FCPA: Brazilian Airline pays $41M to settle corruption charges with US, Brazil Authorities

FCPA: The US Department of Justice (DOJ) announced in a press release this week that Brazil’s second largest airline GOL Linhas Aéreas Inteligentes S.A. (GOL), will pay more than $41 million to resolve parallel bribery investigations by criminal and civil authorities in the United States and Brazil.

The airline was earlier charged by the DOJ and SEC for bribing Brazilian government officials in exchange for certain favorable payroll tax and aviation fuel tax reductions. The airline was also investigated in Brazil by the CGU and the Advocacia-Geral de União (Attorney General’s Office) in  related proceedings.

FCPA and non-US Companies

What’s interesting about this enforcement action is that US Authorities prosecuted a Brazilian airline for bribing its way in Brazil to secure the passage of legislation favorable to the airline. Before we delve into the misconduct, for the benefit of our non-US readers,  let’s analyze what gives the US the authority to go after the airline in the first place.

So for one, GOL’s shares are listed on the NYSE and it files periodic reports with the SEC.

The Foreign Corrupt Practices Act (FCPA), enacted in 1977, generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business. The FCPA can apply to prohibited conduct anywhere in the world and extends to publicly traded companies and their officers, directors, employees, stockholders, and agents. That includes foreign companies listed in a US stock market.

The FCPA requires from publicly traded companies (including foreign companies) to maintain accurate books and records and have a system of internal controls.

Now that we have ascertained the applicability of the FCPA to certain foreign companies, it is interesting to note that the misconduct can be determined to have happened with the use of messaging apps.

In this case for instance, according to the SEC, “The Gol Director discussed the bribe schemes with a close associate of the Brazilian Official in person, by text message, and by phone. The close associate, in turn, discussed the bribe schemes with the Brazilian Official and others in person, by phone, and via an ephemeral messaging application that uses end-to-end encrypted and content-expiring messages with servers exclusively located in the U.S.

Translation: “Do not discuss bribe payments on our servers”, that’s pretty much the message the US is sending.

The Misconduct

Now let’s delve a bit deeper into what the actual bribes were intended for.

According to the company’s admissions and court documents, between 2012 and 2013, GOL paid approximately $3.8 million in bribes to foreign officials in Brazil to secure the passage of two pieces of legislation favorable to GOL. The legislation involved certain payroll tax and fuel tax reductions that financially benefitted GOL, along with other Brazilian airlines. The favorable legislation  saved the company around $39.7 million in 2013, according to the SEC.

In order to make these payments, one of GOL’s directors disguised the payments via sham contracts with various entities connected to the relevant Brazilian officials. GOL maintained books and records that falsely listed the corrupt payments as legitimate expenses, including as advertising expenses, including reimbursements for online advertisement.

The Penalty

When GOL was initially charged by the DOJ and SEC, it agreed to pay more than $87 million and $70 million to settle the criminal and civil charges respectively (that’s $157 million in total).

Interestingly we have a case here of a company that was unable to pay such a hefty fine. So GOL had to demonstrate to the US Authorities that its financial condition made it unable to pay the fines in full.  As a result, the SEC and the DOJ waived payment of all but $24.5 million and $17 million of GOL’s payment obligations, respectively.

That’s a great example of the application of the DOJ’s inability to pay guidance. As set forth in the guidance, both parties first agree on the form of a corporate criminal resolution and the appropriate monetary penalty, based on the law and the facts, and irrespective of inability-to-pay considerations. Then, where Division attorneys find that an organization cannot pay the appropriate fine or penalty, t a reduction of the penalty may be recommended, but only by that amount necessary to avoid existential risk to the company and impairment of its ability to make restitution to victims.

The DOJ additionally agreed to credit up to $1.7 million of the criminal penalty against an approximately $3.4 million fine the company has agreed to pay to authorities in Brazil in connection with related proceedings.

The following factors were considered in reducing the penalty:

  • GOL received full credit for its cooperation with the DOJ’s investigation – which included reviewing voluminous documents, interviewing witnesses, conducting background checks, and testing over two thousand transactions.
  • The company promptly engaged in remedial measures by, among other things, redesigning its entire anti-corruption program.
  • The company disciplined the GOL director who orchestrated the scheme and enhanced its internal accounting controls and anti-corruption policies and procedures.
  • GOL’s financial condition and demonstrated inability to pay the penalty.


In addition, GOL entered into a three-year deferred prosecution agreement (DPA) with the DOJ in connection with a criminal information filed in the District of Maryland charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA.

As part of the DPA, GOL has agreed to continue to cooperate with the DOJ in any ongoing or future criminal investigations relating to the misconduct. In addition, under the agreement, GOL agreed to continue to enhance its compliance program and provide reports to the department regarding remediation and the implementation of compliance measures for the term of the DPA.

It is to be noted that the DOJ will limit the use of probationary deals (NPAs and DPAs) going forward. As covered in this previous post, given NPAs and DPAs have become a “cost of doing business” rather than a real deterrent, the DOJ will avoid granting multiple, successive non-prosecution agreements or deferred prosecution agreements. So the burden is on the company to make sure it doesn’t become a recidivist.

Some additional FCPA reminders.

It is worth reminding the reader that sanctions for FCPA violations can be significant. The SEC and the DOJ are jointly responsible for enforcing the FCPA. In this case, the company received a lenient penalty due to its extensive cooperation, but in other cases the SEC & DOJ may bring civil or criminal enforcement actions against issuers and their officers, directors, employees, stockholders, and agents for violations of the anti-bribery or accounting provisions of the FCPA.

Companies and individuals that have committed violations of the FCPA often have to disgorge their ill-gotten gains plus pay prejudgment interest and substantial civil/criminal penalties.

Companies may also be subject to oversight by an independent consultant at their own cost.


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