Key 2017 Developments in Latin American Anti-Corruption Enforcement

Anti corruption Key 2017 developments in Latin American anti-corruption enforcement Anti-corruption laws are being tightened across Latin America and businesses active in the region need to take note. In this article, lawyers at Gibson Dunn & Crutcher review key recent developments in Mexico, Brazil, Argentina, Colombia, and Peru. n 2017, several Latin American countries stepped up enforcement I and legislative efforts to address corruption in the region. Enforcement activity regarding alleged bribery schemes involving construction conglomerate Odebrecht rippled across Latin America’s business and political environments during the year, with allegations stemming from Brazil’s ongoing Operation Car Wash investigation leading to prosecutions in neighbouring countries. Simultaneously, governments in Latin America have made efforts to strengthen legislative regimes to combat corruption, including expanding liability provisions targeting foreign companies and private individuals. This article focuses on five Latin totaling $10.5 million USD to Mexican corruption cases. The allegations are also American countries (Mexico, Brazil, government officials between 2010 and notable due to their similarity to the Argentina, Colombia, and Peru) that 2014 to secure public contracts. 4 In allegations in Brazil’s Car Wash have ramped up anti-corruption September 2017, Mexico’s SFP released a investigation. In both inquiries, funds enforcement or passed legislation statement noting the agency had were allegedly embezzled from state expanding anti-corruption legal identified $119 million pesos (approx. coffers for the benefit of political party regimes. 1 New laws in the region, $6.7 million USD) in administrative campaigns. coupled with potentially renewed irregularities involving a Pemex public prosecutorial vigour to enforce them, servant and a contract with an Odebrecht Legislative update make it imperative for companies subsidiary. 5 Mexico’s General Law of Administrative operating in Latin America to have In December 2017, Mexican law Responsibility (‘GLAR’) – an anti- robust compliance programmes, as well enforcement authorities arrested a corruption law that provides for as vigilance regarding enforcement former high-level official in the political administrative liability for corporate trends impacting their industries. party of Mexican President Enrique Peña misconduct – took effect on 19 July 2017. Nieto. 6 The former official, Alejandro The GLAR establishes administrative Gutiérrez, allegedly participated in a penalties for improper payments to broad scheme to funnel public funds to government officials, bid rigging in Mexico political parties. 7 While the inquiry has public procurement processes, the use of not yet enveloped the private sector like undue influence, and other corrupt acts. 8 Notable enforcement actions and Brazil’s Operation Car Wash The law reinforces a series of Mexican investigations investigation, the prosecution could legal reforms from 2016 that expanded In 2017, Petróleos Mexicanos (‘Pemex’) signal a new willingness from Mexican the scope of the country’s existing anti- disclosed that Mexico’s Ministry of the authorities to take on large-scale corruption laws and created a new Public Function (‘SFP’) initiated eight anti-corruption enforcement regime administrative sanctions proceedings in encompassing federal, state, and connection with contract irregularities municipal levels of government. Among involving Odebrecht affiliates. 2 The the GLAR’s most significant changes are inquiries stem from a 2016 Odebrecht provisions that target corrupt activities deferred prosecution agreement (‘DPA’) by corporate entities and create with the US Department of Justice incentives for companies to implement (‘DOJ’). 3 According to the DPA, compliance programmes to avoid or Odebrecht made corrupt payments minimise corporate liability. 1 trade Security Journal Issue 7 Anti corruption The GLAR applies to all Mexican $597,000 USD); 21 (2) preclusion from noted, the GLAR’s non-monetary public officials who commit what the law participating in public procurements and sanctions include preclusion from calls ‘non-serious’ and ‘serious’ projects (for a maximum of eight years); 22 participating in public procurements and administrative offences. 9 Non-serious and/or (3) liability for any damages projects for up to eight years (for physical administrative offences include the incurred by any affected public entities or persons) or ten years (for companies). 30 If failure to uphold certain responsibilities governments. 23 a person subject to a preclusion sanction of public officials, as defined by the Legal entities, on the other hand, can self-reports GLAR violations, the GLAR (e.g., cooperating with judicial and be fined up to twice the benefit obtained, preclusion sanction can be reduced or administrative proceedings, reporting or up to approximately $5,970,000 USD, completely lifted by the Mexican misconduct, etc.). 10 Serious precluded from participating in public authorities. 31 Requirements for obtaining administrative offences include accepting procurements for up to ten years, and a reduction of penalties through self- (or demanding) bribes, embezzling held liable for damages. 24 The GLAR also reporting include: (1) involvement in an public funds, and committing other creates two additional penalties for legal alleged GLAR infraction and being the corrupt acts, as defined by the GLAR. 11 entities: suspension of activities within first to contribute information that proves The GLAR also applies to private persons the country for up to three years, and the existence of misconduct and who (companies and individuals) who dissolution. 25 Article 81 limits the ability committed the violations; (2) refraining commit acts considered to be ‘linked to to enforce these two stiffer penalties to from notifying other suspects that an serious administrative offences’. 12 These situations where (1) there was an administrative responsibility action has offences include the following: economic benefit and the administration, been initiated; (3) full and ongoing compliance department, or partners were cooperation with the investigative l Bribery of a public official (directly or involved, or (2) the company committed authorities; and (4) suspension of any through third parties); 13 the prohibited conduct in a systemic further participation in the alleged l Participation in any federal, state, or fashion. 26 The GLAR’s penalties for infraction. 32 municipal administrative proceedings physical and legal persons are Notably, other participants in the from which the person has been administrative, rather than criminal. alleged misconduct who might be the banned for past misconduct; 14 Under Article 25 of the GLAR, second (or later) to disclose information l The use of economic or political power Mexican authorities can take into account could receive up to a 50% penalty (be it actual or apparent) over any a company’s robust compliance ‘Integrity reduction, provided that they also public servant to obtain a benefit or Program’ in determining and potentially comply with the above requirements. 33 If advantage, or to cause injury to any mitigating corporate liability under the a party confesses information to the other person or public official; 15 GLAR. 27 The law requires the Integrity investigative authorities after an l The use of false information to obtain Program to have several elements, administrative action has already begun, an approval, benefit, or advantage, or including clearly written policies and that party could potentially receive a 30% to cause damage to another person or adequate review, training, and reporting reduction of penalties. 34 public servant; 16 systems. 28 l Misuse and misappropriation of The GLAR contains a self-reporting For a full analysis of the GLAR, see public resources, including material, incentive that provides for up to a 70% http://www.gibsondunn.com/publications/P human, and financial resources; 17 reduction of penalties for those who ages/Mexico-General-Law-of- l The hiring of former public officials report past or ongoing misconduct to an Administrative-Responsibility-Targets-Corru who were in office the prior year, investigative authority. 29 As previously pt-Activities-by-Corporate-Entities.aspx acquired confidential information through their prior employment, and give the contractor a benefit in the market and an advantage against competitors; 18 and Taskforce by Transparency l Collusion with one or more private Brazil International. 36 The robust enforcement parties in connection with obtaining environment in Brazil is also reflected in improper benefits or advantages in Following the success of the massive this year’s public company disclosures. federal, state, or municipal public Operation Car Wash investigation into In 2017, 34 companies disclosed contracting processes. 19 Notably, the corruption involving the country’s information regarding new or ongoing collusion provisions apply energy sector, Brazilian regulators inquiries involving Brazil, while extraterritorially and ban coordination launched or advanced inquiries in 2017 disclosures regarding other Latin in ‘international commercial impacting companies in the healthcare, American nations numbered in the transactions’ involving federal, state, meatpacking, and financial industries, single digits. 37 or municipal public contracting among others. Brazilian authorities have processes abroad. 20 also continued to garner international Notable enforcement actions and accolades for their anti-corruption

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