WEBVTT - Odebrecht Ordered to Pay $2.6 Billion Fine for Bribes (Audio)

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<v Speaker 1>The international corruption scandal involving Latin America's biggest construction company, Odebrecht,

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<v Speaker 1>was called Operation car Wash, but involved the kind of

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<v Speaker 1>money you don't see at a car wash. Odebrecht has

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<v Speaker 1>been ordered to pay a two point six billion dollar

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<v Speaker 1>fine after admitting it engaged in a massive bribery and

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<v Speaker 1>bid rigging plot, paying secret payments of about seven hundred

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<v Speaker 1>eighty eight million dollars dating back to at least two

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<v Speaker 1>thousand one. That's the biggest penalty ever in an international

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<v Speaker 1>global bribery case. But it could have been worse. Odebrect

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<v Speaker 1>agreed in December to pay a four and a half

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<v Speaker 1>billion dollar penalty. My guests are Andrew Spaulding, professor at

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<v Speaker 1>the University of Richmond School of Law, and William Burns,

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<v Speaker 1>professor at Texas A and M University School of Law

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<v Speaker 1>and the lead author of Money Laundering, Asset Forfeiture and

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<v Speaker 1>Recovery and Compliance A Global Guide. Andy, what started this investigation?

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<v Speaker 1>What got it going? Sure, it's a fascinating story. It

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<v Speaker 1>started with the suspected was a minor money laundering issue

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<v Speaker 1>involving an officially at Petrobras Um. They detained him for

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<v Speaker 1>questioning and and at first, uh, they were asking momly

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<v Speaker 1>about this more limited matter, but they suspected that he

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<v Speaker 1>knew more, and so they threw an obstruction of justice

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<v Speaker 1>charge at him and he broke uh. He uh, they

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<v Speaker 1>flipped him in he uh disclosed a number of facts

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<v Speaker 1>about comprehensive bribery scheme involving the governments, some state and enterprises,

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<v Speaker 1>and some private companies, including not A BRACT. It's probably

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<v Speaker 1>the biggest single antikruption enforcement initiative we've seen to date.

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<v Speaker 1>And William the US prosecutors said that ODO BRACT actually

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<v Speaker 1>had a stand alone bribery department. Describe how it could

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<v Speaker 1>get away with that for years. So I have a

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<v Speaker 1>unique perspective because my wife's Brazilian were often in Brazil,

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<v Speaker 1>and if and if you take a step back, you

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<v Speaker 1>have to understand from the perspective of the of what's

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<v Speaker 1>called a voting population in Brazil, they they already suspect

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<v Speaker 1>and they know it's common knowledge that the large Brazilian

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<v Speaker 1>government and private industry are in cahoots, that they are corrupt,

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<v Speaker 1>and the politicians traditionally, I mean up until this case,

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<v Speaker 1>um it, Brazilian politicians have rarely, rarely, ever spent a

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<v Speaker 1>day in jail. UM. Brazilian private company people have rarely

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<v Speaker 1>spent a day in jail. It's it's one out of

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<v Speaker 1>a thousand with this ode Brecht UM ye, the larger

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<v Speaker 1>Petro Brass, which is still ongoing. UM. You have what

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<v Speaker 1>they know for sure based on based on the testimony

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<v Speaker 1>and the evidence that that have been uncovered, is that

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<v Speaker 1>many many, meaning almost all night will they have over

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<v Speaker 1>one hundred politicians that are under investigation and likely to

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<v Speaker 1>be charged. But for one copy at all mentioned one

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<v Speaker 1>hundred politicians were in cahoots to receive vibes and other

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<v Speaker 1>kickback schemes with not with through Odebrecht, through Auto Breck's

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<v Speaker 1>sister called Braskam from Petro Brass, dollars and uh. And

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<v Speaker 1>when you have the politicians, when you have the private

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<v Speaker 1>companies and the politicians in Brazil, and this is somewhat

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<v Speaker 1>familiar to the us UM in terms of the executive department.

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<v Speaker 1>But you'll find you know government ministers who become members

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<v Speaker 1>of Congress or their Senate, which is similar to the

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<v Speaker 1>U S system UM, who are maybe in the Attorney

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<v Speaker 1>General's office one year and then in a different tax

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<v Speaker 1>authority the next year, and they somewhat move around his

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<v Speaker 1>career of bureaucrats within an elected or an executive branches.

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<v Speaker 1>Um Lula, by example, is uh Is whose former president

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<v Speaker 1>is now a member of the legislative and was appointed

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<v Speaker 1>minister to try and get out of the corruption charges.

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<v Speaker 1>And and that did not go through um And and

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<v Speaker 1>of course his his predecessor was thrown out of office,

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<v Speaker 1>and uh And and Timors the current but even the

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<v Speaker 1>current president, Timor is under investigation and and I don't

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<v Speaker 1>you know, I will charges actually be brought to another story.

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<v Speaker 1>But yeah, so Andy explained part of the payment, most

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<v Speaker 1>of the payment is going to Brazil, some of it's

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<v Speaker 1>going to the US, and some of it to Switzerland.

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<v Speaker 1>Explain why those those different countries. And when I understand

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<v Speaker 1>that this went through a lot of Latin American countries,

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<v Speaker 1>that's right. And that's really one of the most important

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<v Speaker 1>features of this settlement. It's not just the dollar amount,

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<v Speaker 1>and it's not just that a major Latin American company

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<v Speaker 1>is exposed to have engaged in corruption that was widely known,

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<v Speaker 1>as has already been said. What significant is that this

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<v Speaker 1>is a joint enforcement action involving the United States, Switzerland,

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<v Speaker 1>and Brazil, and that Brazil has taken the lead on

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<v Speaker 1>the enforcement action and is therefore collecting most of the

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<v Speaker 1>penalty money. Historically, the United States was far and away

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<v Speaker 1>the leader in enforcing some of these anti international, anti

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<v Speaker 1>crupt and laws. Part of the success story of the

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<v Speaker 1>Oderbreck cases that we have seen Brazil now take the

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<v Speaker 1>lead in enforcing anti cruption laws in the country which

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<v Speaker 1>very much needs it, and is becoming a leader regionally,

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<v Speaker 1>helping to coordinate enforcement with many other Latin American countries

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<v Speaker 1>where ODO BRAC has allegedly paid bribes. So this really

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<v Speaker 1>is a global enforcement action led largely by Brazil, and

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<v Speaker 1>that I think signals a new era in which other

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<v Speaker 1>countries besides just the United States, are are taking the

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<v Speaker 1>lead in enforcing these laws. William I mentioned that it

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<v Speaker 1>was initially a four point five billion dollar penalty. How

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<v Speaker 1>did Odebreck manage to get it down to two point

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<v Speaker 1>six billion? Yes, so this is another unique aspect which

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<v Speaker 1>which is the right thing to do. Everyone remembers author

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<v Speaker 1>Anderson and and uh and that was a criminal charge

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<v Speaker 1>and it wouldn't solve it, and it caused a lot

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<v Speaker 1>of pain for the United States and foreign economies. So

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<v Speaker 1>Ode Breck similar situation where it it agreed that it

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<v Speaker 1>was you know, the most egregious, UH, it would help

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<v Speaker 1>with the further investigations at a four point five billion,

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<v Speaker 1>but they made a side agreement that said based on

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<v Speaker 1>ability to pay. And in fact, right now there's still

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<v Speaker 1>an ongoing audit by KPMG. UM two fold audit. One

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<v Speaker 1>is on is just checking again the audit the ability

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<v Speaker 1>to pay, But two is UH is to root out

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<v Speaker 1>the other corruption and Ado Brick and well, at least

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<v Speaker 1>odo Brecks cooperating petrograss is but to some limited degree,

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<v Speaker 1>UM the audits late. But um ode brect. If you

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<v Speaker 1>look at the financial situation of this private company, it

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<v Speaker 1>it's CEO is in prison for nineteen years now. He's

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<v Speaker 1>signed a plea deal, so we don't know how much

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<v Speaker 1>evidence he's going to be providing against the hundred politicians

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<v Speaker 1>I mentioned Number two. It owes ten billion dollars on

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<v Speaker 1>the market. Most of that money is US debtors. So

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<v Speaker 1>it's in the US interest to UH to work with Odebrecht,

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<v Speaker 1>you know, the government interest to work with Autobrex so

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<v Speaker 1>that Odo Breck survives, is an operating entity to be

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<v Speaker 1>able to pay back that ten billion dollars. And they're

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<v Speaker 1>they we're doing a workout. It's been reported in your

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<v Speaker 1>Bloomberg itself, but that that workout is going to take

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<v Speaker 1>you know, many many many months to to come to fruition.

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<v Speaker 1>And UH go ahead. So so andy, UM, just in

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<v Speaker 1>about forty five seconds here, what's happening now with odo Breck.

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<v Speaker 1>Have they put anything into place to try to see

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<v Speaker 1>that they comply that this doesn't happen again? Yeah, Well, generally,

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<v Speaker 1>as the condition of these enforcement actions, the company is

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<v Speaker 1>required to adopt new compliance measures. Uh and UH and

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<v Speaker 1>that's important. Uh and and these requirements will be imposed

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<v Speaker 1>not just by the United States, but by the other

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<v Speaker 1>jurisdictions Brazil, including included of course in Brazil. Is is

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<v Speaker 1>now in the midst of of developing a very strong

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<v Speaker 1>compliance culture within the country and and and and a

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<v Speaker 1>compliance industry. So I think we will see uh autorect

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<v Speaker 1>practices clean up in the future, not least of which

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<v Speaker 1>because it's now under investigation by a number of countries

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<v Speaker 1>and it's losing business. Um in dramatic fashion. I'm sure

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<v Speaker 1>we're gonna hear a lot more about this. Thank you both.

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<v Speaker 1>That's Andrew Spaudling, Professor at the University of Richmond School

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<v Speaker 1>of Law, and William Burns, Professor at Texas A and

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<v Speaker 1>M's University School of Law. That's it for this edition

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<v Speaker 1>of Bloomberg Law. Thanks to our technical director Charlie Volmer

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<v Speaker 1>and our producer David Sutcherman.