Lava Jato update

Judge said corruption was “rule of the game”

Publication September 2015

Brazilian judge overseeing corruption investigation into Petrobras has stated corruption was a “rule of the game” and provides warning to all companies having done business with Petrobras.

"Every major Petrobras contract involved a percentage of bribery to company directors and politician…"
-Judge Sérgio Moro,
31 August 2015

Business ethics and anti-corruption regulation and enforcement are at the forefront of the issues facing all businesses today. Standards have changed significantly in recent years and ethical failures can result in significant civil and criminal sanctions for businesses, and even imprisonment for individuals. Brazil’s recent clamp-down on corruption is no exception and companies operating in this jurisdiction must be ready to deal with a rapidly changing and challenging business and legal environment.

Petrobras issuing questionnaire to suppliers in response to Operation Lava Jato – suppliers urged to seek legal advice.

In the face of the Petrobras corruption investigation, “Operation Lava Jato”, Petrobras is now undertaking a rigorous compliance exercise as part of its regular supplier renewal process. As part of this exercise, it has issued an extensive Compliance/Investigation Questionnaire (“the Questionnaire”) to all suppliers containing questions which have serious legal implications.

This questionnaire comes at a difficult time for companies wanting to maintain a business relationship with the Brazilian state-owned giant as Judge Sérgio Moro, who is overseeing the Lava Jato cases, recently condemned what he viewed as “systematic corruption”. He called for a stronger crackdown on corruption and stated that, "Every major Petrobras contract involved a percentage of bribery to company directors and politicians…".

In light of these judicial pronouncements, we would recommend that all Petrobras suppliers consider the details of their contracting history with Petrobras.

These statements are indicative of the current political and commercial climate in Brazil and highlight the real risk of investigation faced by all companies who have done or continue to do business with Petrobras. Completing the Questionnaire potentially exposes companies to legal risks. For example, answers to questions such as, ‘Will you agree to cooperate with our Petrobras internal independent investigation?’ and ‘Are your staff implicated in the Petrobras corruption scandal (Operation Lava Jato), and what have you done about it?’ could instigate or impact already ongoing investigations in Brazil, the U.S. and other jurisdictions.

If you have received the Questionnaire, consider seeking legal advice before responding. It is possible that certain responses could give rise to unexpected legal consequences.

If you would like to discuss in more detail please contact Glenn Faass in Brazil, Richard C. Smith or Marsha Z. Gerber in the U.S., Sam Eastwood or Jason Hungerford in the U.K., and Wilson Ang in Singapore.

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