $1.78 billion combined to the DOJ, the SEC, the shareholders of Petrobras, and Brazilian criminal authorities. While numerous investigations arising out of the original Lava Jato investigation remain ongoing, the settlement represents the latest victory for Brazil's enforcement authorities, who changed the course of Latin America's political landscape and spawned a continuing wave of anti-bribery investigations across the continent.

The settlement papers detail a scheme in which senior Petrobras executives inflated the cost of infrastructure projects by deliberately overpaying its largest contractors. Those contractors, in turn, paid billions in kickbacks to Petrobras executives, who then shared the proceeds with Brazilian politicians and political parties who helped the executives obtain their high-ranking positions at Petrobras. Petrobras fraudulently recorded these payments as funds spent on improving and procuring assets, resulting in an overstatement of assets totaling approximately $2.5 billion. As part of the settlement, Petrobras admitted that it failed to maintain accurate accounting records and that certain Petrobras executives signed false accounting certifications while they were involved in paying bribes to Brazilian politicians and political parties.

The resolution is the latest chapter in the Operation Lava Jato investigation, which originated in Brazil and has proceeded to engulf political leaders, prominent corporate executives, and leading companies across Latin America. The investigation alleges the involvement of prominent politicians in Brazil, including former Brazilian Presidents Luiz Inácio Lula da Silva and Dilma Roussef, current President Michel Temer, and dozens of congressional representatives and local elected officials. In many cases, the allegations arising out of the Lava Jato investigation have led directly to these politicians' impeachment from office. Allegations of wrongdoing in the Lava Jato investigation have also reached prominent political figures outside of Brazil, including former Presidents of Argentina, Nelson Kirchner and Cristina...

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