Latin America remains risky for FCPA violations despite more cooperation from governments

"The degree of cooperation between U.S. and Latin American authorities is at an all-time high,” says attorney Adam Kaufmann.

As the world’s attention turns to the South American nation of Brazil this summer   as it hosts the Olympics, those who follow the enforcement of the Foreign Corrupt Practices Act (FCPA) have long been watching the region.

Even the Olympics themselves — and related economic activity — are risky for bribes and corruption. Contracts to build infrastructure, potential for price fixing by cartels, media rights, and commercial bribes are just some of the potential areas for possible concern, according to Adam Kaufmann, an attorney with Lewis Baach. There have been news reports, too, that the federal government in Brazil is investigating contracts for services and security that used federal funds.

On the positive side, Brazil and some other Latin American nations are doing more about domestic corruption and cooperating more with U.S. authorities investigating bribery cases, according to attorneys involved in the field.

“The Lava Jato matter, the reports of corruption relating to construction projects for the Rio Olympics, the FIFA scandal, the list goes on and on,” John O'Donnell, an attorney at Herbert Smith Freehills who used to be a federal prosecutor, says. “The U.S. authorities will continue their aggressive enforcement of the FCPA worldwide, but especially in Latin America.”  

Similarly, James Koukios, an attorney at Morrison & Foerster, points out that two out of five corporate resolutions brought in 2016 by the Department of Justice (DOJ) have involved Latin America. In late 2015, the DOJ also brought a case against individuals related to Venezuela’s state-owned oil company, Petroleos de Venezuela S.A. (PDVSA), and several defendants have pleaded guilty this year, Koukios says. The case concerns the securing of energy contracts and alleged bribes.

“The SEC [Securities and Exchange Commission] has been more focused on China, but two of 12 corporate resolutions brought in calendar year 2016 have involved Latin America,” he adds. 

Also, when it comes to anti-corruption activities, Koukios — who formerly worked as senior deputy chief at the DOJ’s Fraud Section — singled out Brazil and Colombia as being “particularly cooperative with U.S. enforcement authorities.”

“Our experience is that Latin American governments are generally cooperative with the U.S. and, in fact, are beginning to launch their own anti-corruption enforcement programs,” O’Donnell adds. “Brazil's sprawling Car Wash investigation — leading to dozens of convictions and billions of dollars in fines — is an example of that. Of note, the Brazilian authorities have served over 80 international requests for information.”

Both Brazil and Colombia are part of the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention — which encourages cooperation among prosecutors from all member countries. It is noteworthy, too, that Brazil is paying attention to domestic corruption cases in the Petrobras investigation.

"The degree of cooperation between U.S. and Latin American authorities is at an all-time high,” adds Kaufmann, who used to be chief of the Investigation Division, Manhattan District Attorney's Office. “You see much more emphasis on coordination of corruption cases.”

“When I was investigating corruption cases in Latin America at the Manhattan DA's Office from 2004-20012 or so, there was scant interest from federal authorities in the U.S., and Latin American nations did little, if anything, to prosecute corruption cases. It's a totally different world today. Look at the Petrobras case in Brazil: That investigation has spawned over 150 corruption-related cases in Brazil. DOJ and SEC have teams of lawyers coordinating with the Brazilians, sharing information, evidence, and analysis. All over Latin America, anti-corruption efforts are blossoming, and the U.S. federal authorities have a much more robust interest in coordinating efforts with their foreign prosecution counterparts."

“Latin America continues to be on U.S. enforcement authorities’ radars,” Koukios adds. “Especially when combined with major domestic corruption investigations in the regions, companies have to make sure they are paying attention to anti-corruption issues in the region.”

For instance, the SEC recently reached a settlement with LAN Airlines — based in South America — which will pay more than $22 million to settle civil and criminal cases. The cases relate to a consultant from Argentina who was paid $1.15 million.

The consultant helped in labor negotiations, and payments were made to third parties “who had influence over the unions,” according to the SEC. The payments were made through “a sham contract,” the SEC adds. The involvement of third parties in Latin America and elsewhere show how important their role can be in FCPA cases. “Over 95 percent of FCPA enforcement actions involve the use of third parties as conduits for the illicit payments,” O'Donnell says. “The LAN Airlines case is just the latest example of that trend.”

He advises that, “Companies must vet their third-parties carefully to ensure that there is a well-documented business case for retaining them, and that the agreement and arrangements are transparent and legitimate. Once retained, the company must carefully monitor the third-party's activities on behalf of the company.”

On another front, despite similarities among the nations in Latin America, “each country presents a different risk profile that companies need to be attuned to and account for,” Koukios says.  “For example, in many countries certain industries are dominated by small, family-owned service providers that may rely on personal connections when interfacing with the government and likely do not have the same anti-corruption safeguards that a multi-national company would ordinarily expect.”

Kaufmann also notes that overall companies need to address bribery and corruption risks.

“It’s not just about having a [company] policy,” he says. “Everybody has a policy. What do you do to enforce that policy?”

Further reading:

Blatter, Platini to appeal ban from soccer activities

FBI investigating FIFA awarding 2018 and 2022 World Cups to Russia and Qatar

U.S. probe into FIFA corruption likely to continue as Blatter is re-elected

Contributing Author

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Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...

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