Decree Clarifies Fines, Sanctions Under Brazil’s Anticorruption Law

Devicemakers accused of bribing government employees to purchase their products face stiff fines and penalties in Brazil, now that President Dilma Rousseff has issued a decree implementing last year’s anticorruption law.

The Clean Companies Act officially took effect on Jan. 29, 2014, but lacked supporting regulations on fine assessment, evaluation of business compliance programs and the structure of leniency agreements. The March 18 decree, known as Decree 8,420/2015, fills in many of those gaps.

Firms caught violating the law face minimum fines of either 1 percent of the previous year’s profits or the sum of the value of the undue advantage gained through bribes plus the amount of the bribe. The maximum fine the government can impose is 20 percent of the previous year’s profits or three times the undue advantage plus the amount of the bribe, the decree says.

Leniency for First-Time Offenders

In setting fines, the government will consider the seriousness of the offense, whether the company cooperated with investigators and whether high-level officers of the firm knew of the corrupt practices.

Violators face public shaming, too — both on government websites, which will air details of the offense, and at the company’s place of business.

First-time offenders will sign leniency agreements with the federal comptroller general noting that repeat violations could lead to a loss of government contracts or enforcement of stricter compliance programs. To conclude a leniency agreement, the company must admit to wrongdoing, stop the offensive actions and cooperate with government investigators.

Violators must also establish a compliance program, supported by high-level staff, with standards of conduct that are applicable to all employees, suppliers and service providers. The program should include periodic training and risk analysis to make adjustments, when needed. Other elements of a successful compliance program outlined in the decree include:

• Comprehensive and accurate accounting records;
• Specific procedures to prevent fraud in supplier bidding;
• An independent internal audit body;
• Well-established whistleblowing channels; and
• Established disciplinary measures in case of CCA violations.

The Clean Companies Act also gives the government authority to dissolve a company that regularly violates the law or was established as a front to hide the identities of individuals benefiting from corrupt activities.

Devicemakers need to be aware of the law because many doctors in Brazil are state employees, says Carlos Ayres, a senior associate for compliance at São Paolo law firm Trench, Rossi e Watanabe. Even ethics rules that previously passed muster in Brazil may warrant a second look due to the stricter revised standards, he tells IDDM.

Moreover, the new policy operates on strict liability, meaning lack of corrupt intent is no longer a defense if the government can show a company received an unfair advantage, Ayres says. For example, it’s now considered illegal for a state-owned hospital to put out a request for proposals based on specifications from only one manufacturer. That means company sales reps need to be trained to ensure hospitals approach competitors for the same information.

Another challenge for devicemakers will be physician attendance at industry meetings. Companies will now have to demonstrate a clear rationale behind the trip. A decision to send a doctor to a conference held primarily in a language he or she doesn’t speak may raise eyebrows, Ayres says.

View the decree, in Portuguese, at www.fdanews.com/03-30-15-brazil.pdf. — Elizabeth Orr