Fighting Corruption through International Cooperation

Gina Cabrejo, NAGTRI Criminal Justice Instructor, Latin American Programs, NAGTRI Center for International Partnerships and Strategic Collaboration

A “thorn in one’s side” is “a source of continual annoyance or trouble.”¹ Corruption in Latin American countries has become the thorn in their side: the difficult-to-eliminate problem for Latin American governments working against corrupt actors. It can sometimes seem that the corrupt side is winning the battle against the transparency sought by the governments. Huge corruption scandals are a common feature in the newspapers and television news; citizens are becoming weary of paying increasingly expensive taxes that go straight to the pockets of corrupt individuals, and this situation gives rise to strikes and protests against the government, as well as individual and collective public complaints. Although the overall picture in many countries looks dark, international cooperation has been a key in the fight against corruption.

Public corruption is generally understood to involve a breach of public trust and/or abuse of position by government officials and their private sector accomplices. Typically, it occurs when a government official asks for or accepts anything of value (whether pecuniary or some other advantage) in return for being influenced in the performance of their duty. Public corruption involves both government officials or employees and their private sector accomplices who offer the thing of value.

One of the biggest corruption scandals in Latin American countries is the “Car Wash case,” also known as Lava Jato or the Odebrecht case. This case, prosecution of which is ongoing, has led to new avenues for international cooperation against corruption and provides an excellent example of why international cooperation is key in efforts to investigate and stop public corruption.

Odebrecht S.A. started in 1944 as a small family construction group, founded by Brazilians in Salvador de Bahia and Sao Paulo. The company grew very fast and now operates in the Americas, the Caribbean, Africa, Europe, and the Middle East.² Odebrecht has a diversified business in the construction industry and in the development and operation of infrastructure and energy projects. It also does business in the fields of chemicals and petrochemicals, mining, offshore oil, and gas rigs. Odebrecht has constructed power plants, railroads, ports, and airports in different countries throughout the world.³

The corruption case involving former employees of Odebrecht began in Brazil, with a small investigation called Operation Car Wash (in Portuguese “Operação Lava Jato”). The first accusation was made in 2008 by a businessman who reported an attempt to launder money through his company. The police wiretapped the phones of a transfer business housed in a building that had once housed a car wash. This money-laundering investigation led to allegations of corruption at Petrobras, the Brazilian government-owned oil company headquartered in Rio de Janeiro. Petrobras executives deliberately overpaid on contracts with various companies for office construction, drilling rigs, refineries and exploration vessels. The contractors were guaranteed business on very advantageous terms if they agreed to divert a share of every deal into secret slush funds, which were used for the personal gain of the participants and to finance campaigns of politicians.

Although many companies throughout the Brazilian economy participated in the scheme, Odebrecht’s involvement was particularly extensive and sophisticated. The investigation revealed that Odebrecht created an entire fraud division, known as the Division of Structured Operations. The Division was a secret financial structure with dedicated employees, computers, and off-book communications systems that allowed the co-conspirators to communicate with each other via secure emails using codenames and passwords. The structure had a series of offshore entities that were not included in the balance sheets and, for many years, had a chief of the division reporting to the highest level within Odebrecht. Bribes were approved and paid via wire transfers, using shell companies and a complex network including offshore bank accounts and off-book transactions. The operation was also run through foreign banks and corporations, some of which were in the United States, which were used to hold and disburse these unrecorded funds.⁴ The chief executive officer of Odebrecht was convicted of paying more than $30 million in bribes and was sentenced to 19 years in prison. So far, the investigation has uncovered bribes of more than $750 million, allegedly paid to government officials and political parties in 12 countries.

Currently, the Car Wash case is being investigated by the United States Department of Justice, Brazil, and nine other Latin American countries. The Brazilian federal prosecution office and the financial intelligence unit in Brazil worked closely with the United States and Switzerland throughout this investigation. United States involvement in this case is due to meetings held in Miami by two Odebrecht employees with co-conspirators to advance the scheme. In addition, some of the offshore entities used by Odebrecht operated in the United States.⁵

For anyone involved in anti-corruption efforts, it is remarkable (and instructive) to see a scheme of this magnitude. The overall structure and operation demonstrate how ingenious and well-organized the perpetrators were. It is also heartening to see how international cooperation among Latin American countries and between Latin American countries and the United States has led to positive results in the fight against transnational corruption. Without international collaboration and agreements, the investigation and prosecution might have ended far sooner and been far less successful.

International cooperation on complex criminal matters may occur in several ways. The most formal agreements on prosecutorial cooperation are treaties, and most countries in Latin America have signed the Inter-American Convention on Mutual Legal Assistance of the Organization of American States.⁶ This agreement contemplates assistance in a variety of areas, including notification of rulings and judgments; taking of testimony or statements from persons; immobilization and sequestration of property, freezing of assets, and assistance in procedures related to seizures; searches or seizures; service of judicial documents and transmittal of documents, reports, information, and evidence.

Other important international efforts include the Lima Commitment,⁷ which promotes the exchange of information and evidence and coordination in the investigation and prosecution of transnational crimes. It was signed by 34 countries at the Eighth Summit of the Americas held in April 2018 in Lima, Peru. The Lima Commitment reaffirms the intent of the signatory nations to fight against corruption through the applicability of international treaties such as the United Nations Convention against Corruption (UNCAC)⁸ and the Interamerican Convention against Corruption (IACAC).⁹ In addition, it emphasizes strengthening democratic institutions and the rule of law by increasing government transparency and promoting stronger anti-corruption laws. This commitment is very significant because it is the first time in history that the hemisphere’s countries approved a commitment against corruption. Its impact continues to grow, and the agreement is attracting the interest of international organizations. In September 2018 the Organization of American States (OAS) and the international organization of the Joint Summit Working Group (JSWG) signed an agreement to support the Lima Commitment through technical, political, and financial resources.¹⁰

Mutual Legal Assistance Treaties (MLATs) are the most frequently used tool in prosecutorial cooperation. MLATs are bi-lateral agreements that allow generally for the exchange of evidence and information in criminal and related matters. They can be extremely useful as a means of obtaining banking and other financial records from treaty partners. The United States has executed MLATs with Argentina, Brazil, Uruguay and Venezuela, and has signed, but not yet brought into force, a mutual legal assistance agreement with Colombia.

Each MLAT is unique, but, generally, when a request is made through an MLAT, it includes background information about who is investigating whom and for what charge, enough information about the facts of the case for the foreign authority to conclude that a crime has been committed and to see the relevance of the evidence that is being sought, the precise assistance requested, and the text of the statutes alleged to have been violated. When a request is made under an MLAT, it is made directly from the U.S. Department of Justice to the central authority designated in the treaty. Although MLATs are extremely important tools, the process takes time, which is of concern to prosecutors worldwide. Constraints in various countries on sophisticated forensic and financial analysis, legal limitations on ways of gathering evidence, and court congestion are some of the factors creating delays. Nonetheless, the MLAT process has been a large step forward in international anti-corruption efforts.

Other bilateral treaties also may include legal assistance provisions. Latin American countries have made significant advances in international cooperation with the signing of important bilateral treaties that facilitate obtaining banking and other financial records from a treaty partner. For example, in 2018, Brazil and Argentina signed an agreement to share evidence.¹¹ The Brasilia Declaration for International Judiciary Cooperation, signed by several countries including Argentina, Brazil, Colombia, Chile, Dominican Republic, Ecuador, Mexico, Panama, and Venezuela, permits additional cross-jurisdictional cooperation in the fight against bribery, money laundering, and public corruption.¹²

On a somewhat less formal level, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has a memorandum of understanding (MOU) or an exchange of letters in place with the financial intelligence units (FIUs) of many countries to facilitate the exchange of information between FinCEN and the respective country’s FIU. FinCEN has an MOU or an exchange of letters with the FIUs in Argentina, Brazil, Chile, and Paraguay.

There are, of course, many examples of informal international cooperation between prosecutors. New communications networks allow prosecutors to call a foreign counterpart and ask for financial information. Subsequently, if the information is relevant, the evidence must be requested through an MLAT in order to be admissible at trial. Nevertheless, the initial request between counterparts allows both countries to investigate more quickly and results in more efficient and effective prosecution. This successful technique has been implemented in Latin American countries and the communication network is growing ever wider and more robust. Other informal means of cooperation include taking depositions of voluntary witnesses at embassies or consulates of the investigating country and making police-to-police requests.

Regional cooperation is also occurring in the creation and implementation of compliance programs. Companies are being urged to implement and assess their compliance programs to mitigate fraud and to ensure ethical practices by implementing policies, procedures and good practices. The benefits of a strong program include not only regulatory and legal compliance but also operational benefits. Effective compliance programs work in tandem with a company’s risk management strategies and the transparency of their internal regulations and procedures. Improved compliance programs will help prevent misconduct by corporate employees before it starts.

As the thorn of corruption continues in Latin America’s side, disrupting trust between citizens and their government, the fight against corruption continues with more force thanks to the international cooperation on prevention, investigation, and prosecution.

Endnotes

1. Cresswell, Julia, ed. (2010). “Thorn”. Oxford Dictionary of Word Origins. Oxford: Oxford University Press. p. 444.
2. Odebrecht Group History, available at https://www.odebrecht.com/en/odebrecht-group/history.
3. Odebrecht in the World, available at https://www.odebrecht.com/en/odebrecht-group/odebrecht-world.
4. Id.
5. Press Release, U.S. Dept. of Justice, “Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Penalties to Resolve Largest Foreign Bribery Case in History” (Dec. 16, 2016) available at https://www.justice.gov/opa/pr/odebrecht-and-braskem-plead-guilty-and-agree-pay-least-35-billion-global-penalties-resolve. In the United States, the Foreign Corrupt Practices Act (FCPA) of 1977 prohibits U.S. firms, persons, and companies from paying bribes to foreign officials. The FCPA also applies to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. 15 U.S.C. §§ 78dd-1, et seq..
6. Organization of American States, Inter-American Convention on Mutual Assistance in Criminal Matters, May 23, 1992, O.A.S.T.S. No. 75.
7. Lima Commitment Democratic Governance against corruption. Available at http://www.summit-americas.org/LIMA_COMMITMENT/LimaCommitment_en.pdf and https://www.state.gov/wp-content/uploads/2019/05/Lima-Commitment-041418.pdf.
8. United Nations Convention against Corruption, Dec. 14, 2004, 2349 U.N.%.S. 41, available at https://www.unodc.org/unodc/en/corruption/uncac.html.
9. Organization of American States, Inter-American Convention against Corruption, Mar. 29, 1996, O.A.S.T.S. No. B-58.
10. Organization of American States, “OAS and other Multilaterals will Collaborate to Support Lima’s Summit of the Americas Pact against Corruption,” (Sept. 4, 2018), available at https://www.oas.org/en/media_center/photonews.asp?sCodigo=FNE-94892.
11. Press Release, Ministerio Publico Federal, “MPF acerta bases de acordo para utilização de delações firmadas no âmbito da Lava Jato em investigações na Argentina (Atualizada) (July 17, 2018), available at http://www.mpf.mp.br/pgr/noticias-pgr/argentina-faz-acordo-com-o-mpf-e-podera-utilizar-delacoes-feitas-no-brasil-no-ambito-da-operacao-lava-jato.
12. Brasilia Declaration, June 3, 2017, available at http://www.stf.jus.br/arquivo/cms/noticiaNoticiaStf/anexo/declaracaobrasilia.pdf.