On April 8, 2021, King & Spalding and Levy & Salomão Advogados co-hosted a panel discussion on the current state of U.S.-Brazilian cross-border investigations as part of the Brazil-U.S. 40 and Under White Collar Lawyers Initiative. Kyle Sheahen of King & Spalding and Marcos Drummond Malvar of Levy & Salomão Advogados moderated the panel, which featured Jason Jones, General Counsel at the Federal Bureau of Investigation (FBI), Drew Hruska, partner with King & Spalding’s Special Matters and Government Investigations group, Eduardo El Hage, a federal prosecutor in Rio de Janeiro and former head of the Rio de Janeiro Lava Jato Task Force, and Bolivar Moura Rocha, a partner with Levy & Salomão Advogados.
The panel highlighted how the Lava Jato investigation has changed the corruption landscape in Brazil and brought important institutional changes in cross-border cases. Below is a summary of the session’s highlights. It is not a verbatim transcript.
Finality in Brazilian Cooperation Agreements
Rocha addressed the hardships faced by companies and individuals who wish to settle their cases with Brazilian authorities due to lack of finality. Rocha mentioned cases in which companies have entered into leniency agreements with the Federal Prosecutors Office (“MPF”) and the General Comptroller’s Office and were subsequently debarred by the Federal Audit Courts or faced new investigations over the same facts by State Prosecutors.
Rocha proposed legislative changes to address this situation, including granting MPF a relevant role in the negotiation and execution of leniency agreements, and streamlining sanctions imposed on individuals and companies that settle. El Hage said he believes that a solution for the finality issues mentioned by Rocha could be adopting a single framework for leniency agreements that must include the MPF.
El Hage noted that he still has hope for change in Brazil and that the anti-corruption enforcement focus is not over yet. El Hage pointed out that over the past ten years, companies in Brazil have become much more aware of the need for compliance controls. El Hage said that compliance has become the word of the day in Brazil.
U.S./Brazil Cross-Border Challenges
Regarding challenges to cross-border investigations posed by the pandemic, Jones noted that there are certain practical challenges, such as not being able to read a witness’s body language in a virtual meeting. However, Jones said assistance from the FBI’s partners overseas has allowed the FBI to continue to get the job done, noting that there has been a shift over the last ten years toward greater cooperation between U.S. and foreign authorities that has been essential to investigations. Jones said that, for instance, in the case of the Petrobras settlement, U.S. authorities would not have been successful without Brazilian cooperation.
Jones also cautioned against concluding that a decrease in prosecutions meant a decrease in investigations. He stated the FBI has devoted significant resources to investigating foreign bribery allegations, pointing out that the FBI has agents in field offices around the world that are trained to investigate corruption with a view toward prosecution.
Hruska noted similar difficulties that the pandemic has posed to investigations, such as the inability to travel due to the restrictions. Hruska also highlighted recent changes in U.S. anti-money laundering laws that will give prosecutors significant new tools, including enhanced methods of achieving access to foreign bank accounts and the creation of a beneficial ownership registry that could change how individuals interact with the U.S. financial system. Hruska also predicted stronger tax enforcement under the Biden Administration.
Q&A Session Highlights
The first question in the Q&A session was about the impact that former Brazilian President Luiz Inácio Lula da Silva might have on investigations if he is elected president. El Hage said that Lula’s potential impact is hard to predict, but that he had allowed prosecutors a level of independence to pursue investigations while previously in office. Brazilian judges and prosecutors are now more eager than ever to avoid any impression of improper dealing. El Hage also noted that the Supreme Court in Brazil should place greater emphasis on following jurisprudence and case law to create more certainty in its decisions.
The next question concerned U.S. extraterritorial jurisdiction in Brazil. Jones said the FBI’s view is that it investigates potential criminal violations wherever they may occur. Hruska noted that the U.S. has a transactional view of jurisdiction that is more expansive than many other countries and seemingly ministerial acts like completing a wire transfer through the U.S. could create a jurisdictional hook. Hruska pointed out that Brazilian citizens who never leave Brazil could violate U.S. law solely based on their interactions with U.S. citizens.
The last question was about resolving multiple prosecutions involving the same conduct. El Hage said that when there are authorities from multiple jurisdictions seeking prosecution for the same conduct, the first country in line is usually the one entitled to take the lead in prosecution. Jones said those can be difficult situations, but the ideal scenario is when the two jurisdictions work together from the beginning. That is better for companies under investigation, too, because they can achieve finality and fairness when resolving the matter.