Odebrecht corruption settlement rejected by São Paulo Public Ministry council

1 November 2018 8:10pm

31 October 2018. By Rodrigo Russo.

​Construction company Odebrecht's corruption settlement with São Paulo state public prosecutors was recently rejected by a São Paulo Public Ministry council of appellate-level prosecutors, MLex has learned.

Odebrecht and the trial court prosecutors who negotiated the deal are asking for reconsideration of the decision made by the Superior Council of the Public Ministry, it is understood, although such an appeal is not provided for under the ministry's internal rules.

The decision could become an important precedent, indicating that the ministry will not automatically approve settlements companies negotiate with trial court prosecutors.

It is understood that instances of companies negotiating agreements with state prosecutors are expected to become more common because leniency agreements with federal agencies don’t provide immunity from state-level prosecution.

Odebrecht had signed four earlier settlement agreements with prosecutors in São Paulo state without any setbacks. The company and trial court prosecutors agreed to this fifth deal in April. Under its terms, Odebrecht agreed to pay 7 million reais ($1.885 million) in annual installments over 22 years to put an end to a corruption investigation.

The probe involved an alleged bid-rigging scheme in 2011 to win the public contract for construction of a tunnel and roads in the city of São Paulo estimated to be worth 500 million reais ($135 million). The company had already received 23 million reais ($6.194 million) to begin work when the contract was suspended by São Paulo city officials.

Odebrecht acknowledged the illegality of its bid in a 2016 multijurisdictional resolution involving Brazil, US and Swiss authorities. However the company had yet to be indicted in the São Paulo state probe.

The settlement with state prosecutors had to be approved by the ministry's Superior Council, rather than ratified by courts, because there hasn't yet been an indictment.

At a session earlier in October, members of the council dissented from the original terms of the settlement. The leading vote had requested a series of amendments, but a dissent vote by Councilor Augusto Rossini asked for the full rejection of the settlement and the filing of an improbity lawsuit targeting Odebrecht, MLex understands.

The substitute president, whose vote to reject the deal counted as two, decided the 5-4 ruling, breaking the tie among the eight councilors over rejecting the settlement and imposing amendments.

Prosecutors on the council were unhappy with a series of the conditions of the original settlement. The low amount in restitution was one of them, as Odebrecht’s payments wouldn’t even equal the amount it received from the city. The fact that the contract, admittedly cartelized, could be returned to Odebrecht if resumed was another factor that sparked controversy.

The members of the council ultimately ruled that Odebrecht’s violations of public bid rules were too serious to allow a non-judicial settlement, even if conditions were amended.

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