Brazilian agencies must harmonize ‘like a choir’ regarding leniency agreements, says transparency minister

The Brazilian government expects by the end of the year to have solved one of the most worrisome points of the federal anticorruption initiatives: the lack of clear criteria for cooperation among the four agencies entitled to investigate corporate crimes and sign leniency agreements with companies. 

"Four members are enough to form a rock band. We need to make the Brazilian state sound like a choir, in harmony," Transparency Minister Torquato Jardim told MLex in an exclusive interview. 

In order to achieve such harmony, the Ministry of Transparency has been in touch with the offices of the federal prosecutor and the attorney general as well as with the Court of Auditors. 

The most important step in this sense was Jardim's recent formal request to the prosecutor's office chamber of review on corruption matters asking for the creation of a joint working group to establish common criteria for calculating companies' leniency agreement fines. 

"If the Brazilian Constitution grants authority on anticorruption matters to four agencies, either the law or the administrative practice needs to reconcile the four competencies," said Jardim.

"The four leading agencies need to agree on two points: how each one will operate individually, and then how they will calculate the fines together, bearing in mind the reinsertion of the company in the production of wealth," he said. 

"We want to impose a sanction, but also admit the company's reintegration into the economic system. This is the intelligent interpretation of the law, the minister said. "We don't want companies to get into a critical financial situation that could lead to their bankruptcy." 

SBM Offshore agreement 

Gaging by the negotiations for the SBM Offshore leniency agreement, however, the Brazilian state's agencies sound more like a rock band rather than a choir. 

Last year, the Dutch company acknowledged it took part in the Petroleo Brasileiro, or Petrobras, corruption scandal, and discussed a leniency agreement that would encompass all agencies and Petrobras. 

"SBM is the classic example of the need for a common and rational understanding among all agencies. We reached a settlement, but under the internal structure of the prosecutor's office, the first-instance prosecutor did not have enough autonomy to sign the agreement. The second-instance chamber for corruption matters denied its approval and sent the case back … for a new round of negotiations. 

"It's the most striking example of the need to reach a balance. We need more coordination," Jardim said. 

Currently, each agency uses its own criteria to determine the sanctions for companies granted leniency. For the Ministry of Transparency, there are standard solutions: Fines are determined on a case-by-case basis, based on the contracts signed between companies and the government. 

"Our team of experts audit the agreements and are able to divide it into three parts: the fair price of the contract, the surcharge, and, finally, the bribes paid. We then calculate the fine based on the value of surcharges and bribes," Jardim said. 

According to the transparency minister, one further problem is that the Brazilian anticorruption law does not take into account the companies' ability to pay the fines imposed by authorities. 

"Our legislation was poorly adapted from the common law regime. In the US legislation, for example, once the negotiation is over, the company brings a technical analysis from an independent party that states how much it can pay without harming its operational and investment capacity. This is not present in our regime, what makes [the need for] an agreement among the four agencies on the calculation methods even more urgent," he said. 

Supreme Court route

If the Brazilian agencies are unable to reach a solution, there is always the option of asking the country's high court to decide. But this could bring a lot of legal uncertainty for companies interested in settling probes. 

"Either we live in harmony, talking more closely about operational topics, or the Supreme Court will have to rule on what each agency is able to do," Jardim said. 

The road to the highest court of the country, however, is far from simple. Only the federal prosecutor's or the attorney general's offices could file such cases, since the Transparency Ministry and the Court of Auditors are not legally entitled to do so.

Asking the Supreme Court to decide this conflict could actually aggravate the conflicts while a decision is pending — a period of further uncertainty that could be measured in years. 

Another option, according to Jardim, is to wait for a concrete dispute to be taken to the high court. That could happen through an appeal presented by the companies that signed leniency agreements, but would be equally time-consuming, since there are at least two appeal tribunals that would hear a case before the Supreme Court in the Brazilian judicial system. 

As the anticorruption law didn't bring any more legal certainty to either the agencies or companies, administrative dialogue is the best path according to Jardim.