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    Locke Lord QuickStudy: Legal Risks for Brazilian and U.S. Persons Arising From U.S. Investigations of Petrobras

    Locke Lord Publications

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    One of Brazil’s largest corruption investigations – an investigation involving Petrobras, Brazil’s government-controlled oil company – has attracted the attention of United States prosecutors and regulators. The investigation by Brazilian authorities has already led to criminal charges against at least 40 companies and individuals in Brazil, including some of Brazil’s largest construction companies and their executives. In the U.S. a number of Federal securities class actions have been commenced against Petrobras, its directors and its investment bankers.

    The U.S. Department of Justice and U.S. Securities and Exchange Commission (SEC) are reportedly investigating the Petrobras-related corruption allegations for possible violations of the U.S. Foreign Corrupt Practices Act (the FCPA). Press reports indicate that U.S. investigations are focusing on the business activities of Petrobras in Brazil. Such investigations, however, can also expose other Brazilian and U.S. persons (including companies and individuals) to the risk of becoming the subject of U.S. investigations.

    The FCPA prohibits any person that issues securities in the United States and any United States national from making payments to foreign government officials to assist in obtaining or retaining business. Violations of the FCPA carry criminal penalties, including incarceration. In addition, U.S. or Brazilian companies found to have participated in bribery or similar corrupt practices anywhere in the world may be prohibited from participating in contracts with governmental entities in the United States.

    Consequently, testimony required by U.S. or Brazilian authorities in the Petrobras and related investigations can expose U.S. and Brazilian persons to legal risks in the United States. Specifically, those who have been involved with Petrobras or its business partners should be aware of the following:

    • Information sharing among jurisdictions: Information provided to Brazilian authorities may be transmitted to United States law enforcement authorities for use in U.S. FCPA investigations.
    • Responding to United States subpoenas: U.S. regulators and criminal authorities may issue subpoenas seeking documents and testimony from Brazilian or U.S. persons. These persons should consider how to respond to such requests to minimize the risk of any adverse action by U.S. authorities. They should also consider whether to invoke privileges that protect certain information from disclosure. Even persons (Brazilian or U.S.) not the subjects of an FCPA investigation may be called upon to provide evidence that U.S. authorities seek in the investigation of others.
    • An increased United States enforcement focus on Brazilian activities: Reports indicate that U.S. authorities are now focusing on activities involving Petrobras. There is a risk, however, that U.S. authorities may expand their investigation into other activities by others in or involving Brazil. Brazilian companies should review their compliance policies and procedures to help ensure that they do not find themselves the subjects of a U.S. FCPA investigation.
    • The need to interface with United States authorities: The subjects of an FCPA investigation are often best served by engaging in a dialogue with U.S. enforcement authorities both to facilitate the delivery of requested information and to ensure that the U.S. authorities understand that the person is being cooperative.
    • Review of contracts with governmental entities in the United States: Brazilian and U.S. persons may be barred from contracts with U.S. governmental entities if they or their joint venture partners are deemed ineligible to bid or participate in such contracts by reason of their violation of the FCPA or similar laws elsewhere. Such persons should review the terms of their government contracts and their agreements with partners to assure that no default or other penalty provisions may apply to their detriment.

    Our lawyers include former regulators and prosecutors and attorneys experienced in Brazil, including:

    • Former U.S. Attorneys, Paul Coggins and Tim Johnson, who ran two of the largest offices of federal prosecutors in the United States; and other former federal prosecutors;
    • Former SEC Commissioner Roel Campos; Marlon Paz, the former Principal Integrity Officer of the Inter-American Development Bank and a former SEC staff lawyer; and other former SEC staff lawyers;
    • Partner Robert Romano, who heads our Brazil practice and speaks fluent Portuguese.

    Our team has conducted internal investigations of alleged FCPA violations and has created FCPA compliance policies for numerous companies, including the following:

    • Conducted internal investigation, compliance protocols and coordinated self-reporting to Department of Justice of alleged world-wide FCPA violations by a U.S.-based chemicals manufacturer.
    • Investigated claims of possible FCPA violations by affiliates or agents of U.S. parents in various countries including Angola, Mexico and Malaysia.
    • Conducted FCPA investigation and due diligence regarding operations in numerous countries in connection with the sale of a U.S.-based restaurant and hotel conglomerate.
    • Conducted FCPA investigation for a publicly-traded manufacturing conglomerate in connection with the proposed acquisition of an international company with operations worldwide.
    • Conducted FCPA/anti-corruption risk assessment of the international operations for a U.S. parent.

    For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.

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