1 00:00:00,120 --> 00:00:05,560 Speaker 1: The international corruption scandal involving Latin America's biggest construction company, Odebrecht, 2 00:00:05,760 --> 00:00:09,200 Speaker 1: was called Operation car Wash, but involved the kind of 3 00:00:09,240 --> 00:00:11,879 Speaker 1: money you don't see at a car wash. Odebrecht has 4 00:00:11,920 --> 00:00:14,680 Speaker 1: been ordered to pay a two point six billion dollar 5 00:00:14,840 --> 00:00:18,159 Speaker 1: fine after admitting it engaged in a massive bribery and 6 00:00:18,200 --> 00:00:22,040 Speaker 1: bid rigging plot, paying secret payments of about seven hundred 7 00:00:22,079 --> 00:00:25,120 Speaker 1: eighty eight million dollars dating back to at least two 8 00:00:25,160 --> 00:00:29,840 Speaker 1: thousand one. That's the biggest penalty ever in an international 9 00:00:29,920 --> 00:00:33,120 Speaker 1: global bribery case. But it could have been worse. Odebrect 10 00:00:33,120 --> 00:00:35,640 Speaker 1: agreed in December to pay a four and a half 11 00:00:35,680 --> 00:00:39,519 Speaker 1: billion dollar penalty. My guests are Andrew Spaulding, professor at 12 00:00:39,520 --> 00:00:42,760 Speaker 1: the University of Richmond School of Law, and William Burns, 13 00:00:42,800 --> 00:00:45,920 Speaker 1: professor at Texas A and M University School of Law 14 00:00:46,000 --> 00:00:49,360 Speaker 1: and the lead author of Money Laundering, Asset Forfeiture and 15 00:00:49,400 --> 00:00:55,040 Speaker 1: Recovery and Compliance A Global Guide. Andy, what started this investigation? 16 00:00:55,120 --> 00:00:58,600 Speaker 1: What got it going? Sure, it's a fascinating story. It 17 00:00:58,680 --> 00:01:03,000 Speaker 1: started with the suspected was a minor money laundering issue 18 00:01:03,440 --> 00:01:07,720 Speaker 1: involving an officially at Petrobras Um. They detained him for 19 00:01:07,800 --> 00:01:11,000 Speaker 1: questioning and and at first, uh, they were asking momly 20 00:01:11,000 --> 00:01:13,399 Speaker 1: about this more limited matter, but they suspected that he 21 00:01:13,440 --> 00:01:17,040 Speaker 1: knew more, and so they threw an obstruction of justice 22 00:01:17,120 --> 00:01:20,160 Speaker 1: charge at him and he broke uh. He uh, they 23 00:01:20,160 --> 00:01:23,320 Speaker 1: flipped him in he uh disclosed a number of facts 24 00:01:23,480 --> 00:01:28,680 Speaker 1: about comprehensive bribery scheme involving the governments, some state and enterprises, 25 00:01:28,800 --> 00:01:31,240 Speaker 1: and some private companies, including not A BRACT. It's probably 26 00:01:31,280 --> 00:01:34,840 Speaker 1: the biggest single antikruption enforcement initiative we've seen to date. 27 00:01:35,959 --> 00:01:40,480 Speaker 1: And William the US prosecutors said that ODO BRACT actually 28 00:01:40,480 --> 00:01:45,280 Speaker 1: had a stand alone bribery department. Describe how it could 29 00:01:45,319 --> 00:01:50,040 Speaker 1: get away with that for years. So I have a 30 00:01:50,120 --> 00:01:53,640 Speaker 1: unique perspective because my wife's Brazilian were often in Brazil, 31 00:01:53,840 --> 00:01:56,600 Speaker 1: and if and if you take a step back, you 32 00:01:56,640 --> 00:01:59,440 Speaker 1: have to understand from the perspective of the of what's 33 00:01:59,480 --> 00:02:03,480 Speaker 1: called a voting population in Brazil, they they already suspect 34 00:02:03,720 --> 00:02:06,880 Speaker 1: and they know it's common knowledge that the large Brazilian 35 00:02:06,920 --> 00:02:10,200 Speaker 1: government and private industry are in cahoots, that they are corrupt, 36 00:02:10,840 --> 00:02:15,160 Speaker 1: and the politicians traditionally, I mean up until this case, 37 00:02:16,080 --> 00:02:21,560 Speaker 1: um it, Brazilian politicians have rarely, rarely, ever spent a 38 00:02:21,600 --> 00:02:25,240 Speaker 1: day in jail. UM. Brazilian private company people have rarely 39 00:02:25,280 --> 00:02:27,359 Speaker 1: spent a day in jail. It's it's one out of 40 00:02:27,400 --> 00:02:32,639 Speaker 1: a thousand with this ode Brecht UM ye, the larger 41 00:02:32,680 --> 00:02:38,360 Speaker 1: Petro Brass, which is still ongoing. UM. You have what 42 00:02:38,480 --> 00:02:41,239 Speaker 1: they know for sure based on based on the testimony 43 00:02:41,280 --> 00:02:43,880 Speaker 1: and the evidence that that have been uncovered, is that 44 00:02:45,080 --> 00:02:48,639 Speaker 1: many many, meaning almost all night will they have over 45 00:02:48,720 --> 00:02:53,400 Speaker 1: one hundred politicians that are under investigation and likely to 46 00:02:53,400 --> 00:02:56,560 Speaker 1: be charged. But for one copy at all mentioned one 47 00:02:56,639 --> 00:03:00,560 Speaker 1: hundred politicians were in cahoots to receive vibes and other 48 00:03:00,639 --> 00:03:06,320 Speaker 1: kickback schemes with not with through Odebrecht, through Auto Breck's 49 00:03:06,320 --> 00:03:12,480 Speaker 1: sister called Braskam from Petro Brass, dollars and uh. And 50 00:03:12,560 --> 00:03:14,840 Speaker 1: when you have the politicians, when you have the private 51 00:03:14,919 --> 00:03:19,280 Speaker 1: companies and the politicians in Brazil, and this is somewhat 52 00:03:19,280 --> 00:03:23,280 Speaker 1: familiar to the us UM in terms of the executive department. 53 00:03:23,320 --> 00:03:27,800 Speaker 1: But you'll find you know government ministers who become members 54 00:03:27,880 --> 00:03:30,200 Speaker 1: of Congress or their Senate, which is similar to the 55 00:03:30,320 --> 00:03:33,520 Speaker 1: U S system UM, who are maybe in the Attorney 56 00:03:33,560 --> 00:03:36,720 Speaker 1: General's office one year and then in a different tax 57 00:03:36,800 --> 00:03:39,520 Speaker 1: authority the next year, and they somewhat move around his 58 00:03:39,640 --> 00:03:43,560 Speaker 1: career of bureaucrats within an elected or an executive branches. 59 00:03:44,160 --> 00:03:48,440 Speaker 1: Um Lula, by example, is uh Is whose former president 60 00:03:48,640 --> 00:03:52,320 Speaker 1: is now a member of the legislative and was appointed 61 00:03:52,360 --> 00:03:54,400 Speaker 1: minister to try and get out of the corruption charges. 62 00:03:54,520 --> 00:03:57,080 Speaker 1: And and that did not go through um And and 63 00:03:57,240 --> 00:04:00,360 Speaker 1: of course his his predecessor was thrown out of office, 64 00:04:00,440 --> 00:04:03,000 Speaker 1: and uh And and Timors the current but even the 65 00:04:03,080 --> 00:04:09,160 Speaker 1: current president, Timor is under investigation and and I don't 66 00:04:09,160 --> 00:04:11,480 Speaker 1: you know, I will charges actually be brought to another story. 67 00:04:11,600 --> 00:04:16,360 Speaker 1: But yeah, so Andy explained part of the payment, most 68 00:04:16,360 --> 00:04:19,000 Speaker 1: of the payment is going to Brazil, some of it's 69 00:04:19,000 --> 00:04:22,039 Speaker 1: going to the US, and some of it to Switzerland. 70 00:04:22,720 --> 00:04:26,880 Speaker 1: Explain why those those different countries. And when I understand 71 00:04:26,920 --> 00:04:30,120 Speaker 1: that this went through a lot of Latin American countries, 72 00:04:30,880 --> 00:04:32,760 Speaker 1: that's right. And that's really one of the most important 73 00:04:32,800 --> 00:04:35,480 Speaker 1: features of this settlement. It's not just the dollar amount, 74 00:04:35,880 --> 00:04:38,279 Speaker 1: and it's not just that a major Latin American company 75 00:04:38,400 --> 00:04:41,160 Speaker 1: is exposed to have engaged in corruption that was widely known, 76 00:04:41,200 --> 00:04:43,520 Speaker 1: as has already been said. What significant is that this 77 00:04:43,680 --> 00:04:47,159 Speaker 1: is a joint enforcement action involving the United States, Switzerland, 78 00:04:47,240 --> 00:04:49,960 Speaker 1: and Brazil, and that Brazil has taken the lead on 79 00:04:50,040 --> 00:04:52,680 Speaker 1: the enforcement action and is therefore collecting most of the 80 00:04:52,760 --> 00:04:56,279 Speaker 1: penalty money. Historically, the United States was far and away 81 00:04:56,320 --> 00:04:59,680 Speaker 1: the leader in enforcing some of these anti international, anti 82 00:04:59,680 --> 00:05:02,480 Speaker 1: crupt and laws. Part of the success story of the 83 00:05:02,520 --> 00:05:05,040 Speaker 1: Oderbreck cases that we have seen Brazil now take the 84 00:05:05,160 --> 00:05:07,599 Speaker 1: lead in enforcing anti cruption laws in the country which 85 00:05:07,680 --> 00:05:10,920 Speaker 1: very much needs it, and is becoming a leader regionally, 86 00:05:11,000 --> 00:05:14,000 Speaker 1: helping to coordinate enforcement with many other Latin American countries 87 00:05:14,000 --> 00:05:16,839 Speaker 1: where ODO BRAC has allegedly paid bribes. So this really 88 00:05:16,960 --> 00:05:21,560 Speaker 1: is a global enforcement action led largely by Brazil, and 89 00:05:21,880 --> 00:05:25,040 Speaker 1: that I think signals a new era in which other 90 00:05:25,120 --> 00:05:27,720 Speaker 1: countries besides just the United States, are are taking the 91 00:05:27,839 --> 00:05:31,960 Speaker 1: lead in enforcing these laws. William I mentioned that it 92 00:05:32,160 --> 00:05:36,360 Speaker 1: was initially a four point five billion dollar penalty. How 93 00:05:36,400 --> 00:05:39,040 Speaker 1: did Odebreck manage to get it down to two point 94 00:05:39,120 --> 00:05:43,279 Speaker 1: six billion? Yes, so this is another unique aspect which 95 00:05:43,839 --> 00:05:46,159 Speaker 1: which is the right thing to do. Everyone remembers author 96 00:05:46,200 --> 00:05:49,080 Speaker 1: Anderson and and uh and that was a criminal charge 97 00:05:49,120 --> 00:05:50,600 Speaker 1: and it wouldn't solve it, and it caused a lot 98 00:05:50,640 --> 00:05:53,560 Speaker 1: of pain for the United States and foreign economies. So 99 00:05:53,680 --> 00:05:57,640 Speaker 1: Ode Breck similar situation where it it agreed that it 100 00:05:57,720 --> 00:06:00,560 Speaker 1: was you know, the most egregious, UH, it would help 101 00:06:00,640 --> 00:06:03,120 Speaker 1: with the further investigations at a four point five billion, 102 00:06:03,160 --> 00:06:05,440 Speaker 1: but they made a side agreement that said based on 103 00:06:05,520 --> 00:06:09,039 Speaker 1: ability to pay. And in fact, right now there's still 104 00:06:09,080 --> 00:06:12,480 Speaker 1: an ongoing audit by KPMG. UM two fold audit. One 105 00:06:12,640 --> 00:06:16,039 Speaker 1: is on is just checking again the audit the ability 106 00:06:16,080 --> 00:06:18,640 Speaker 1: to pay, But two is UH is to root out 107 00:06:18,720 --> 00:06:21,760 Speaker 1: the other corruption and Ado Brick and well, at least 108 00:06:21,760 --> 00:06:25,320 Speaker 1: odo Brecks cooperating petrograss is but to some limited degree, 109 00:06:25,920 --> 00:06:29,920 Speaker 1: UM the audits late. But um ode brect. If you 110 00:06:30,000 --> 00:06:33,200 Speaker 1: look at the financial situation of this private company, it 111 00:06:33,560 --> 00:06:36,400 Speaker 1: it's CEO is in prison for nineteen years now. He's 112 00:06:36,440 --> 00:06:38,600 Speaker 1: signed a plea deal, so we don't know how much 113 00:06:38,640 --> 00:06:41,440 Speaker 1: evidence he's going to be providing against the hundred politicians 114 00:06:41,520 --> 00:06:45,920 Speaker 1: I mentioned Number two. It owes ten billion dollars on 115 00:06:46,040 --> 00:06:50,120 Speaker 1: the market. Most of that money is US debtors. So 116 00:06:50,200 --> 00:06:53,440 Speaker 1: it's in the US interest to UH to work with Odebrecht, 117 00:06:53,760 --> 00:06:55,600 Speaker 1: you know, the government interest to work with Autobrex so 118 00:06:55,680 --> 00:06:58,400 Speaker 1: that Odo Breck survives, is an operating entity to be 119 00:06:58,440 --> 00:07:00,880 Speaker 1: able to pay back that ten billion dollars. And they're 120 00:07:00,880 --> 00:07:03,560 Speaker 1: they we're doing a workout. It's been reported in your 121 00:07:03,960 --> 00:07:07,080 Speaker 1: Bloomberg itself, but that that workout is going to take 122 00:07:07,120 --> 00:07:10,080 Speaker 1: you know, many many many months to to come to fruition. 123 00:07:10,360 --> 00:07:14,400 Speaker 1: And UH go ahead. So so andy, UM, just in 124 00:07:14,400 --> 00:07:19,520 Speaker 1: about forty five seconds here, what's happening now with odo Breck. 125 00:07:19,640 --> 00:07:23,520 Speaker 1: Have they put anything into place to try to see 126 00:07:23,600 --> 00:07:27,480 Speaker 1: that they comply that this doesn't happen again? Yeah, Well, generally, 127 00:07:27,720 --> 00:07:30,280 Speaker 1: as the condition of these enforcement actions, the company is 128 00:07:30,360 --> 00:07:34,120 Speaker 1: required to adopt new compliance measures. Uh and UH and 129 00:07:34,200 --> 00:07:37,960 Speaker 1: that's important. Uh and and these requirements will be imposed 130 00:07:38,000 --> 00:07:40,240 Speaker 1: not just by the United States, but by the other 131 00:07:40,400 --> 00:07:43,960 Speaker 1: jurisdictions Brazil, including included of course in Brazil. Is is 132 00:07:44,040 --> 00:07:47,080 Speaker 1: now in the midst of of developing a very strong 133 00:07:47,440 --> 00:07:50,200 Speaker 1: compliance culture within the country and and and and a 134 00:07:50,560 --> 00:07:54,720 Speaker 1: compliance industry. So I think we will see uh autorect 135 00:07:54,760 --> 00:07:56,800 Speaker 1: practices clean up in the future, not least of which 136 00:07:56,840 --> 00:07:59,760 Speaker 1: because it's now under investigation by a number of countries 137 00:07:59,840 --> 00:08:02,960 Speaker 1: and it's losing business. Um in dramatic fashion. I'm sure 138 00:08:03,000 --> 00:08:05,440 Speaker 1: we're gonna hear a lot more about this. Thank you both. 139 00:08:05,560 --> 00:08:08,720 Speaker 1: That's Andrew Spaudling, Professor at the University of Richmond School 140 00:08:08,760 --> 00:08:11,360 Speaker 1: of Law, and William Burns, Professor at Texas A and 141 00:08:11,520 --> 00:08:14,400 Speaker 1: M's University School of Law. That's it for this edition 142 00:08:14,440 --> 00:08:17,280 Speaker 1: of Bloomberg Law. Thanks to our technical director Charlie Volmer 143 00:08:17,280 --> 00:08:18,760 Speaker 1: and our producer David Sutcherman.