Brazilian Court of Auditors freezing assets of companies in probe of Petrobras oil refinery

8 June 2017 9:36am

31 May 2017. By Rodrigo Russo.

During a tense session last week, the Brazilian Court of Auditors decided to freeze assets of construction companies Odebrecht, OAS, UTC, and Consórcio Conpar, MLex has learned.

The Court of Auditors, or TCU, said this was a precautionary measure in the investigation of the companies' alleged bid-rigging and bribery concerning contracts for modernization work on Petróleo Brasileiro's Presidente Getúlio Vargas oil refinery in Paraná state.

After formal notification, the companies will be able to propose which assets they feel are vital to keep the business running and should remain unfrozen The written decision has not yet been made public, and it is not yet clear whether TCU specified the assets to be frozen or the amounts involved.

Lawyers and even dissenting TCU councilors saw this decision as a huge setback for new leniency agreements in Brazil, saying it deepens the legal uncertainty faced by companies that have to deal with different federal agencies that can claim damages and impose sanctions in corruption cases.

Practitioners with experience in administrative law said that the Supreme Court, or STF, according to its jurisprudence, could overrule last week's TCU decision. The companies would have to take the case to the STF, however — another costly and lengthy step.

The TCU councilors acknowledged during their debates that whistleblower companies should be better off than those that didn't report their wrongdoings. It was not clear, however, what benefit Odebrecht would derive in the present case for having entered into a leniency agreement with the Federal Prosecutor's Office.

Damages claim

Among the most controversial topics discussed was TCU's majority claim of integral recovery of damages caused by the companies to the public purse.

The leading councilor of the case, André Luis de Carvalho, suggested the agency respect the settlement amounts agreed to in the companies' leniency agreements with the Federal Prosecutor's Office. Carvalho said the agency's insistence on recovering amounts higher than the settlements would only serve the interests of those aiming to harm the "Lava Jato" corruption investigations.

Carvalho also noted that if the companies had not blown the whistle and offered new evidence, there would be no money recovery at all, since the TCU had almost closed the probe for lack of evidence.

Some in the Federal Prosecutor's Office partially support Carvalho's reasoning. They, as well as many at other agencies, have been saying that whistleblowers shouldn't be further sanctioned on the basis of evidence the companies produced to reach a leniency agreement, though they acknowledge that the TCU is allowed to claim the damages from the companies.

Other TCU members, however, strongly disagreed with Carvalho. Councilor Walton Alencar said he was "appalled" by this probe.

Alencar said the single point on which the agency can't compromise is the recovery of the damages, otherwise the leniency agreements would work in favor of malfeasance. He said he was seeing a "catastrophic situation."

Carvalho replied that TCU's decision to freeze assets could prevent defendants of this case who were discussing leniency agreements from blowing the whistle — a reference to OAS, which has been holding preliminary meetings with federal prosecutors to discuss a settlement.

Although he made clear his disagreement with the asset freeze, Carvalho said he would follow the majority of in the adoption of the preliminary measure. The case will continue to be discussed by the agency in the next few months.

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