Speaker 1: The international corruption scandal involving Latin America's biggest construction company, Odebrecht,
Speaker 1: was called Operation car Wash, but involved the kind of
Speaker 1: money you don't see at a car wash. Odebrecht has
Speaker 1: been ordered to pay a two point six billion dollar
Speaker 1: fine after admitting it engaged in a massive bribery and
Speaker 1: bid rigging plot, paying secret payments of about seven hundred
Speaker 1: eighty eight million dollars dating back to at least two
Speaker 1: thousand one. That's the biggest penalty ever in an international
Speaker 1: global bribery case. But it could have been worse. Odebrect
Speaker 1: agreed in December to pay a four and a half
Speaker 1: billion dollar penalty. My guests are Andrew Spaulding, professor at
Speaker 1: the University of Richmond School of Law, and William Burns,
Speaker 1: professor at Texas A and M University School of Law
Speaker 1: and the lead author of Money Laundering, Asset Forfeiture and
Speaker 1: Recovery and Compliance A Global Guide. Andy, what started this investigation?
Speaker 1: What got it going? Sure, it's a fascinating story. It
Speaker 1: started with the suspected was a minor money laundering issue
Speaker 1: involving an officially at Petrobras Um. They detained him for
Speaker 1: questioning and and at first, uh, they were asking momly
Speaker 1: about this more limited matter, but they suspected that he
Speaker 1: knew more, and so they threw an obstruction of justice
Speaker 1: charge at him and he broke uh. He uh, they
Speaker 1: flipped him in he uh disclosed a number of facts
Speaker 1: about comprehensive bribery scheme involving the governments, some state and enterprises,
Speaker 1: and some private companies, including not A BRACT. It's probably
Speaker 1: the biggest single antikruption enforcement initiative we've seen to date.
Speaker 1: And William the US prosecutors said that ODO BRACT actually
Speaker 1: had a stand alone bribery department. Describe how it could
Speaker 1: get away with that for years. So I have a
Speaker 1: unique perspective because my wife's Brazilian were often in Brazil,
Speaker 1: and if and if you take a step back, you
Speaker 1: have to understand from the perspective of the of what's
Speaker 1: called a voting population in Brazil, they they already suspect
Speaker 1: and they know it's common knowledge that the large Brazilian
Speaker 1: government and private industry are in cahoots, that they are corrupt,
Speaker 1: and the politicians traditionally, I mean up until this case,
Speaker 1: um it, Brazilian politicians have rarely, rarely, ever spent a
Speaker 1: day in jail. UM. Brazilian private company people have rarely
Speaker 1: spent a day in jail. It's it's one out of
Speaker 1: a thousand with this ode Brecht UM ye, the larger
Speaker 1: Petro Brass, which is still ongoing. UM. You have what
Speaker 1: they know for sure based on based on the testimony
Speaker 1: and the evidence that that have been uncovered, is that
Speaker 1: many many, meaning almost all night will they have over
Speaker 1: one hundred politicians that are under investigation and likely to
Speaker 1: be charged. But for one copy at all mentioned one
Speaker 1: hundred politicians were in cahoots to receive vibes and other
Speaker 1: kickback schemes with not with through Odebrecht, through Auto Breck's
Speaker 1: sister called Braskam from Petro Brass, dollars and uh. And
Speaker 1: when you have the politicians, when you have the private
Speaker 1: companies and the politicians in Brazil, and this is somewhat
Speaker 1: familiar to the us UM in terms of the executive department.
Speaker 1: But you'll find you know government ministers who become members
Speaker 1: of Congress or their Senate, which is similar to the
Speaker 1: U S system UM, who are maybe in the Attorney
Speaker 1: General's office one year and then in a different tax
Speaker 1: authority the next year, and they somewhat move around his
Speaker 1: career of bureaucrats within an elected or an executive branches.
Speaker 1: Um Lula, by example, is uh Is whose former president
Speaker 1: is now a member of the legislative and was appointed
Speaker 1: minister to try and get out of the corruption charges.
Speaker 1: And and that did not go through um And and
Speaker 1: of course his his predecessor was thrown out of office,
Speaker 1: and uh And and Timors the current but even the
Speaker 1: current president, Timor is under investigation and and I don't
Speaker 1: you know, I will charges actually be brought to another story.
Speaker 1: But yeah, so Andy explained part of the payment, most
Speaker 1: of the payment is going to Brazil, some of it's
Speaker 1: going to the US, and some of it to Switzerland.
Speaker 1: Explain why those those different countries. And when I understand
Speaker 1: that this went through a lot of Latin American countries,
Speaker 1: that's right. And that's really one of the most important
Speaker 1: features of this settlement. It's not just the dollar amount,
Speaker 1: and it's not just that a major Latin American company
Speaker 1: is exposed to have engaged in corruption that was widely known,
Speaker 1: as has already been said. What significant is that this
Speaker 1: is a joint enforcement action involving the United States, Switzerland,
Speaker 1: and Brazil, and that Brazil has taken the lead on
Speaker 1: the enforcement action and is therefore collecting most of the
Speaker 1: penalty money. Historically, the United States was far and away
Speaker 1: the leader in enforcing some of these anti international, anti
Speaker 1: crupt and laws. Part of the success story of the
Speaker 1: Oderbreck cases that we have seen Brazil now take the
Speaker 1: lead in enforcing anti cruption laws in the country which
Speaker 1: very much needs it, and is becoming a leader regionally,
Speaker 1: helping to coordinate enforcement with many other Latin American countries
Speaker 1: where ODO BRAC has allegedly paid bribes. So this really
Speaker 1: is a global enforcement action led largely by Brazil, and
Speaker 1: that I think signals a new era in which other
Speaker 1: countries besides just the United States, are are taking the
Speaker 1: lead in enforcing these laws. William I mentioned that it
Speaker 1: was initially a four point five billion dollar penalty. How
Speaker 1: did Odebreck manage to get it down to two point
Speaker 1: six billion? Yes, so this is another unique aspect which
Speaker 1: which is the right thing to do. Everyone remembers author
Speaker 1: Anderson and and uh and that was a criminal charge
Speaker 1: and it wouldn't solve it, and it caused a lot
Speaker 1: of pain for the United States and foreign economies. So
Speaker 1: Ode Breck similar situation where it it agreed that it
Speaker 1: was you know, the most egregious, UH, it would help
Speaker 1: with the further investigations at a four point five billion,
Speaker 1: but they made a side agreement that said based on
Speaker 1: ability to pay. And in fact, right now there's still
Speaker 1: an ongoing audit by KPMG. UM two fold audit. One
Speaker 1: is on is just checking again the audit the ability
Speaker 1: to pay, But two is UH is to root out
Speaker 1: the other corruption and Ado Brick and well, at least
Speaker 1: odo Brecks cooperating petrograss is but to some limited degree,
Speaker 1: UM the audits late. But um ode brect. If you
Speaker 1: look at the financial situation of this private company, it
Speaker 1: it's CEO is in prison for nineteen years now. He's
Speaker 1: signed a plea deal, so we don't know how much
Speaker 1: evidence he's going to be providing against the hundred politicians
Speaker 1: I mentioned Number two. It owes ten billion dollars on
Speaker 1: the market. Most of that money is US debtors. So
Speaker 1: it's in the US interest to UH to work with Odebrecht,
Speaker 1: you know, the government interest to work with Autobrex so
Speaker 1: that Odo Breck survives, is an operating entity to be
Speaker 1: able to pay back that ten billion dollars. And they're
Speaker 1: they we're doing a workout. It's been reported in your
Speaker 1: Bloomberg itself, but that that workout is going to take
Speaker 1: you know, many many many months to to come to fruition.
Speaker 1: And UH go ahead. So so andy, UM, just in
Speaker 1: about forty five seconds here, what's happening now with odo Breck.
Speaker 1: Have they put anything into place to try to see
Speaker 1: that they comply that this doesn't happen again? Yeah, Well, generally,
Speaker 1: as the condition of these enforcement actions, the company is
Speaker 1: required to adopt new compliance measures. Uh and UH and
Speaker 1: that's important. Uh and and these requirements will be imposed
Speaker 1: not just by the United States, but by the other
Speaker 1: jurisdictions Brazil, including included of course in Brazil. Is is
Speaker 1: now in the midst of of developing a very strong
Speaker 1: compliance culture within the country and and and and a
Speaker 1: compliance industry. So I think we will see uh autorect
Speaker 1: practices clean up in the future, not least of which
Speaker 1: because it's now under investigation by a number of countries
Speaker 1: and it's losing business. Um in dramatic fashion. I'm sure
Speaker 1: we're gonna hear a lot more about this. Thank you both.
Speaker 1: That's Andrew Spaudling, Professor at the University of Richmond School
Speaker 1: of Law, and William Burns, Professor at Texas A and
Speaker 1: M's University School of Law. That's it for this edition
Speaker 1: of Bloomberg Law. Thanks to our technical director Charlie Volmer
Speaker 1: and our producer David Sutcherman.