On March 19, Decree No. 8,420 was published, regulating the Anticorruption Act (Law No. 12,846/2013), and detailing important aspects of its application, such as the form of calculating any fines levied on companies and the criteria that are to be analyzed at the time of appraisal of programs of integrity by the authorities.
Reiterating the provisions of the Anticorruption Act, the Decree states that administrative proceedings of liability for acts against the public administration shall be opened by the highest authority at the entity harmed; this competency may be delegated just once. If the entity harmed is a body of the direct administration, competency for opening the proceeding will fall to the Minister of State, who may also delegate competency just once.
Besides laying down procedural rules concerning the investigation within the realm of the Federal administration, the Decree has created a system for calculating fines in the event of a conviction at administrative level. According to the Anticorruption Act, companies considered responsible for harmful acts would be subject to fines equivalent to 0.1% to 20% of their gross revenues in the last fiscal year prior to the opening of the administrative proceeding, excluding taxes. Under the Decree, the fine will be set, initially, adding up the following percentages of the company's gross revenues in the last fiscal year prior to the opening of the proceeding, excluding taxes:
i. 1% to 2.5%, if the harmful act continues over time;
ii. 1% to 2.5%, if the leadership or management of the legal entity are aware of or tolerate the harmful act;
iii. 1% to 4%, if the harmful act entails interruption of the provision of a public service or execution of a work contracted;
iv. 1%, if the legal entity displays a sound economic condition;
v. 5%, in case of recidivism; and
vi. 1% to 5%, if the harmful conduct is linked to a contract maintained or intended with the federal public a
Upon completing this exercise, the Decree states five criteria for attenuating the fine, which are given percentages of the gross revenues of the legal entity and must be subtracted from the sum total above:
i. 1%, if the conduct is not consummated;
ii. 1.5%, if the legal entity has made good any damages caused;
iii. 1% to 1.5%, if the company collaborates with the investigations;
iv. 2%, if the legal entity spontaneously communicates the harmful act to the authorities; and
v. 1% to 4%, if the company has and applies a compliance program.
According to the Decree. the fines shall necessarily have as a minimum limit the greatest amount among: (i) that of the advantage gained, or (ii) 0.1% of the gross revenues of the legal entity or (iii) R$6,000.00. In its turn, the maximum limit for the fine is to be the lesser of (i) 20% of the company's gross revenues or (ii) three times the amount of the advantage sought or gained by the illicit conduct.
So as to permit an objective appraisal of companies' compliance program, the Decree has established a list of criteria to be analyzed as part of the administrative proceeding, which must be assessed taking into account the size of the company, the countries and economic sector where it is active and the degree of complexity of its internal structure, among other aspects. The list of criteria to be appraised in compliance programs is as follows:
i. commitment of the top management of the legal entity, including boards;
ii. standards of conduct, code of ethics, policies and procedures of integrity, applicable to all employees and officers;
iii. standards of conduct, code of ethics and policies of integrity extended, when necessary, to third parties;
iv. periodical training on the compliance program;
v. periodical risk analysis;
vi. proper bookkeeping;
vii. internal controls that ensure the prompt preparation and reliability of financial reports and statements of the legal entity;
viii. specific procedures to prevent fraud and wrongdoing in tender procedures, in the performance of administrative contracts or any interaction with the public sector;
ix. independence, structure and authority or the internal instance responsible for applying the compliance program and supervision of its obedience;
x. channels for whistle-blowing and mechanisms destined to protecting whistle-blowers in good faith;
xi. disciplinary measures in case of violation of the compliance program;
xii. procedures that ensure the prompt stoppage of irregularities;
xiii. appropriate steps for the contracting and supervision of third parties;
xiv. verification, during processes of mergers, acquisitions and corporate restructuring, of irregularities or wrongdoing or the existence of vulnerabilities at the legal entities involved;
xv. ongoing monitoring of the compliance program; and
xvi. transparency of the legal entity in relation to contributions to political parties and candidates.
If the company investigated is small-scale or a micro-company, the parameters used for appraising the compliance program will be simplified, and thus some of the above items need not be practiced by the company for its compliance program to be deemed complete.
Lastly, the Decree contains greater details on the mechanism of the leniency agreement, specifying, for instance, that the agreement can only be signed with the first legal entity to express its interest, if this circumstance is relevant. It is therefore understood that in correlated but independent conducts, more than one legal entity may sign a leniency agreement with the competent authority. It should also be noted that the decree reiterates the need for the legal entity to admit its participation in the infringement, to enable signature of the leniency agreement; a rejected proposal for a leniency agreement will not entail acknowledgement of committing the harmful act.
The Decree, along the line established by the Anticorruption Act, makes it clear that maintaining an effective and complete compliance program is the best way for companies to protect themselves from possible convictions for acts against the public administration, or to mitigate any fines.
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