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Enforcement Action Dataset

 

Initiation Date:    12/21/2016  Information

Prosecuting Agency:    U.S. Securities and Exchange Commission

Name of Prosecuting Attorneys:   

  • David S. Johnson, Assistant Chief Litigation Counsel, SEC Headquarters
  • Ernesto Palacios, Senior Counsel, FCPA Unit
  • Thierry Olivier Desmet, Assistant Director, FCPA Unit, SEC Miami

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation , Swiss Attorney General's Office , Brazilian Federal Prosecution Office (Ministerio Publico Federal) , Brazilian Federal Police (Departamento de Policia Federal)

Type of Action:    SEC Federal Court Proceeding

Docket or Case Number:    16-cv-02488

Court:    District of Columbia

Origin of the Proceeding:    Unknown

Whistleblower:    Unknown

Case Status:    Resolved


Summary  Information

Braskem, S.A., a corporation headquartered and incorporated in Brazil, was the largest petrochemical company in the Americas, with significant interests in the petrochemical and thermoplastic products industries. Braskem's shares were registered with the SEC and traded on the New York Stock Exchange.

Odebrecht S.A., a Brazilian conglomerate that conducted business in a variety of industries, indirectly owned 38.1% of the total shares of Braskem and controlled the company through its ownership of 50.11% of the voting shares. At the time, Odebrecht had established a standalone division within the company called the Division of Structured Operations that was used extensively for the payment of bribes around the world.

Petroleo Brasileiro S.A. ("Petrobras") was Brazil's state-controlled oil company, and it owned 36.1% of the shares of Braskem.

Between about 2006 and 2014, Braskem paid bribes to Brazilian officials and political parties as part of a scheme to obtain business and influence the company's taxes in Brazil. Many of these bribes were paid through intermediaries, offshore bank accounts, and Odebrecht's Division of Structured Operations and were authorized and approved by certain senior Braskem executives. In all, Braskem made approximately $250 million in improper payments to the Division of Structured Operations, which were not properly accounted for in either company's books and records, and at least $75 million of that amount was used for bribes that directly benefited Braskem.

On December 21, 2016, the SEC filed a three count complaint in the Distict of Columbia against Braskem alleging violations of the anti-bribery, books & records, and internal controls provisions of the FCPA. On the same date, Braskem entered into a consent agreement with the SEC. Under the terms of that agreement, Braskem was permanently enjoined from future violations of the FCPA, agreed to pay $325 million in disgorgement, and hire an independent compliance monitor for a term of three years. Payment of the $325 million disgorgement will be split between the United States and Brazil, with the United States receiving a $65 million share contingent upon payment of the remainder to Brazil (if the company fails to pay the Brazilian share, the full amount will be due to the United States).

In a related preceeding, Braskem entered into a plea agreement with the DOJ on December 21, 2016. Under the terms of the agreement, Braskem agreed to plead guilty to the conspiracy charge, pay a criminal penalty of $632,625,336.81 plus disgorgement of $325 million, strengthen its anti-corruption compliance policies and procedures, and hire an independent compliance monitor for a term of three years. The DOJ agreed to that the criminal penalty imposed represented a 15% downward departure from the minimum guidelines range based on the company's remediation and partial cooperation. Of the total criminal penalty imposed, Brakem will pay 15%, or $94,893,800.52, to the United States, 15% to Switzerland, and 70% to Brazil. The DOJ deemed that the disgorgement imposed in this proceeding would be satisfied by payment of $325 million in disgorgement in the parallel SEC proceeding.

In a related proceeding, Odebrecht entered into a plea agreement as well on December 21, 2016. Under the terms of the agreement, Odebrecht plead guilty to the conspiracy charge, agreed to pay a criminal fine of $2.6 billion, and agreed to appoint an independent compliance monitor for a term of three years. The $2.6 billion fine was to be divvied up by the United States, Brazil, and Switzerland. Assuming full payment of the the fine to Brazil and Switzerland, the share that Odebrecht is scheduled to pay to the United States is 10% of the total fine, or $260 million, plus any interest accrued before payment, which is due in June 2017. This fine represents a significant departure from the minimum guidelines range for the offense. The DOJ agreed that a 25% downward departure was appropriate given the company's cooperation and remediation, but even that amount, $4.5 billion, was more than the company could afford. Due to inability to pay the full fine, the DOJ agreed to allow the company to pay only $2.6 billion. Subsequent negotiations between the company and the enforcement authorities resulted in a further diminution of the fine. In the sentencing memorandum filed by the government on April 11, 2017, the DOJ reduced the fine that Odebrecht must pay to the United States to $93 million due to the company's inability to pay the full fine.

In a related proceeding, on February 27, 2019, the DOJ filed a sealed three count indictment in the Eastern District of New York against the former CEO of Braskem, Jose Carlos Grubisich, alleging conspiracy to violate the anti-bribery and books and records provisions of the FCPA as well as conspiracy to commit money laundering. Though the indictment was initially filed under seal, the DOJ announced the indictment on November 20, 2019, following the arrest of Grubisich. That case is ongoing.

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