South Korean shipbuilder Samsung Heavy Industries (SHI) agreed on Monday to pay $149M in a leniency agreement with Brazilian authorities to resolve investigations into acts of corruption and money laundering. 15 months earlier, the shipbuilder resolved similar allegations with U.S. Authorities.
The corruption investigation was related to the massive Lava Jato scandal ( “Operation Car Wash”), the biggest corruption scandal in Brazil’s history, which eventually led former President Lula to serve 12 years in jail. The scandal resulted in investigations into nine former presidents from five countries in Latin America (Brazil, El Salvador, Colombia, Ecuador and Perú). Former Peruvian president Alan García even killed himself when police arrived at his home to arrest him on charges related to this scheme.
Although details of the misconduct in Brazil are not yet publicly available on the Federal Comptroller General’s website (where such agreements are usually published), we may probably refer to the DPA Samsung Heavy entered into with the U.S. Department of Justice to get an idea.
On November 22, 2019, SHI agreed to pay $75 Million in global penalties to resolve the U.S. investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of a scheme to pay millions of dollars in bribes to officials in Brazil.
According to its own admissions, SHI, “beginning in 2007 and continuing until 2013, conspired with others to violate the FCPA by corruptly providing approximately $20 million in commission payments to a Brazilian intermediary, knowing that portions of the money would be paid as bribes to officials at Petrobras, the Brazilian state-owned oil and state-controlled energy company, in order to secure improper business advantages and to cause Petrobras to enter into a contract to charter a drill ship that Samsung Heavy Industries was selling to a Houston-based offshore oil drilling company, which facilitated Samsung Heavy Industries executing the sale of the drill ship. Samsung Heavy Industries took actions in furtherance of the bribery conspiracy from its branch office located in the United States.”
In short, SHI paid kickbacks to government officials at Petrobras disguised as commissions to a Brazilian agent in order to secure lucrative Petrobras contracts.
As part of the deferred prosecution agreement, Samsung Heavy Industries has agreed to continue to cooperate with the DOJ in any ongoing investigations and prosecutions relating to the conduct, including of individuals; to enhance its compliance program; and to report to the DOJ on the implementation of its enhanced compliance program.
The entire Operation Car Wash scandal surrounded state-owned oil company Petrobras, and uncovered an enormous bribery scheme using money from Brazilian state oil. Some of Brazil’s biggest construction and engineering companies paid nearly $3 billion in bribes to Petrobras officials to overcharge Petrobras, for construction and service work. The excess markups were used to funnel the bribes to the Petrobras executives and high-ranking government officials.
Petrobras presented itself as a victim of this scheme, and there have been 160 arrests, 184 plea bargain agreements, 159 convictions and about US$1 billion recovered to date, according to Brazilian public prosecutors.
Important to note that the U.S. authorities heavily collaborated with Brazil’s authorities to succeed with these anti-bribery enforcement actions. The two countries extensively shared the investigative responsibilities, negotiations with companies, and even the financial returns.
According to a statement made by the State Attorney’s Office in Parana, the SHI deal was agreed with three Brazilian Authorities: the Federal Public Ministry, the Federal Comptroller General, and the Federal Attorney General.
Of the total amount, SHI will return:
In a regulatory filing on Tuesday, SHI stated, “The company has accepted and agreed to results of Brazilian authorities’ investigation to resolve management uncertainties, which may arise from litigation processes, if they last long.”
Samsung Heavy Industries has 30 days from the approval of the agreement by the MPF Anti-Corruption Chamber to pay the amounts subject of the leniency agreement.