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Transparency International Series

International cooperation and other catalysts for anticorruption prosecution

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Challenges

The fight against transnational corruption

A gigantic, billion-dollar scheme hit Angola, Mozambique and nine Latin American countries

This content was produced in partnership by JOTA and Transparency International Brazil.

For other languages:  In Spanish  In Portuguese

On February 15th, 1999, the Organisation for Economic Co-operation and Development’s (OECD) Anti-Bribery Convention came into force. The twenty-year anniversary of this important treaty seems like a proper occasion to reflect on the difficulties that our region’s criminal justice systems face when trying to efficiently prosecute transnational corruption, and also the measures that are being adopted to overcome them.

Transnational cases have become increasingly common in Brazilian forensic practices. The scandal involving the building of the São Paulo Regional Labour Court’s forum, the “Propinoduto” and “Mensalão” corruption schemes, the Banestado scandal, Operations Carwash and Greenfield, etc., are not historical processes, but part of a long historical process, one that has a civilizing effect on the country, in which one may find mistakes and triumphs, lessons learned and good practices to be repeated.

In the last three decades, during the re-democratisation period, Brazilian society and the state have created adequate conditions for investigations such as these to take place and succeed. Despite the setbacks common to any human enterprise, these complex forensic cases had more triumphs than failures.

The main factors operating in this historical process concern legislation, anticorruption culture and public liberties. The country’s return to democracy after 1984 was crucial for the flourishing of the freedom of the press, the freedom of assembly and free speech. These three fundamental rights are essential for an anticorruption culture to blossom, together with the actions of non-governmental organisations and citizens that are dedicated to monitoring their elected officials’ acts and promote integrity and transparency. The free press also continues to strive towards the perfecting of governmental practices.

The new communications technologies and the internet’s social networks have also benefited from this atmosphere of liberty, which was enhanced every time a good law was added to Brazil’s legal system, and when other laws were rejected by Parliament or the Supreme Court.

The Administrative Improbity Law, the Money Laundering Law, the Access to Information Law, the Anticorruption Law, the Ficha Limpa (Clean Record) Law and the Organized Crime Law were very relevant to remake the legal environment so as to incentivize various public and private sector agents, notably political agents, to have a more responsible and careful conduct.

In this trajectory that spans at least three decades, people’s perception of the importance of probity in the management of public affairs has also changed. Many politicians in twentieth century Brazil got elected spouting the slogan “rouba mas faz!” (“he steals but he gets things done!”). In the last few years, we have been witnesses to this still ongoing cultural shift, which is giving rise to a society increasingly intolerant of corruption and fraud. Politicians with “dirty” records have found they are becoming less and less welcome in government positions and legislative bodies.

To all of that is added an international factor. Starting in the 1990s, there was the formation of what I call a new global prohibition regime, one that was aimed at reducing corruption worldwide. The perception that corruption is linked to underdevelopment, low human development indexes and despoilment has led the international community to adopt mechanisms to promote integrity at a global level, focusing on domestic, as well as transnational, corruption.

The pathway was opened by the Organisation of American States (OAS) during its Inter-American Convention Against Corruption (Caracas, 1996). In the following year, OECD adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Paris, 1997), which came into force 20 years ago. Shortly after, under the UN’s auspices, the international community concluded the United Nations Convention against Corruption (Merida, 2003). These international documents had an immensely powerful catalyst effect. Their implementation mechanisms, such as OAS’ MESICIC (OEA), have led the participating countries to modify their own laws, as Brazil did in 2002, when it changed its Penal Code to better adjust it to the OECD’s anticorruption treaty.

More recently, international organisations have begun emphasizing the adverse effect corruption has on human rights, such as the Inter-American Commission on Human Rights did in its Recommendations 01/2017 and 01/2018, and the Inter-American Court of Human Rights, in Costa Rica, in the Ramírez Escobar and others vs. Guatemala case, tried in March 2018. The Guiding Principles on Business and Human Rights, approved by Resolution 17/4 (2011) of the United Nations Human Rights Council may be added to these declarations, which work together to consolidate a new branch of corruption fighting.

The building of a strong national and international culture against corruption, in both the public and private sectors, is crucial for this scourge (that operates like a swarm of locusts) to be faced and drastically mitigated in the next decades.

However, there are other relevant aspects in the fight against transnational corruption. One of them is the existence of Public Prosecutor’s Offices with functional independence and true institutional, as well as budgetary, autonomy.

The heads of these institutions, the Attorney Generals (or Fiscales Generales, in Spanish), ideally should be picked from career professionals, or through clear and objective constitutional criteria. Fortunately, in Brazil, this factor has been enshrined in the Constitution since 1988, which makes all the difference for the country’s prosecutors in performing their roles. As early as 1985, the Rules of Havana already pointed out the importance of this trait in the composition of public prosecutor’s offices.

An independent and capable judiciary system is also necessary, as advocated for in the Rules of Bangalore. Judges are authorities that are essential for securing and maintaining the rule of law. Judges guarantee rights and legitimate punishments given to offenders. From the prism of the grand corruption approach, offenders are defined as those that hold economic and political power, across the public and private sectors, that become corrupt, actively or passively, and siphon public resources.

The design of state institutions is highly important to the success of these historical processes in Latin America and other third-world countries. It is not for nothing that Sustainable Development Goal (SDG) 16 of the UN’s 2030 Agenda lists the need to build strong, transparent, inclusive and accountable institutions to reduce the levels of corruption and the flow of dirty money around the globe, so as to make viable the Agendas other goals, such as reducing poverty, access to better education and healthcare services, improving the infrastructure for developing and respecting the environment.

Corruption deteriorates states’ capacities to plan, fund and implement public policies. Poorer states tend to be the most corrupt. Corruption finds the ideal conditions for its subsistence in failed states or in ones with weak social and political controls. Dictatorships tend to be more corrupt than democracies.

Looking closely into the phenomenon of transnational corruption, we realize that the flow of illegal assets linked to corrupt practices are in lockstep with the market movements of multinationals. Large, global companies are less corrupting in their own countries of origin than they are in Africa, Asia or in the Americas. There is no shortage of examples, but special mention must be given to the Siemens, Volkswagen (Dieselgate), SNC-Lavalin, Eni and Shell scandals, all within recent memory, which leads us to a different problem. The compliance systems in these companies have not been functioning in a satisfactory manner, even though they are beholden to it, seeing as these companies are important stakeholders in the effort to build sustainable practices for corporate social responsibility.

Given the complexity of legal relations in a globalized Society and the intensity of illegal interactions that globalization breeds, there has been a notable increase in transnational criminality in its various subjective dimensions: more individuals have been committing crimes with international aspects; more criminal groups have been operating illegal transnational schemes. This makes it imperative that police forces and public prosecutor’s offices have units specialized in international cooperation and asset recovery available.

Without technical qualification and without operational capabilities for formal cooperation and for conducting international cooperation intelligence (pre-mutual legal assistance), one cannot expect satisfying results. Brazil is a good example of how inadequate legal conditions and the operators’ lack of training can produce meagre results. Between 2004 and 2014, despite the numerous corruption scandals and other transnational criminal offences, the country was only able to recover R$ 45 million (US$ 11.5 million). A scarcity of treaties and expertise along with procedural difficulties (claims being barred by the statute of limitations and systems that allow for an endless number of appeals) have resulted in these low figures. Very well. In the Operation Car Wash case alone, in the last five years, the amount recovered reached R$ 800 million (US$ 205 million). How was this possible? The answer is: via the combination of plea bargain deals assisting the tracking and returning of assets with international cooperation instruments.

That is why, apart from an adequate domestic normative framework — built in an autonomous manner, but also as a result of the implementation of the most important treaties within the anticorruption regime —, there is also the need for agents capable of finding innovative solutions. These solutions require the leadership of the Public Prosecutor’s Office and the police, which are criminal investigation organs, and the least amount of interference from central authorities possible. These are the organs that take care of the cooperative bureaucracy and, following the European model, tend to disappear.

In order to function well, the handling of the range of international treaties on criminal matters must be supported by networks of Public Prosecutor’s Offices (such as Eurojust, the future Amerijust and the still-informal networks of AIAMP and IAP), of police institutions (such as Interpol, Europol and Ameripol), of tax revenue agencies (with mechanisms such as CRS/OECD and the FATCA/USA implementation agreements), of securities and exchange commissions (which take part in accords that provide their own means of international data exchange) and of financial intelligence units (which make use of Financial Action Task Force, the Egmont Group and Gafilat, for example). The overlapping of all these different networks casts a global net that drastically increases the capacity of prosecution and monitoring agencies of detecting illegal acts, tracking and blocking assets, acquiring evidence and locating and catching fugitives.

The advances made in Brazil in the last years were made possible by many of these factors and catalysts. However, police officers, prosecutors and appellate prosecutors also made extensive use of software and computer systems in their criminal investigations. The Register for Clients of the National Financial System (CCS, in Portuguese), controlled by Brazil’s Central Bank, and the Banking Transactions Investigation System (SIMBA, in Portuguese) allows the Brazilian government to efficiently and swiftly respond to requests for international cooperation, as well as increase the investigative capabilities of Brazilian authorities in economic and financial domestic crime cases.

The availability of collaborative justice tools was also highly important, be it in criminal, noncriminal and administrative courts. Plea bargain deals and leniency agreements made in the lawsuits involving administrative improbity and in the Corporate Anticorruption Law’s punitive proceedings were (and still are) essential for stopping illegal conducts, producing concrete evidence of complex illegal schemes, identifying their perpetrators and accomplices and locating the assets and amounts, acquired through the crimes.

There is also merit to the capacity to articulate internally, which is to say, the ability to coordinate prosecution agencies and other state monitoring and control organs. Without adequate interaction and a well-oiled information sharing system, as well as swift operational synergy, results fall short of what is expected, international cooperation being no exception. In several moments, for example, Operation Car Wash suffered from the lack of support from the Ministry of Justice in the implementation of joint investigative teams, be they with Switzerland’s Public Prosecutor’s Office or the ones from Argentina and Peru.

Looking back, one may notice that, from its earliest months, Operation Car Wash showed signs that it would have a very important international dimension.  Since the scandal first broke out in the oil industry, with the involvement of various board members of Brazil’s multinational oil company being revealed, it seemed clear that its transnational operations would inevitably be impacted by the enormous corruption scheme organised within it.

The revelation that the company’s head of Downstream had taken bribes from a well-known dollar smuggler promptly raised a red flag, just in the first few months. In fact, in June 2004, the case’s first request for cooperation was made. It was a passive request, made by Switzerland to Brazil, concerning the financial activities of said company official in Europe. Following that, Brazil’s Public Prosecutor’s Office presented its first active request for the case, to Switzerland, concerning the same suspect. Thus began an intense and lawful exchange of intelligence data and evidence that helped to convict dozens of actively and passively corrupt officials in the oil and construction companies’ scheme, and to recover over 2.5 billion for Petrobras, up until 2018.

With the evolution of the investigations, the country’s prosecutors based in Curitiba together with other investigators located a hotbed of corruption in the civil construction sector. Odebrecht appeared as a company that was exporting an ingenious corruption system, to be implemented in other Latin-American countries, as well as some in Africa, even making use of illegal campaign funding money. The investigation was able to close in on the company thanks to the intense international cooperation between Brazil, Switzerland and the United States. These efforts ended up revealing a network of offshore companies set up by Odebrecht in various countries to corrupt public officials and authorities.

The plea bargain deals made in December 2016 by Odebrecht and Braskem with the US Attorney-General’s Office in New York, the abbreviated settlement adjusted by the Ministère Public de la Confédération in Bern, and the leniency agreements made by Brazil’s Public Prosecutor’s Office are a perfect example of a global settlement of a grave criminal case, with simultaneous non-criminal repercussions. The joint handling of the corruption scheme via the applicability of criminal law and collective action is another significant good practice that helps with the recovery of resources that can be returned to the parties affected.

Due to the violations made to the US’ Foreign Corrupt Practices Act (FCPA), Odebrecht paid more than US$ 2.6 billion due to its plea bargain deal, confirmed by court in that country. It was also made to collaborate with the investigations and apologized to Brazil in the newspapers.

These measures, in conjunction with others that concerned improving governance, exposed a gigantic and billion-dollar transnational corruption scheme that affected Angola, Argentina, Colombia, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, the Dominican Republic and Venezuela.

As was expected, the number of requests for passive cooperation made towards Brazil and the United States exploded after the 2016 agreements. An extraordinary milestone of this increase in cooperation is the 2017 Declaration of Brasília. Brazil’s Attorney-General, by way of its International Cooperation Office (SCI), organised a summit of all the Public Prosecutor’s Offices affected by the Odebrecht case. The goal was to transmit reliable information to similar institutions and to establish a common method of procedural dialogue (the Merida and OECD’s Conventions), observing the principles of good faith, legal security and of non bis in idem, which permeate cases of cooperation where there are collaborating defendants.

Brazil took the lead in the process of cooperation within the continent during the Odebrecht case. As per the Constitution, passive cooperation, at the federal level, is the purview of the Public Prosecutor’s Office. Foreign requests that need judicialisation are handled by the federal justice courts. After being addressed, they are returned to the petitioning states, via the central authority (the Ministry of Justice, as a general rule).

After the Declaration of Brasília, the addressing of passive cooperation requests accelerated in an organised fashion, but still faced obstacles resulting from lacking legislation here and there, and from the excessive bureaucratisation of international cooperation, due to the current central-authority model. Despite the clear terms found in the Merida Convention, one of the most significant hurdles were the lack of local laws on plea bargain deals that ensured Brazilian collaborators would also be able to enjoy the benefits for which they exchanged their incriminating information in foreign countries, their testimonies having been made after waiving the right to not producing evidence against themselves.

The effects of the Carwash scandal in these eleven countries, especially in the Odebrecht case, cannot yet be measured with precision. There are different levels of institutionality in said countries, public transparency cannot be found in some of them and there have been several attempts against the autonomy of the local Public Prosecutor’s Office or against the functional independence of the fiscales, as seen in Argentina, Colombia, Peru and in Venezuela.

In the five years of the case, the Public Prosecutor’s Office branches in Rio de Janeiro, Curitiba and Brasília have sent 269 requests for assistance to 45 countries, and the Attorney-General’s Office has addressed 279 requests from 36 countries. This total amount of 548 requests for international cooperation is unprecedented for a single case and shows the dimension of transnational corruption and the correlated money laundering charges that were levelled against companies, public organs and financial institutions in these countries.

There are still other challenges to be faced in the Carwash case, ones that concern the punishment given to multinationals that corrupt public officials from Brazil and other countries in the region and in Africa. Some cases have already been concluded, such as that of Rolls Royce, and others in progress, such as those of Glencore, Trafigura and Sevan Marine, among other global companies, whose punishment may be enacted in Brazil, in their countries of origin (via OECD’s Convention) or even in the United States, if the FCPA requisites are met.

The impressive ramifications of Operation Car Wash in Rio de Janeiro and in São Paulo and their analogues in various countries in the region, notably in Peru, reveal just how entrenched corruption is in the structures of power of these Latin-American and African republics.

The touchstones for greater accountability are, without a doubt, the raising of awareness in civil society, the changes in corporate culture and the engagement of state monitoring and control organs in this all-important and difficult task. Collective actions conducted jointly with non-governmental organisations, civil society and the private sector cannot be dismissed. No-one is able to defeat corruption alone. One of the great pillars in any successful strategy is that of cooperation within and between nations.

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Full Coverage

This content was produced in partnership by JOTA and Transparency International Brazil.

Unpublished data present x-ray on activity of Latin American investigative organizations in the Odebrecht case

Countries:

Argentina

Panama

Dominican Republic

Peru

Mexico

Guatemala

Colombia

Venezuela

Ecuador