Resin producer Braskem SA and its parent company, Brazil's Odebrecht SA, will pay a combined $3.5 billion in penalties after pleading guilty in what the U.S. Department of Justice termed the “largest foreign bribery case in history.”
The Justice Department announced the resolution to a years-long investigation on Dec. 21, which also involved officials from Brazil and Switzerland.
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit — a ‘Department of Bribery' so to speak — that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Deputy Assistant Attorney General Sung-Hee Suh in a statement.
Braskem, which ranks as North America's largest polypropylene resin maker, will pay $957 million after pleading guilty to one count of criminal information filed in the federal court for the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). The U.S. and Switzerland will each received 15 percent of that penalty with Brazil collecting the remaining 70 percent.
The fee includes a criminal penalty of $632 million and $325 million in “disgorgement of profits.”
In a statement on its web site, Braskem said it “acknowledges its responsibility for the acts of its former team members and agents, and regrets its past conduct. The company reaffirms its commitment to continue to cooperate with the authorities, and to adopting the appropriate and necessary measures to enhance its commitment to ethical business practices and transparency in its actions.
“As part of the resolution, Braskem has also agreed to engage an external and independent anti-corruption compliance monitor for three years, during which the company will continue to enhance its anti-corruption compliance program above and beyond the extensive remedial steps already taken.”
“We have overcome this phase and now we will concentrate our focus on the future,” said Fernando Musa, who was named CEO in May. “We are implementing more robust practices, policies and processes across the organization to enhance our governance and compliance system.”
Odebrecht will pay approximately $2.6 billion for its part, with 10 percent going to the U.S., 10 percent to Switzerland and 80 percent to Brazil.
The charges are the result of a massive investigation called Lava Jato or “Operation Carwash,” in which Odebrecht engaged in an “unparalleled bribery and bid-rigging scheme” starting at least as early as 2001 in which it paid approximately $788 million in bribes to government officials, their representatives and political parties in multiple countries, the Justice Department said.
Court documents stated that the payments by Odebrecht went beyond Brazil to officials in Angola, Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru and Venezuela.
As part of that scheme, Odebrecht created a secret financial structure within the company to account for and disburse bribe payments. By 2006, it had evolved to create the “Division of Structured Operations,” which “effectively functioned as a stand-alone bribe department within Odebrecht and its related entities.”
The conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion, the justice department said.
“In an attempt to conceal their crimes, the defendants used the global financial system — including the banking system in the United States — to disguise the source and disbursements of the bribe payments by passing funds through a series of shell companies,” said U.S. Attorney Robert L. Capers of the Eastern District of New York in a statement.
The U.S. Department of Justice got involved because part of the planning took place in the U.S. The department's statement said that in 2014 and 2015, for examples, while in Miami two Odebrecht employees engaged in conduct related the their schemes, including “meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations.”
For its part, petrochemicals firm Braskem paid $250 million between 2006 and 2014 into Odebrchts off-book bribe payments system.
“Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Patróleo Brasileiro SA (Petrobras) … in exchange Braskem received various benefits including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company's tax liabilities in Brazil.”
The conduct resulted in “corrupt payments and/or profits totaling approximately $465 million.”
Braskem opened Ethylene XXI petrochemical complex in Nanchital, Mexico, earlier this year. Braskem has a 75 percent stake in the joint venture and Mexico's Grupo IDESA SA de CV the remaining 25 percent.
The company also is finalizing plans for a polypropylene plant in the U.S.